Universal Music Publishing recently signed agreements with Maker Studios and Fullscreen, two of the YouTube "multichannel networks" or MCNs. MCNs have been criticized for being unlicensed and of course YouTube has been criticized for permitting these unlicensed networks on the YouTube system.
Fortunately for all concerned -- starting with songwriters -- Universal has taken a leading role in getting these MCNs licensed and in making the Universal catalog available to Maker and Fullscreen producers for cover recordings. That announcement was immediately followed by the announcement that Crunch Digital would be handling the royalty reporting on behalf of Fullscreen.
While he acknowledged the progress of the MCNs from illegitimate to legitimate licensed services, David Israelite at the National Music Publishers Association reminded all of the MCNs that having one deal with one publisher doesn't solve their problem:
But let me be clear -- all MCNs must be licensed for the use of all songs. This agreement between two MCNs and one music publishing company does not solve the entirety of the problem. As the popularity of digital entertainment has grown, MCNs have significantly profited, often without compensating the songwriters whose work is being used.
But today, we will be happy for Universal's songwriters because their publisher has been able to license these new services. I interviewed David Kokakis, Senior Vice President, Legal Affairs/Business Development, Universal Music Publishing Group, about the two MCN deals for Universal's songwriters.
Castle: Universal Music Publishing recently announced a license agreement with the YouTube "multichannel networks" Maker and Fullscreen that allows songs by your writers to be used on these two MCNs. What are the basic rights you are licensing?
David Kokakis: The deals are relatively straightforward. We licensed reproduction and synchronization rights directly to Maker and Fullscreen (for the time being, we prefer that performance rights be secured through the applicable performance rights societies). The licenses give artists affiliated with these MCNs access to our entire catalog, allowing them to create and post their own cover videos of our songs within the Maker and Fullscreen networks on YouTube.
Castle: It may seem obvious, but people frequently confuse the rights of a music publisher like Universal Music Publishing for songs and the rights of a record company such as your affiliates at Republic for sound recordings. Can you spin out that difference a little bit?
Kokakis: It's a common misconception that securing a license from a record company is all that is needed to legally exploit a recording. There are two distinct copyrights involved: one for the recording itself and the other for the underlying musical composition embodied in the recording. As a music publisher, UMPG administers rights in the underlying musical composition, whereas the record company owns or controls rights in the recording of the composition. Cover videos are in a unique content category because a license from the publisher is typically all that is required (except in instances when the cover recording incorporates elements of the original master recording, such as with karaoke-style covers).
Castle: Universal Music Publishing has deals with YouTube and now also a deal with two MCNs for plays on YouTube. What's the difference between licensing songs to YouTube and licensing songs to an MCN?
Kokakis: I will explain the context in which the deals arose in order to highlight the difference. Our deal with YouTube covers certain types of user-generated content (UGC) uploaded to the platform. This UGC, when claimed and monetized by MCNs, fell outside the scope of our YouTube deal (videos created by or in partnership with MCNs were also unlicensed). This presented a unique problem because content that was previously licensed by us under our YouTube deal was suddenly unauthorized when that same content was curated by an MCN. We recognized that certain MCNs, such as Maker and Fullscreen, had established themselves as influential players within YouTube's ecosystem and that they could help promote our catalog and generate higher advertising revenue for our writers. Consequently, instead of pulling back rights and forcing our content out of the networks controlled by the MCNs, we worked with them to create a new licensing model that protects and fairly compensates our writers, but also gives the MCNs and their artists freedom to create. We believe that collaborating with the MCNs and their artists will prove to be the best way to maximize growth for all involved.
Castle: I realize that the financial terms of your deals with the MCNs haven't been disclosed, but can you describe the money flow from YouTube through to your songwriters?
Kokakis: Advertisers pay YouTube for spots against videos and watch pages (e.g., pre-rolls, banner ads, overlays, etc.), which are typically serviced through Google's own ad companies, AdSense and DoubleClick. YouTube then pays the MCN a percentage of advertising revenue derived from monetized views of ad enabled videos claimed by the MCN. The MCN in turn pays UMPG a prorata portion of its gross receipts attributable to UMPG's interest in the compositions embodied in such videos, as well as to all other publishers who have an interest in the compositions concerned. UMPG then distributes royalties to its songwriters pursuant to the terms of the applicable writer agreements.
Castle: Maker and Fullscreen aren't the only MCNs out there, are you going to license others?
Kokakis: Several other MCNs have reached out to explore licensing opportunities and we are actively negotiating with them. They recognize that building comprehensive music programming within their networks can be lucrative if done properly and with our input. They appreciate our collaborative approach and our willingness to strike deals that are beneficial to all parties.