YouTube rights row over music videos could spread to MySpace

The dispute between YouTube and the Performing Rights Society for Music that prompted the website to remove music videos could spread to MySpace UK and other music sites, industry sources said today.

MySpace UK and other sites are struggling to renegotiate their own licences with PRS, which pays royalties to artists.

One source close to the negotiations said that the launch of MySpace UK's comprehensive music service later this year could be thrown into jeopardy unless it secured an economically viable licence with PRS.

"A lot of service providers are negotiating and renewing licences with PRS right now, but the rates are widely known to be uneconomical," said the source. "Nobody could run an online business on those terms." contacted MySpace UK, but the company declined to comment.

The streaming service Pandora was forced to cut off its service for UK users on 15 January after it failed to renegotiate its licence with PRS. Imeem, which reportedly received $15m in funding from Warner Music last year, and RealNetworks are also understood to be renegotiating.

Meanwhile, YouTube and PRS are due to meet in London this afternoon and both say they are determined to resolve the deadlock.

PRS is understood to be basing its royalty claims on the results of the 2007 UK Copyright Tribunal, but the source said the rates PRS were demanding were so high that a free-to-view, ad-based service would not be able to charge advertisers enough to cover royalty payments on each video.

YouTube, which began to remove videos last night, repeated its claim that the rates are not sustainable except for sites that charge subscription access.

"However, we want to share the revenue generated from music videos on YouTube with the music industry," said a spokesman. "But at the rate set by the Copyright Tribunal - which is the rate PRS is seeking - YouTube would be losing money with each stream. 

"It's simply unsustainable for our business." 

A PRS spokeswoman said the ultimate aim of the talks were to come to an agreement, while YouTube said withdrawing videos from UK users was "not a breakdown in talks, but something that had to happen for talks to continue".

Technology and internet lawyer Kolvin Stone, of Fox Williams, said that YouTube could not afford to subsidise music video because of its own extremely high running costs for bandwidth.

"YouTube has had trouble with PRS and this is good negotiating practice," said Stone. "They had to come up with something and by publicising this, lots of performers and artists will be contacting PRS to ask why they are no longer profiting from a YouTube deal."

He said that while the outcome of the copyright tribunal may suit paid-for services such as the iTunes Store, it won't work for free, advertising-backed services, "because the revenues just aren't the same - they might be a percentage of a penny".

"The model has been set up on one basis but ... that model needs to change. Consumers are so used to free content that ad-backed services are here to stay, and more content owners have to change to fit their revenue models around the internet."

Stone said that if PRS were forced to compromise its royalty fees, it would not necessarily be bad news for performers and artists.

"The web 2.0 model is all about scale, and if artists are able to get scale and reach new audiences around the world, they can ultimately make more money from sales and gigs. It's about charging less but for more consumers, and driving revenue from other means."

