Facebook Tries to Offer Music Labels a YouTube Alternative

A parade of up-and-coming musicians from Universal Music took the stage at the Ace Hotel in downtown Los Angeles Saturday in a pre-Grammy Awards performance for a room full of the executives who will make or break their careers.

Talent bookers from James Corden’s late-night show, marketing executives from top brands and executives from Spotify Ltd. and YouTube looked on. Sandwiched in between tables for Apple Inc., an imposing player in online music, and Pandora Media Inc., owner of the world’s largest online radio service, sat executives from a new act trying to break onto the scene: Facebook Inc. 

The world’s largest social network has redoubled its efforts to reach a broad accord with the industry, according to interviews with negotiators at labels, music publishers and trade associations. A deal would govern user-generated videos that include songs and potentially pave the way for Facebook to obtain more professional videos from the labels themselves.

“We’re hopeful that they are moving towards licensing music for the entire site,” said David Israelite, president of the National Music Publishers Association, an industry trade group.

Facebook’s interest in music rights is inextricably linked to its growing interest in video. Having siphoned ads away from print, online companies have recently targeted TV, which attracts about $70 billion in advertising a year. While Facebook faces competition from Twitter Inc. and Snapchat Inc., its main rival is Google, and music is one of the most popular types of videos on Google’s YouTube service. Facebook declined to make an executive available for an interview.

Licensing to music on Facebook would have huge ramifications for the music industry, which is fighting to grab a larger share of the money from online services. With nearly 2 billion users and a growing advertising business, Facebook could provide billions in new sales for the music industry.

Beyond the revenue gains, the music industry could use a deal with Menlo Park, California-based Facebook to exert more pressure on YouTube. Music executives have long assailed what they say is YouTube’s lax approach to copyright enforcement — even though the video-sharing website is the most popular in the world for music, has catapulted many young artists to stardom and delivered $1 billion in ad revenue to the industry last year.

An agreement with Facebook could also serve as a blueprint for deals with other social-media companies, like Snapchat.

On the other hand, providing Facebook users with another way to get music for free could disrupt the music industry’s recent surge in sales from paid services like Spotify.

The talks with Facebook are complex, involving how to prevent copyright violations in user-generated videos, so a deal could be a couple months away or more.

Facebook has reassured the music industry that the company will police piracy and share ad sales. Music executives are also encouraged because Facebook in January hired Tamara Hrivnak, a well-liked former record executive who also spent time at YouTube.

Video consumption on Facebook has grown to billions of views over the past couple of years, as TV networks, news organizations and users experiment with the site much like they once did with YouTube. The results have encouraged Facebook to fund original videos, though those plans are still being developed.

For Facebook to obtain professional video — both music and otherwise — it may have to alleviate concerns about how clips will be presented. At the moment, most Facebook users see videos in their newsfeed, where a clip from a TV show may be followed by a baby photo and then a friend complaining about romantic frustrations.

Facebook must also finish a system to police copyright-infringing material akin to Content ID, the system used by YouTube. Videos on the site already feature a lot of music for which artists don’t receive royalties — a major source of tension.



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