More Cash for Covers

ETHAN SMITH  02/15/13  Wall Stret Journal

Those cover videos on YouTube could start generating some more revenue for the music industry.

VivendiSA’s Universal Music Publishing Group has struck deals with Maker Studios Inc. and Fullscreen Inc., two of the biggest “multichannel networks”—a new breed of digital entertainment companies that distribute, promote and sometimes produce videos specifically made for Google Inc.’s YouTube. Under terms of the deals, Universal will get an undisclosed percentage of revenue from ads that run alongside cover videos of the publisher’s songs on YouTube.

Music publishers control the copyrights on musical compositions and lyrics, unlike record companies, which typically own specific recordings of those songs.

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Cover videos are among the most popular on YouTube, perhaps because they combine the appeal of established hit songs with the allure of new performers putting their own spin on the songs. Such cover videos can be an career steppingstone. Justin Bieber‘s path to stardom began with posting covers of pop songs on YouTube, where his manager spotted them.

But until now, little if any of the ad revenue from those cover videos went back to the band members, producers and songwriters who composed the song, or the music publishers who represent them.

Take, for example, the music video for Maroon 5’s hit song “Payphone.” The pop band’s original video has garnered over 90 million views on YouTube, a valuable source of advertising revenue for Universal, the band’s record label and music publisher.

Meanwhile, dozens of amateur and aspiring musicians have posted videos for their own renditions of the song. Individually, none of these cover versions has come close to the official video’s tally. But as a group, 10 of the most popular covers—from a cappella renditions to versions backed entirely by music played on iPhones—have racked up a combined 89 million views.

In some cases, royalty payments that were supposed to flow to Universal Music Publishing Group and its songwriters instead were collected by the multichannel networks, or MCNs, which typically share the ad-sales proceeds with the videos’ creators. Under agreements with YouTube, MCNs were responsible for making royalty payments to music publishers and other content owners. In many cases, however, they weren’t making those payments.

Universal Music Publishing Chairman Zach Horowitz said he first approached the multichannel networks because he had noticed how much online exposure they were generating for his company’s songs. “I’m thinking I’ve discovered this great way of tapping into all this money,” he said. “And instead I find out we’re not getting paid.

Terms of the new deals weren’t disclosed. Courtney Holt, chief operating officer of Maker Studios, said, “the goal is an equitable arrangement where the network, the artist and the publisher are all able to generate income.”

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