YouTube Signs New Royalty Deals, Streaming Service Incoming

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YouTube has announced new long-term royalty deals with two major music labels. It’s no secret that the Google-owned video site has been hoping to renew its deals with music labels for some time now, but finally, after nearly two years of negotiations, YouTube has confirmed that it has reached new agreements with both Universal Music Group and Sony Music Entertainment.

As part of the new deals, YouTube will police user uploads of copyrighted songs with a much stronger stance, while artists should expect much more flexibility and higher payments – the agreements establish new royalty rates between YouTube and the rights holder for music videos, as well as other user-uploaded clips. Not only this, but Universal has also gained control over what content appears on ad-supported channels. Nonetheless, as part of the deal, it appears both labels have negotiated the option of restricting certain music and videos to paying subscribers, which is where YouTube’s future plans enter into action. Earlier this year, Spotify announced new agreements that would see certain releases restricted to premium users for an initial period of time at the request of music labels in order to maximize revenue. Now, with YouTube having secured agreements with both Universal and Sony, as well as their existing agreement with Warner Music, the streaming site is hoping to launch its own Spotify-competitor sometime next year, but it appears similar release restriction terms will apply to the future streaming service. Nonetheless, the restrictions will likely push a number of non-paying users towards the premium option, therefore adding to the revenues of both Google and the music labels, while reducing the possibility of disagreements between the companies.

In the first half of this year, the music industry shot up 15 percent in the US alone, while global sales have grown 5.9 percent largely thanks to the increasing popularity of streaming. However, music labels such as Sony have argued that the revenue growth could be stronger if YouTube paid fair royalty rates. But with YouTube set to launch its own streaming service, not to mention the newly agreed royalty rates, it’ll remain to be seen how its relationships with music labels improve over time, as revenue generated from the site gradually increases.