DCMS hearing on Economics of music streaming - Feb 10

The Digital, Culture, Media and Sport Committee today heard evidence from:

• Steve Bené, General Counsel at Twitch
• Raoul Chatterjee, Vice President for Content Partnerships at SoundCloud
• Katherine Oyama, Director, Government Affairs & Public Policy at YouTube

It should be noted that Steve Bené was not asked a single question during the hearing.

The following is a transcript based on voice-recognition software.

Julian Knight [00:00:26] This digital culture, media and sport, select committee and enquiry into the economics of music streaming this third and final panel of the day, we are joined by Katherine Oyama, the director of government affairs and public policy at YouTube, Raoul Chatterjee vice president for content partnerships at SoundCloud and Steve Bené general counsel at Twitch.

Kevin Brennan [00:01:16] Isn't safe. Harbour just a get out of jail card to allow copyright infringement to happen on your services.

Katherine Oyama [00:01:23] Thank you for that question and good afternoon. Thank you so much for inviting us to be part of the conversation. I don't think so. You know, I think if we look at Safe Harbour as they exist and, you know, pretty much every modern economy in the world, they've been credited as being a key foundation for the vibrant digital economy that the U.K. has. I can say from the tech sector, not only do we see creativity flourishing, but the digital economy in the U.K., it's such an important place for start-ups, for FinTech, for EdTech and Safe Harbours have really been credited as creating a foundation of certainty that allows investment in services. I'd say specifically from YouTube's perspective and I think relevant to today's conversation about music, Safe Harbours have really powered the user-generated content movement that we're seeing. And if we look at the economics of our business in the panel before someone had mentioned that statistic, we're proud of that. We've sent 12 billion dollars to the music industry. The partners who we work with, many of them are receiving more than half of their revenue every year from the user-generated side. So not only has that system created a really vibrant place for artists, and fans are able to be more interactive, and we see pieces of music content going viral. But there has been a big shift where this sector is really driving real revenue and powering this five to six-year positive growth we're seeing now in the global recorded music industry. So we're happy to see streaming now be a majority. And we see the UGC side truly powering a lot of that growth in the industry.

Kevin Brennan [00:03:06] But you heard the record labels representatives earlier on say basically it just suppresses the value of their intellectual property effectively. I mean, for example, when the EU copyright directive was being debated, which the UK government at that time was was actually quite an active player in favour of - although it's working out what he's going to do now we've left the EU - isn't it true that YouTube paid some of its video stars to allege that the directive would ban memes which actually were exempt under the directive? Isn't that a case of you promoting fake news?

Katherine Oyama [00:03:46] I don't think so. I mean, of course, the directive is still under evaluation. I believe it's only been transposed by one member state so far. So these debates are ongoing. We've heard concerns and uncertainty raised by all sectors. I mean, I think rights holders, if you look at the debate there's truly an equal amount of concern and controversy from the user community as well as the rights holder community. Our creators, obviously, were following that very closely. I'd say one specific example...

Kevin Brennan [00:04:16] Is that true, though, that you did pay some of your music video creators to say that the directive would ban memes when, in fact, they're exempt under the directive?

Katherine Oyama [00:04:28] No, I think one specific concern that they have raised with us recently in the last few months is due to some of the uncertainty, some of the music rights holders have been concerned that incidental right holders... So a toy and a video or the owner of a copyrighted design on a T-shirt that those that are kind of more incidental uses in a music video, that the new laws could be so confusing that those other rights holders would be empowered to strike down their content and reduce their revenues. And I think that's a legitimate concern.

Kevin Brennan [00:05:00] Are you trying to influence policymakers in the U.S. to insist that Safe Harbour is part of any UK US trade deal that might be negotiated, even though the UK government previously obviously favoured the directive and may want to introduce a form of it here in the UK eventually or their own form it?

Katherine Oyama [00:05:22] I think we generally support the Safe Harbour Foundation, both for the importance it has had for the digital economy and for the music sector driving, you know, more than half of the revenue. Certainly in the US, Canada, Mexico agreement, that was a debate. I have not been any part of the debate in the UK, US discussions.

Kevin Brennan [00:05:40] OK, so you haven't been sort of talking to people in Washington and trying to persuade them to insist on inserting that into any future US UK trade deal?

Katherine Oyama [00:05:50] I haven't. I think if we were asked, we would be happy to share what we just shared earlier; that we do think that it is a strong foundation. We obviously go far above and beyond the Safe Harbour framework with our investments. We've been licenced in the UK for more than 10 years with all the major players, all the labels, the publishers. We've opened up a new platform for creativity for artists, but that injecting significant uncertainty in the framework by eroding the Safe Harbours would have, I think, a counterproductive effect. And we are concerned about rolling back the growth, the important growth that we are now seeing in the industry.

Kevin Brennan [00:06:25] OK, some people might think that might be the digital equivalent of chlorinated chicken if you did insist on putting it in. But I won't ask you to comment on that because that's a very active debate here, I think, rather than with you. Just one final question, Chair, to one of the other panellists, if I could ask Raul from SoundCloud. We've had a bit of discussion about user-centric payment systems for streaming services, which is this obviously this enquiry into the economics of music streaming. Am I right in saying that this is something that the SoundCloud is getting into a bit?

