Music groups claim YouTube 'abuses' copyright law

The world's biggest record labels have accused Google's YouTube video hosting service of "abusing" exemptions to copyright law - and called on European policy makers to reform the system.

On Tuesday, the International Federation of the Phonographic Industry - an organisation that represents recording companies - said certain digital platforms, including YouTube, Dailymotion and SoundCloud, have been exploiting legal loopholes to gain an unfair advantage in licensing negotiations.

Its warning came as it reported a 0.4 per cent fall in industry revenues to $15bn in 2014. Despite rapid growth in streaming services, the new revenues they generated failed to compensate for declines in sales of CDs and downloads.

However, Frances Moore, IFPI chief executive, said that in addition to piracy the primary reason the record industry was unable to achieve sustainable growth was "a flaw in the legislative environment".

According to the industry body, this flaw centres on the "safe harbours" introduced to US copyright law in 1998 and European law in 2000, which prevent internet service providers (ISPs) and hosting companies from being liable for copyright infringement by users. They only have to remove infringing content swiftly when notified by a rights owner.

YouTube, whose users upload more than 300 hours of video to the platform every minute, has been one of the primary beneficiaries of the safe harbour exemptions, IFPI claimed. It has been able to build up 1bn monthly users and become the world's most popular source of on-demand music.

But YouTube and other digital platforms that enjoy safe harbour exemptions contributed just $641m in revenues to record companies last year - less than half the amount paid by subscription services such as Spotify and Deezer.

YouTube is "abusing the safe harbours in order to not pay for full licences," argued Ms Moore.

YouTube declined to comment.

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All three of the world's largest record labels - Universal, Sony and Warner - use Content ID to manage their content on YouTube, but complain that it requires investment and is not perfect.

Tuesday's intervention by the IFPI comes as Brussels mulls far-reaching reforms of copyright within Europe, sparking frantic lobbying from all sides of the debate. Maria Martin Prat, head of the European Commission's copyright unit, previously spent years directing legal policy for the IFPI, and the reforms will be overseen by Gunther Oettinger - an official who has repeatedly argued for tough measures to ensure that companies such as Google follow EU rules.

One representative of a large internet company said that the removal of the safe harbour provision "would be absolutely catastrophic for digital services". Checking every single piece of user-generated content before it is uploaded to popular internet sites would be impossible, the person said.

Figures published by the IFPI on Tuesday showed that the recorded music industry's revenues from digital formats last year hit the same level as those from physical format sales for the first time.

Digital revenues rose 6.9 per cent to $6.9bn, representing 46 per cent of all global music sales. Of this total, subscription revenues made up $1.6bn, an increase of 39 per cent, while download sales dropped 8 per cent. Numbers of paying subscribers rose by 46 per cent to an estimated 41m, the IFPI said.

Physical recorded music sales fell 8.1 per cent to $6.9bn. Revenues from performance rights - the use of music by broadcasters and public venues - and synchronisation - the use of music in advertising, film, games and TV - increased 8.3 per cent to about $1.2bn, representing 8 per cent of the total recorded music market.

Additional reporting by Duncan Robinson in Brussels

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