YouTube’s Music-Royalty System Is ‘Ripe for Abuse,’ Report Claims

·5-min read

YouTube’s royalty system has long been criticized by multiple music-industry organizations for opaqueness, a lack of oversight and, many feel, insufficient payments. But a new report in Billboard makes a number of detailed allegations, supported by claims from a number of unnamed sources, who say that YouTube — which is the single largest streaming service for music in the world — has a rights-management system that is “full of errors” and “ripe for abuse,” and claim that Create Music Group, which initially established itself as a royalty-collection service for music companies, frequently collected royalties to which it is not entitled.

Create co-founder Jonathan Strauss categorically denied those claims, and said the company’s claims are always guided by its clients’ deals — “CMG does not input or remove shares without authorization.” In a statement to Variety, a rep for Create said: “At Create Music Group we work tirelessly to ensure that our clients, independent artists and labels, receive all of the revenue that they are entitled to. We take that responsibility very seriously. We unequivocally deny, however, the assertion made in the Billboard article by our competitors that we “game the system,” and the data proves this out. More than 90% of the conflicts created by our competitors, over 26,000 in all, have been settled in our favor. We follow both the letter and spirit of the rules YouTube has set up for our industry and are very proud of our track record in this regard.”

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Contacted by Variety after the article published, a rep for YouTube said: “We have dedicated teams working to detect and prevent abuse or otherwise invalid use of each of our tools. We rely on a combination of humans and technology to detect suspicious behavior, request additional information where necessary, and remove reference files that are low-quality or invalid. We take abuse of our tools seriously—we terminate tens of thousands of accounts each year that attempt to abuse our copyright tools.”

YouTube music chief Lyor Cohen said last year that the platform had paid more than $4 billion in royalties to the music industry in the previous 12 months alone. However, at issue is how that money is tallied and distributed.

As noted in the article, YouTube, which generates money for rights holders primarily from ads that run in front of their songs or videos, has limited access to its content-management system to a small number of labels, publishers, performance rights organizations and collection companies that tally and collect royalties for their clients. Create is one such collection company, and a rep says it has collected some $400 million for its clients from its formation in 2015 through 2021 (it has also expanded into publishing and distribution).

Sources in the article say that such collection companies can take anywhere from a 10% to 50% commission for collecting publishing royalties from YouTube, depending on their contract with the artist and the level of service provided. But the sources also claim that YouTube’s deeply restricted access to its CMS has made the system rife with impropriety.

As examples, the article cites two Phoenix-based men who were indicted for collecting $23 million in recording and publishing royalties for over 50,000 Latin music copyrights they did not control, making “hundreds” of inaccurate claims for music they didn’t have the rights to. It cites sources familiar with the CMS as saying that anyone with access can “claim” some or all publishing royalties from a song “without having to prove they have a right to collect that revenue. As long as no one else has claimed the same royalties, YouTube simply sends them the money.”

While YouTube has long been criticized for its hands-off approach (rights-holders, not YouTube, are usually the ones who must act to have unlicensed content removed), the article also notes that publishing rights in particular are notoriously complex, and also that countless songs — including half of the top 20 tracks on the Billboard Hot 100, according to Strauss — are “in conflict,” meaning there are disputes between writers, publishers and others over who is due what, and how much.

It also acknowledges the delays and inaccuracies that can result from the vast number of songs posted on the platform, let alone the publishing splits between writers, or unregistered songwriters.

However, it continues, “YouTube doesn’t notify artists or songwriters that they are owed royalties. It also doesn’t check claims to ensure they’re made by actual rights holders, or intervene when works are ‘in conflict.’” The article does note that much of the music posted on the platform contains inaccurate metadata, which can lead to inaccurate payments, but sources said that is not the primary problem.

“If someone has access, they can spend time trolling around looking for popular songs, seeing what is and isn’t claimed, and then start claiming the crap out of everything,” one royalty collections executive said.

Speaking to specific claims about Create, Strauss told Billboard, “There are times when Create has a specific split or percentage of ownership on a song that gets adjusted later on. This is not because Create is trying to get ‘extra’ money but simply because the official splits on songs often get changed after the initial release has already happened because of un-accounted for samples or smaller collaborators that get overlooked.” Any claims Create makes on YouTube are at the direction of its clients, Strauss says, adding that “clients are legally required to give us the correct splits.”

He added, “Clients often switch managers and lawyers very frequently,” and new representation “get[s] a commission on new deals.” He says that these incentives lead artist teams to sign their clients up for new publishing deals and then “be very frustrated that they’re still” in a previous agreement with Create that entitles the company to collect their royalties.

However, he proposed the same solution to this ongoing problem that many in the industry have proposed: transparency.

“I think everything in the music industry needs to be a hundred percent transparent for the public to view,” he said. “What we do needs to be public; what the competitors do needs to be public. The only way to solve things quickly is if we all had access to that data.”

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