Raoul Chatterjee [00:07:05] Well, it's definitely an interesting area and as an artist first platform, we're always looking for ways to make payouts to artists fairer. That's definitely something we believe in. But the whole investigation into user-centric is a very complex and detailed investigation that needs to be taken. It's one potential path that we're exploring. We haven't ruled anything out as yet. We haven't officially announced anything. I'm aware that there have been some stories, but all of those are officially announced and it would require industry-wide conversations and support to be impactful. We actually pay out the majority of the payouts through intermediaries, record companies, distributors, publishers, collection societies. So in order to have the most significant effects on artists, we would have to work in the corporation with those partners of ours.

Alex Davies-Jones [00:08:03] Thank you, Chair. Katherine, if I could come to you, please, many in the industry have said that the Safe Harbour policy has resulted in a value gap where revenue from free ad-funded music streaming pays up significantly less than the subscription-based streaming services. What's causing this to happen? And do you think that this value gap is currently fair?

Katherine Oyama [00:08:23] Thank you. I think there from the panel that I heard a few hours ago, I do think there's a little bit of confusion. So I think it's important to remember, especially from the YouTube side, we have a few different business models powering our music business. On one side, we do have a subscription service. We've been a late arrival, but we're super happy to see we have now more than 30 million subscribers. I think all the analysis I've ever seen about payouts and, you know, breakdowns is that we are on par with those other services. Then separately there is the ad-supported side of the business, which has the user-generated content. And I think that's probably where there's quite a bit of confusion. So if you think about a platform, you take a step back, like YouTube music's incredibly important to the platform. We also have health and fitness, education, religious institutions, nonprofits, filmmakers. And so it's possible that music surfaces on that side of the house, both in the kind of premium channels that, say, a label or an individual artist might upload just their video. But there's also a lot of content on YouTube that has these more minor uses. So like a video of a skateboard or a tourist video where you have, you know, a different amount of music. And so I think it's just important to remember when you're looking at a service as robust as YouTube, that not all streams are exactly equivalent to, say, this one model that we might have. But what we're so happy to see is that this fan uploaded content...I've been at the company almost a decade. And I do think five years ago, our partners, when they saw fans uploading, they definitely were like, we want to use your tools to block the content. We don't want it there. But today, in 95 per cent of those cases...So any time users uploading our partners...So those labels, the indie labels, the publishers, they're alerted that their content is being uploaded in 95 per cent of the cases - and it's completely, of course, their decision - rather than block, rather than saying we don't want it on the platform, they're choosing to have it up and they're choosing to get the monetisation from...

Alex Davies-Jones [00:10:31] is it their fault the value gap exists?

Katherine Oyama [00:10:39] No, of course. I mean, I don't think it's anybody's fault. I just I think we honestly reject the notion we are seeing value. So we've sent out over 12 billion to the music industry and we're seeing daily we're seeing artists being broken on the UGC side. We're seeing Queen is a good example. So they had a video from before the 1990s, but they had over a billion views only a couple of years ago, and in part, because tens of thousands of their fans were participating with their content and that was creating an entirely new revenue stream. So I just I wanted to say, I don't think for us there's a gap. I think we are seeing new forms of revenue to songwriters, to traditional institutions and to new artists.

Alex Davies-Jones [00:11:24] OK, so the advertising revenues that are from ad funding streaming split the same way as premium revenues. So would you take that per cent in industry? Take 70 per cent?

Katherine Oyama [00:11:36] Generally, yes, so is both sides it's a revenue share where we take the minority, the majority goes to the rights holders. As you know, there's a complex system on the rights holders side of how that gets divvied up. But I think the numbers someone mentioned in the panel earlier, generally those breakdowns are accurate. Yes.

Alex Davies-Jones [00:11:53] Raul Is that the same for SoundCloud?

Raoul Chatterjee [00:11:56] SoundCloud operates a different type of service from YouTube. We don't have video which just audio-only. SoundCloud has a hybrid model. We do have uploaded content from individual creators, artists. More than 12 million creators are heard every month. We have over two hundred and fifty million. So it's a very different service, very differentiated and with such a wide range, an array of content is obviously very different types of models that we work under. We have a direct monetisation scheme for a lot of artists. Many artists sign up with us and join a revenue share programme with us. We also work with the music industry, record companies or the ones that have been on and merlin for the independents and lots of direct independents and publishers. There's a whole variety of different types of deals. But on the ad-supported service, it's worth remembering that not all of the ad-supported services at the same SoundCloud is a fully interactive service. We have the ability for everybody to search for tracks. That isn't necessarily the case across all the different services. But because of that interactivity, some of the charging structures could change as well. So we actually believe we pay over the kind of 70 per cent amount for the ad-supported service.

Alex Davies-Jones [00:13:07] OK. What mechanisms do you have in place to proactively identify any cases of copyright infringement?

