Assignment: YouTube Case Study
Shannen Marie Simpson-Pike 
2219913
Legal and Business Affairs
BMTY7002_LON
Lecturer: Ian Penman




Critically analyse and review business strategies, challenges and revenue mechanisms
related to the commercialisation of music and entertainment content on YouTube.

YouTube was founded in May 2005 by former Paypal employees Steve Chen, Chad Hurley and Jawed Karim with the intent of simplifying video sharing for the general public by facilitating the uploading, sharing and viewing of content without restriction (Mcfadden, 2021).  

By September of the same year the platform had achieved its first piece of viral content with a promotional video by Nike, featuring Brazilian football star Ronaldinho. A year later the platform was acquired by Google for 1.5 billion USD and has since evolved into the world’s leading video distribution platform, functioning as a social media network, search engine and content archive. (Ingham, 2020)

YouTube’s expansion has been exponential, with a reported 1.5 billion active users in 2022, operating on a built in self service system for its users (Pereira, 2022). It has facilitated substantial careers and income streams for many of its participants, also known as ‘YouTubers’ and partnered with the world’s leading media and entertainment companies as a powerful marketing and promotional tool. 

YouTube is categorised as a platform business, meaning its value is created by facilitating exchange between interdependent groups, typically cultivating large, scalable user networks and resources that can be accessed on demand whilst enabling external innovation and user generated content or ‘UGC’. (Maozed, 2021) In using connected technology, platform businesses like YouTube are able to facilitate exchanges between mass decentralised user networks and achieve exponential scale.

Google leveraged its acquisition of YouTube by integrating their advertisement services into the platform's video content, with the company now powered primarily through an ads generated revenue stream. The targeted adverts service enabled businesses to reach large and relevant audiences with YouTube trading the data of their users in exchange for free access to video content. Additional revenue streams are generated by their monthly subscription services such as YouTube Premium, previously known as YouTube Red which launched in 2015, where members are able to  access content advertisement free whilst still supporting creators through their membership fees. This revenue is then split between eligible content creators and YouTube, with payments divided through a tiered system depending on how successful the creators content is amongst Premium members. This is referred to as Revenue Sharing on their website and includes the Superchat, channel membership and merchandise features. (YouTube Help)

YouTube quickly became a major player in the field of online entertainment for its efficacy as a promotional tool and digital marketplace. Record labels marketing major artists, to independent musicians, to non commercial user generated content has embedded music into the fabric of the company. In 2008, the audioswap feature was incorporated into the site, with the launch of the specialised music video service Vevo in 2009. In December 2012, Gangnam Style became the first YouTube video in any category to reach 1 billion views. (Mcfadden, 2021) Despite amounting to just 5% of all content on the platform, music videos accounted for 22% of all YouTube views in 2019, with music videos accounting for 83% of videos exceeding 1 billion views, (Pex, 2019). In January 2016,  Adele’s Hello was the fastest video to reach 1 billion streams (Mcfadden 2021). A Pex study found that music as a category had perennially increased in value on YouTube. (Pex, 2019)


There are two types of copyright that must be considered in relation to use of a song or musical work, outlined in the U.K’s 1988 Copyright, Designs and Patent Act (CDPA). In the United Kingdom, the very creation of a work qualifies it for copyright protection, however, the CDPA specifies that these protections are only triggered if said work has been recorded. Under the act, a ‘musical work’ or the original sound recording is protected by the master rights, often assigned to record labels through an agreement with the author of the work. (Musician’s Union, 2022) Separately, the lyrics, melody and arrangement of the song are safeguarded under the publishing rights and remunerated via mechanical royalties. Mechanical royalties apply whenever a song or a part of a song is reproduced as a physical product, synchronised for film/ tv, streamed or downloaded etc and are collected and distributed in the U.K by CMOs like the Performing Rights Society (PRS) and  Mechanical-Copyright Collection Society (MCPS). Publishing contracts often assign copyright from the composer/writer to the publisher, thereafter the publisher owns the copyright of the work. The copyright for musical works, sound recordings and lyrics persist for the duration of the author's life with a 70 year extension. In the case of joint authorship, this stands for the last surviving author of the work. (Musicians Union, 2022) 

Instances of copyright infringement occur when a work is streamed, downloaded, adapted, broadcast, transmitted, rented, communicated, performed or played to the public without the consent of the relevant rights holders. (Musicians Union, 2022) The CDPA also legislates ‘the making available to the public’ of a protected work ‘by electronic transmission in such a way that members of the public may access it from a place and at a time individually chosen by them’ (CDPA, 1988) as an act of infringement. Due to the expanse of user generated content uploaded daily to YouTube at an exponential rate, issues of copyright infringement on the site have been consistent and complex. 

