Universal Music Publishing Group, looking to cash in at a higher level on the YouTube money train, has struck licensing deals with Fullscreen and Maker Studios — two companies that together account for more than 4 billion video views a month.
The dual deals will allow video creators who work with either Maker or Fullscreen to use songs from the Universal catalog -– either as covers or as soundtracks and samples for their videos. The potential revenue upside for publishers is initially small, in the millions of dollars a year. But that could grow significantly, depending on how often videographers use Universal’s songs and how popular those videos become, according to executives close to the negotiations who did not want to be named because the terms of the deals are confidential.
The agreements represent a significant advance in how rights holders make money from a rapidly growing medium whose viewership is measured in the billions. By plugging into networks such as Fullscreen and Maker, Universal instantly taps into a higher advertising rate than the average YouTube video. That’s because advertisers are often willing to pay a premium to make sure their ads are attached to YouTube videos distributed by networks such as Fullscreen and Maker, which tend to have better production values and more engaging content, often targeted at valuable demographics.
“This is a groundbreaking arrangement that encourages the use of our music,” UMPG Chairman and Chief Executive Zach Horowitz said in a statement. “We hope it serves as a template for all other multi-channel networks.”
The agreement averts what could have been an ugly conflict between large YouTube networks and music publishers, who were concerned that some user-generated videos in their networks using copyrighted music inadvertently were not properly paying royalties. Rather than file lawsuits, which would have been the automatic response just a few years ago, music publishers worked with the networks to reach a mutually beneficial deal. The result is an arrangement that lets YouTube videographers select from a library of millions of Universal’s songs and create videos that generate revenue for themselves, the network and publishers.
Universal and other music publishers already make money from user-generated YouTube covers, though not very efficiently. Through legal settlements and private agreements, YouTube gives publishers a choice of whether to take down the video with the cover song, or place an ad against it. If the publisher chooses to place an ad, as most do, YouTube then pays publishers 15% of net advertising revenue when a user generated video uses a master recording in a video and 50% when it is a cover.
The key problem, however, is that cover songs are tough to identify on a massive scale. Google’s technology for detecting copyrighted songs can’t always detect melodies, and many publishers don’t have the resources to scour through the 72 hours of video uploaded to YouTube every minute. As a result, many cover videos slip past and aren’t monetized, leaving publishers frustrated.
“It hasn’t been easy for publishers to locate all those covers in order to begin monetizing them,” said George Strompolos, who founded Fullscreen just two years ago. Strompolos had previously worked at Google and in 2007 co-created YouTube’s Partner Program, which allows a select group of about 1 million YouTube creators to share the ad revenue generated by their videos.
“Once publishers have found those covers and allowed ads to be placed against them, those videos have usually peaked,” Strompolos said. “With us, publishers start monetizing covers from the very first view. They don’t have to be in reactionary mode” of having to identify covers in the first place.
By doing direct deals with networks such as Fullscreen and Maker, publishers are able to cast a tighter net. The agreements could also provide a framework for publishers to forge deals with other large YouTube networks that also aggregate millions of videos.
In addition, Fullscreen says it is giving publishers a higher split of their revenue than the average take on YouTube, though Strompolos would not disclose its exact terms with Universal.
“Ultimately, we’re saying that this cover video is not possible without them, so we want to treat them like a true partner by giving them a larger than typical split,” Strompolos said.
Fullscreen, which works with more than 700 aspiring musicians, last year approached Warner/Chappell Music Inc. andsigned a similar arrangement with the publisher in February 2012 that allows Fullscreen’s video creators to use Warner’s catalog.
Fullscreen, which works with more than 700 aspiring musicians, already has a similar arrangement with Warner/Chappell Music Inc.
Fullscreen and Maker are examples of a burgeoning economy that’s mushrooming around YouTube as the online video platform cranks up efforts to better monetize its social video service.
Maker, for example, is a network of more than 5,000 YouTube channels that, together, have about 140 million subscribers. Some of those channels are produced in-house at Maker’s facilities in Culver City, Calif., but many are created by independent videographers. Among the company’s most popular music shows and personalities are “Epic Rap Battles,” The Gregory Brothers, Mike Tomkins and Snoop Lion’s WestFestTV.
“We have a network of creative people who have developed their own voices, but who also want to pay homage to the work that’s inspired them,” said Courtney Holt, Maker’s chief operating officer. “This allows them to do that and still stay on the right side of the music industry.”