Quick Take: EU Takes A Swipe At YouTube’s Safe Harbour

The EU today announced a raft of reform proposals for copyright, encompassing news, video and of course music. Among the proposals is the recommendation that sites like YouTube that currently operate under safe harbour proposals would have to proactively scan their services for copyright infringing material. This is music to the ears of labels who have been lobbying loudly for this change.

There is no doubt that content identification technology is dramatically better now than it was decades ago when safe harbour provisions were first enshrined in legislation. The fact that YouTube has its highly effective Content ID technology but only uses it post-facto has long been a bone of contention for labels. So this change, if approved and implemented will fix one of the music industry’s big ‘YouTube problems’.

However, it will not fix its other problem the ‘value gap’ i.e. the apparent gap between what YouTube pays per stream versus the likes of Spotify. While there is undoubtedly a gap, as we explained in our ’State Of The YouTube Music Economy’ report, the gap is actually the result of many different things, the most important of which is that YouTube pays rights holders as a % of revenue rather than on a per stream basis. So any per stream rate is an effective rate rather than actual rate. Proactively filtering out infringing content will not fix this.

This is why the proposals also recommend YouTube and co find ways to create agreements with rights holders that ‘reflect the economic value of the use made of the protected content’. YouTube is an ad supported video business that has music as part of its business (17% to be precise) rather than a music business like most of its streaming competitors. As such, the economics for its $7bn ad business are built around monetizing time spent by its audience viewing video. YouTube’s position is that it can only pay a share of what it earns. This contrasts strongly with venture funded streaming businesses like Spotify and Deezer that pay a fixed rate regardless of how well their revenue is performing. It is a clash of commercial world views that is not going to be fixed be legislation.

There is though, a bigger angle to all this. The big tech companies (Apple, Google, Amazon, Facebook) can easily appear to resemble permanent edifices with the dominance of their respective fields a state of digital nature. In truth though, we are at but an early stage in the development of the digital economy and state regulation is only beginning to catch up with these businesses. The EU’s rulings on Microsoft back in the 2000’s played no small part in triggering that company’s demise. Things may play out differently for this crop of tech powerhouses, but what will certainly transpire is that they will increasingly find their wings clipped by legislators and regulators on both sides of the Atlantic.