Statistics show that YouTube generates over 300 hours of user generated content a day. (Ingham, 2022) Music is a key component of creator content and this paired with YouTube’s self service and democratised uploading system has led to multiple instances of copyright infringement, raising questions from artist and rights holder communities pertaining to the ethics and legality of the company’s conduct. Artist’s concerns regarding YouTube’s handling of intellectual property violations are exacerbated by the value gap between royalties paid to artists per stream by YouTube in comparison to its competitors. Data from 2018 shows that YouTube paid 0.00054p per stream, meaning that a song must accrue 51.1million streams before artists make the average U.K salary with YouTube royalties. Although other streaming platforms like Spotify also calculate artist revenue per stream, issues of copyright differ as YouTube operates on user generated, audio visual content, where licenses or rights holder consent are often neglected on monetised content. On the contrary, Spotify works directly with labels and independent artists on the music it makes available. (Ellyard, 2018)

A 2015 report by the International Federation of the Phonographic Industry (IFPI) attributed the value gap in the share of revenue paid to rights holders between user free advertising supported services like YouTube and DailyMotion -  and digital service providers like Spotify and TIDAL, to the exploitation of safe harbor protections generated under the Digital Millennium Copyright Act of 1998, intended to create a fair licensing environment for neutral online hosting services by providing exemptions to copyright infringement (Ingham, 2015). Section 512 of the DCMA outlines that a service provider is exempt from claims of copyright infringement relating to UGC, provided it does not have "actual knowledge that the material or an activity using the material on the system or network is infringing" with the condition that a designated agent is engaged to oversee take down claims and disputes (Loeb & Loeb, 2010). It can be argued that YouTube remained within these parameters through its content id system moderated by engineers. 

Rights holders and monitoring groups have contested YouTube’s validity as a protectorate of safe harbor, with the IFPI’s CEO Frances Moore calling for clarification “that any liability exemptions can only apply to genuinely neutral and passive online service providers, and not to services that play an active role in distributing, promoting and monetising content.” (2015) The IFPI’s report detailed that whilst YouTube is thought to be the world’s most popular access route to music, the revenue paid out by the company in 2015 amounted to less then half of the overall revenue paid by subscription services to rights holders. (Ingham, 2015)  Calls across the industry to clarify and adapt these laws to accommodate the changes brought by the digitisation of the music industry have persisted from artists, records labels and CMOs alike.  

In 2017, after arduous negotiations YouTube reached multi-year, global licensing agreements with the world’s largest music company Universal Music Group as well as Warner and Sony ahead of the launch of their streaming service YouTube Music, with the promise of stronger policing of unlicensed user uploaded content. (Schlagenhauf, 2017) Although the agreements were not disclosed to the public, it was evident that negotiations culminated in different settlements for each company. Universal Music Group’s chairman Lucien Grange stated the agreements were a positive step toward improved content flexibility and the compensation of artists and songwriters from YouTube’s ad-supported and paid subscription tiers, whilst furthering YouTube’s commitment to better management of music rights. (Charbonneau, 2017). Relations between Warner and YouTube have been historically contentious, with Warner removing the entirety of its catalogue from the site in 2008, only to return within a year due to revenue loss from unlicensed content. Despite extending its recorded music and publishing deals with YouTube in 2017, CEO Steve Cooper stated that Warner had “secured the best possible deals under very difficult circumstances…with the protection provided under safe harbor laws to sites like YouTube incapable of achieving equitable remuneration for their artists and songwriters”. The company consequently settled for shorter agreement terms to ensure leverage in future negotiations with the platform. (Charbonneau, 2017)

Copyright infringement on YouTube has caused a contentious divide between rights holders - namely record labels - and content creators, who often lack understanding on separate copyright protections and their relevence to different rights holders, or licensing clauses e.g limitations of use concerning duration, exclusivity and acceptable territories. When a song is played, sung, whistled or in some cases referenced without the consent of rights holders, YouTube’s automated content ID matching system triggers a copyright strike notification. If the video is monetised, YouTube may block, remove or demonetise the content, only releasing revenue once the dispute is settled to the lawful claimant. (YouTube Help)

Once a copyright claim is issued by a record label, the video may be removed entirely from the site, or the label may collect some or all revenue gained from the content’s monetisation. The creator may also be banned from the platform. As YouTube’s content ID feature is automated, detections arise in which notifications of infringement are inaccurate and entirely different songs with similar composition are wrongly identified. (YouTube Help) When content is blocked or removed a loss of revenue occurs, with additional loss of influencer capital or channel value, e.g likes and views. 

