New York — Google-owned online video-sharing site, YouTube, on Monday said it is blocking all premium music videos in the U.K. after it failed to settle a royalty fracas with the country’s Performing Right Society (PRS), which represents composers and publishers.
Thousands of videos will be inaccessible to YouTube users from later on Monday.
The world’s largest video-sharing site, owned by Google, has been in discussions for several months in an effort to renew its contract with PRS for Music, a British group that collects royalties on behalf of nearly 50,000 of its composers each time one of their songs is performed, was asking it to pay “many, many times” more than the previous licensing agreement that has expired.
“The costs are simply prohibitive for us — under PRS’s proposed conditions, we would lose significant amounts of money with every playback,” said Patrick Walker, YouTube’s director of video partnerships in Europe.
Walker said the move was “regrettable”, and the block would remain in place until “mutually acceptable terms” were reached.
“Our previous license from PRS for Music has expired, and we have been unable so far to come to an agreement to renew it on terms that are economically sustainable for us,” a statement from YouTube read. “There are two obstacles in these negotiations: prohibitive licensing fees and lack of transparency. We value the creativity of musicians and songwriters and have worked hard with rights-holders to generate significant online revenue for them and to respect copyright. But PRS is now asking us to pay many, many times more for our license than before.”
The move is the fresh indication of the tension between YouTube and the music industry and also suggests that the video site’s resolve to keep operating costs under control as it strives to generate meaningful profits for Google.
YouTube said PRS was also unclear about which songs are included in the renewed license.
“We have been negotiating with them for a long time and we are still talking to them,” said Walker.
But PRS argued over YouTube’s version of events and said it was caught by surprise by the announcement in the middle of ongoing negotiations.
“We were shocked and disappointed to receive a call late this afternoon informing us of Google’s drastic action,” said PRS for Music Chief Executive Steve Porter.
A statement from PRS for Music claimed that Google does not want to pay enough for licensing fees.
“PRS for Music is outraged on behalf of consumers and songwriters that Google has chosen to close down access to music videos on YouTube in the U.K.,” read a statement from the industry group, which noted that Google rakes in billions of dollars in revenue. “Google has told us they are taking this step because they wish to pay significantly less than at present to the writers of the music on which their service relies, despite the massive increase in YouTube viewing.”
Royalty fees in the U.K., according to reports caused streaming music service Pandora to pull out of the country (along with other non-U.S. markets) two years ago, and many smaller players in digital media are presently experiencing the pain. PRS for Music has also targeted small businesses in the U.K. for playing radios publicly, which the group says is a form of piracy.
Since it only relates to music videos, this would not affect, say, Queen Elizabeth’s royal YouTube channel. But U.S. digital media companies, particularly when it comes to music, have repeatedly encountered rough seas abroad.
The PRS statement mentioned that Google, YouTube’s parent, saw its revenue grow to $5.7 billion in the last quarter. The figure will likely be juxtaposed against the fast dwindling fortunes of the music industry.
The commercial association between YouTube and PRS is separate from YouTube’s association with major record companies. Those association have also been strained at times.
Record companies such as Vivendi SA’s Universal Music Group or Warner Music Group Corp own rights to the sound recordings and music videos. In December, rights talks between YouTube and Warner Music broke down after they failed to agree to payment terms, leading to thousands of videos being taken down.
But at the same time with plunging CD sales, the labels hope that YouTube, which benefits from millions of visitors seeking music videos, will serve both as a promotional outlet and a key revenue source.
While not mentioning the rate the PRS was seeking, Walker said: “It has to be a rate than can drive a business model. We are in the business for the long run and we want to drive the use of online video.”
“The rate they are applying would mean we would lose significant amounts of money on every stream of a music video. It is not a reasonable rate to ask.”
“We are not agreeing to do this [new licensing deal] at any cost,” said Walker.
He said the issue was an industry-wide one and not just related to YouTube.
“By setting rates that do not allow new business models to flourish, nobody wins.”
Services such as Pandora.com, MySpace UK and Imeem have also had issues securing license deals in the UK in the last 12 months.