The National Music Publishers’ Association, or NMPA, is suing YouTube network Fullscreen for copyright infringement, bringing the company to court primarily over the distribution of unlicensed cover song videos. At the same time, the publisher association has announced a deal in principle with Fullscreen competitor Maker Studios.
Fullscreen is what you’d call a “multichannel network” (MCN) on YouTube, aggregating a large number of independent creators and giving them tools to grow their audiences and better monetize their videos. Today, it’s one of the largest MCNs, with more than 15,000 channels and 2.5 billion views per month, according to the Fullscreen website. That puts it No. 2 behind VEVO in terms of the number of unique viewers, according to comScore’s Video Metrix report.
But some of the content that Fullscreen helps creators distribute and monetize comes in the form of unlicensed covers of popular songs, according to the NMPA. In fact, that’s a problem that NMPA president and CEO David Israelite called “endemic” in the association’s press release. That release claims that MCN channels represent a significant number of total views on YouTube and are “comprised largely of cover song videos.”
Music, of course, is a big part of why people tune in to YouTube. You can see that in the popularity of top channel VEVO, which carries the bulk of licensed music videos from the top recording agencies, as well as Warner Music’s channel, which is also in the top five of all YouTube networks. The NMPA, for its part, wants to ensure that it’s getting paid when one of its artists’ songs is performed to the public — which in this case, means on YouTube.
At the same time that the NMPA announced the lawsuit, it also said that it had reached an agreement in principle with Maker Studios, another one of the big MCNs. The deal, once finalized, will let music publishers get paid for past infringement by Maker partners, and ensure licensing going forward.
The lawsuit comes not long after Fullscreen announced the launch of its Creator Platform to better manage and monetize their channels. One of the features of that platform is the ability to add licensed songs and to enable creators to make their own music available to others on the platform.
Fullscreen is a next-generation media company building a global network of YouTube channels with content creators and brands. The Fullscreen network generates over 1 billion monthly video views and reaches over 90 million subscribers, making Fullscreen a Top 5 YouTube Partner. Fullscreen was founded on January 2011 by CEO George Strompolos, the co-creator and co-founder of the YouTube Partner Program. Fullscreen is headquartered in Culver City, CA.
YouTube provides a platform for you to create, connect and discover the world’s videos. The company recently redesigned the site around its hundreds of millions of channels. Partners from major movie studios, record labels, web original creators, viral stars, and millions more all have channels on YouTube. YouTube is predominantly an ad-supported platform, but also offers rental options for a growing number of movie titles. YouTube was founded in 2005 by Chad Hurley, Steve Chen and Jawed Karim, who…
Spotify has made finding music on its service even easier after it introduced ‘Browse’, a feature that surfaces the best of the one billion-plus playlists that it houses.
The Sweden-headquartered company has selected 20,000 of its favorite playlists to help you find whatever music that you’re in the mood to listen to with ease. Browse is built by Tunigo, the music recommendations startup that Spotify acquired earlier this year, and it begins life on iOS and Android, before rolling out to other platforms.
Headline image via Mario Tama/AFP/Getty Images
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Go here to see the original: Spotify introduces Browse to showcase the best playlists on its service
Spotify’s 2012 results are out today, with Reuters reporting that the private company had revenue of 435 million euros, and a 58.7 million euro net loss.
The revenue figure is impressive, more than doubling 2011′s 190 million euro tally. However, the company’s net loss widened in the year, even as it saw a dramatic expansion of its top line from 45.4 million euros to the aforementioned 58.7 million figure.
Spotify notes, in the document that Reuters attained, that as a company it “cannot exclude the need or desire to raise more funds in the future to fund future growth initiatives.” The company is essentially stating that it may again lean on outside capital to grow its operations and, presumably, find profits.
Spotify, its documentation revealed, pays around 70 percent of its revenue in royalty costs. So, for every dollar that flows into Spotify, 70 cents goes right back out the door to rights holders. I pay, like many of you, $10 to Spotify monthly for both desktop and mobile access to its tunes sans advertisements. From this perspective, I pay the music industry $7 per month to listen to its music, and $3 to Spotify to deliver it.
A music company with growing revenue, low cash reserves, and a niggling loss? That’s not just Spotify, it’s also Pandora, a rival to the Stockholm-based company music streaming company.
Pandora, for its most recent quarter, the first of its fiscal 2014 year, lists its “content acquisition costs” at $82.85 million. Its gross revenues for the period totaled $125.5 million. Pandora therefore pays out 66 percent of its revenue to cover the cost of the music that it spins out to its vast listener network.
Pandora and Spotify pay, therefore, around the same royalty rate. And it’s strangling them both. Spotify is unsure if it will need an additional shot of capital to make it to profits, and the public markets, and Pandora is shedding cash no matter how you measure it:
Total cash and cash equivalents:
Cash, cash equivalents and short-term investments:
Total cash equivalents and marketable securities [fair value]:
Pandora lost $28 million in the quarter, up from $20 million the year before, even as its revenue grew from $80.7 million to $125 million for the comparable first quarter in fiscal year 2013 and FY 2014.
If growing their revenue isn’t an effective tool for the firms to find short-term profits, as their expenses do not decrease as a percentage of revenue given their fixed royalty costs, can the two companies not run out of gas? In the short term, they are more than safe. Spotify can raise capital from the private sector, and Pandora, as a public firm, has ways to raise rash.
However, the longer term efficacy of their business model is perhaps somewhat unsettling; if profits can’t be found in greatly expanded revenues, from whence can they be sourced? The simple answer is that royalty rates may need to ease to allow the two firms to find positive margins on their businesses.
Last year, Reps. Chaffetz and Polis introduced the Internet Radio Fairness Act, which aimed to do this at least for Pandora. As The Hill reported at the time: “According to statistics provided by Chaffetz’s office, Internet radio services pay more than 55 percent of their revenue in royalty fees, while cable and satellite stations pay between 7 and 16 percent. “
However, as we have seen, that 55 percent number is quite low. For fun, if Spotify paid the 55 percent rate, would it be profitable? Using back of the envelope scribbling, the answer appears to be yes: 70 – 55 = 15. Fifteen percent of 435 million euros is 65.25 million euros, which is greater than its first-quarter loss of 58.7 million euros. So, the company would have booked a profit in the realm of 6.5 million euros.
If that rate were further decreased, Spotify and Pandora would in fact be comfortably profitable. However, even at the 55 percent rate, both companies’ chances of knocking out real net income appears far healthier.
There could be cost cuts at both firms, but as long as the 66 or 70 cents they take in leaves before they take into account other expenses — development, advertising, content delivery, and so forth — the squeeze will remain in place. The question then becomes whether the music industry will hug the two so hard that in the end each suffocates. Something has to give.
Top Image Credit: Serendipiddy
Spotify has created a lightweight software application that allows instant listening to specific tracks or albums with virtually no buffering delay. It was launched in the fall of 2008 and had approximately 10 million users by September 2010. Spotify offers streaming music from major and independent record labels including Sony, EMI, Warner Music Group, and Universal. Users download Spotify and then log onto their service enabling the on-demand streaming of music. Music can be browsed by artist, album, record…
Type in the name of an artist or song to get started with your own customizable internet radio station. Although stations start with a single artist or song, users can add additional songs and artists to tune their stations to their liking. Avid users advocate using at least a few artists/songs for any one station to receive the best results. Click the thumbs up on a song if you like it and want to hear more…