YouTube requests that before launching a copyright strike, rights holders consider whether the content may be protected under the fair use or fair dealing legal doctrine that allows for the reuse of copyrighted material without acquiring permission of rights holders, if the content is line with particular criteria. (YouTube Help) For example, in the instance of non commercial research, educational purposes, criticism and review, satire or parody and news or legal advice. (Lam, 2022). Although fair use protects transformative works, guidelines on what material can be defined as transformative have been ambiguous. (Alexander, 2019) Music instruction channels that offer tutorials for popular songs report the entirety of their content’s revenue claimed by labels for as little as a 10 second use of a copyrighted song, despite the educational purpose of the video. (Alexander, 2019) Youtube receives around 4 million content ID claims daily, with inaccurate claims, including videos that qualify for fair use or belong to the rights holder, even incorrectly flagging sound effects.Content creators have argued the site is less likely to hold major organisations accountable for unreasonable copyright claims. (Padilla-Rodriguez, 2022)   

Such disputes require YouTube to consistently update its policy and website features, with YouTube’s CEO Susan Wojcicki acknowledging content creator’s frustrations concerning harsh copyright claims over the short and incidental playback of a track. (Wojcicki, 2019) A prevailing challenge to YouTube’s business model will continue to be retaining the user experience and enthusiasm of its creators and appeasing the copyright owners whose works appear on the site as well as adhering to copyright law across territories. Other companies face similar challenges to their business model, with TikTok, Facebook and Snapchat emulating YouTube’s revenue share business model to maintain user experience. (Choplin, 2021)

In 2020, musician Tom Gray launched the Broken Record Campaign for fairer remuneration from streaming amidst hardships faced by musicians and songwriters that were magnified by the Covid19 Pandemic. The campaign called for the UK government’s regulation of the music industry and legislative reform to the way revenue is divided from the UK’s pro-rata streaming business model, as well as transparency from CMOs and publishers around royalty chain statistics. Previous calls for reform to the Digital Millennium Copyright Act in the United States were raised in an open letter to congress in 2016 signed by major artists like Taylor Swift, U2, Paul McCarntey and Vince Staples as well as Sony and Universal, critiquing YouTube’s protections under safe harbor and calling for fairer remuneration and stronger defense of intellectual property. (Kosoff, 2016)

In 2021, the DCMS select committee launched an inquiry into the economics of music streaming, which highlighted concerns that artists and songwriters were not receiving equitable remuneration. The report raised concerns regarding the major labels, Universal, Sony and Warner, requesting investigation into ‘the economic impact of the major’s dominance’, due to data showing 60% of streams in the UK come from the top 0.4% of artists, who are likely to be backed by majors. The DCMS provided recommendations for legislative reform from the U.K Government and on January 27th 2022 the Competition and Markets Authority facilitated a study on streaming. Whilst the study reiterated artists and songwriters concerns in reporting that ‘ an artist could expect to earn £12,000 from 12 million streams in the UK…but less then 1% of artist achieve that level of consumption’, it also stated that ‘neither record labels nor streaming services are likely to be making significant excess profits that could be charred with creators.’ (Paine, 2022) The study reiterated the value gap in royalty payouts between YouTube and its competitors, however, concluded that the digitisation of the music industry creates new opportunities for artists, and the concerns raised are not driven by market competition. (Penman, 2021)

For international rights holders, a more hopeful shift in legislation has come from the E.U’s Article 17 directive, a proposal on the modernisation of copyright designed to bring clearer rules for all online players. (Kirk et al, 2022) From 2022, the EU member states moved to adopt legislation implementing the EU Directive on Copyright in the Digital Single Market aiming to increase liability if user generated content (UGC) platforms requiring them to make ‘best efforts’ to license copyrighted videos and songs in UGC or take down infringing content to minimise repeat violations. The directive aims to benefit the platforms, their users, advertisers, independent artists and large rights holders. (Choplin, 2021)

Whilst the EU’s updated digital rights legislations are only obligatory to its member states, there is hope that a ripple effect will occur, similar to the global shifts that came with the General Data Protection Regulation of 2018. Canada, Australia and the United States have all seen governmental reviews and moves to update digital rights management in their territories and better facilitate the transition of media in the digital age. (Choplin, 2021) It can be argued that, whilst its per stream revenue shares undervalue the work of artists, YouTube make ongoing adaptations to their platform’s copyright management suite, and perhaps have a more sophisticated and robust approach to infringement then other UGC platforms like Twitch and DailyMotion. For the upcoming generation of musical artists, YouTube remains a valuable promotional tool. As international governing bodies look to update digital rights management to assimilate to an increasingly digitised media marketplace, YouTube must remain malleable, regardless of its dominance. 















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