Raoul Chatterjee [00:13:14] So we put a huge amount of effort into protecting the industry's copyrighted content. So we have a content ID system. So when users upload content is scanned against a reference database of content that we have that we've collected ourselves. We also work with the industry market leader, Audible Magic, who have a reference library as well. If there are any matches against the music industry's content and we take the most conservative business rules, which is typically blocked. So what we do is we work with the music industry to block secondary copies of their content. I prefer to have that content sitting on our own artist profiles that pure home of the content. So you don't tend to see secondary copies because we don't have videos where you might have a different skateboarded, for instance. So in our world, the labels as well can make the choice as to whether their tracks appear in the support service. They have a choice. They can actually put music just behind our subscription paywall, which is a different way of working compared to the others.

Alex Davies-Jones [00:14:15] OK. What does YouTube put in place to prevent any copyright infringement?

Katherine Oyama [00:14:22] We have a system called Content ID. It powers all of YouTube. So we've invested about a hundred million dollars into content ID and it's basically a collaboration with the rights holders. So they give us their fingerprints or their digital files and then when the users uploading the content, we can alert them in advance before it goes live. There's been a match and then they get to decide what they want to do so they can choose to monetise that content. This also includes composers and songwriters. If there's been a fan cover song, they can choose to just let it go up. They don't want to monetise that. They want to see some kind of analytics about how it performs. They can also choose to block it. If they don't want their content, they have the full ability to strike it from YouTube or to even do that geography by geography. So they might say, hey, I like this rate that I'm getting in the Philippines, but I don't like this rate in Nigeria. And they have that kind of granular control. Or they could say a user fan cover can go up for thirty seconds, but not for two minutes. So it's quite granular. That system has sent about five and a half billion dollars up to rights holders.

Raoul Chatterjee [00:15:30] On the so-called value gap, it's important to remember with the ad-supported services, there's a lot of incremental revenue that's being created. So there are not everybody in the world can afford a 999 for the service. We have a lot of people we have a wide range of diversity in our user base. Many young people who don't have that kind of disposable income to earning money from advertising from those groups is definitely additive to the industry. We also have a large number of people who are using our free and supported service who also subscribe to either one of the other services. There are many others I know you're talking to later on this month. So if you have people paying for a subscription and then experiencing an ad-supported service alongside that because they're accessing additional content, then that's additive to the industry. So there's no so-called value gap, but it comes into those two situations.

Alex Davies-Jones [00:16:19] I appreciate that people can't afford maybe the 9.99 subscription service, but we've got musicians here who can't afford to pay their mortgage and are struggling to pay their bills because they aren't earning the average wage in the country. So your justification there is that, well, because people can't afford service, we should just give it to them for free?

Raoul Chatterjee [00:16:37] Any of those musicians can work with SoundCloud to figure out the best way to represent their content on SoundCloud, so obviously I have a huge amount of sympathy for musicians who are struggling, particularly those who have had their income hit in the last year or so. You know, we're an artist-centric platform, so majority of people who are actually using SoundCloud are uploading their own material themselves. And we have a whole variety of tools to help them reach their audience and collaborate with other musicians. That's a very normal thing that people do on SoundCloud. And yeah, as as I mentioned before, there's a whole variety of ways they can operate to ensure that their music is protected.

Alex Davies-Jones [00:17:13] Yeah, OK. One of the issues is protecting that from copyright infringement. And so what proportion of the copyright infringement is proactively identified compared to where the rights holder has no notified you, for example, that the infringement is taking place? So before you have to be told.

Raoul Chatterjee [00:17:32] On SoundCloud, we have a team of people who are working 365 days a year to respond to any requests that come through it, but it's worth also just bearing in mind that we do operate a notice and stay-down policy. So if somebody puts up a request and sends a request against a new sound recording that's been taken down, that is recorded and put into our reference database. So no further copies of that audio can be uploaded by anybody else. So that notice and state policy is something that we've had for many years that helps protects every single right soldier so that I don't have to make repeated takedown requests. We don't get complaints from rights holders or artists that there's a, you know, a big challenge with trying to send repeated takedown notices.

Alex Davies-Jones [00:18:18] But how many are identified by you directly compared to take the request that you receive?

Raoul Chatterjee [00:18:24] We don't measure that. That's not something I'm prepared to answer. But I can help you separately to look at the balance between the two. But, you know, we're active. The technology is active. It blocks content people sometimes to try and upload things they shouldn't. And it does block things every day. Things are being blocked and every day we have things that are requested to be taken down. But every day we also monetise content and every day we pay rights. So there's a growing amount of money for the use of that content on SoundCloud.

Alex Davies-Jones [00:18:52] YouTube - how much copyright infringement is taken down directly by yourselves compared to what's reported to you?

Katherine Oyama [00:19:01] When we look at the numbers, we also have a very simple Web form where rights holders can just submit the Web form. And then we also have that more automated content ID system I mentioned. About 98 percent of claims go through the content ID side, so much less on the Web form. And in about the last six months, we processed 600 million claims in content ID. And so those are all the automated proactive matching. I mean, of course, it's a collaboration where we want to know from the rights holders that they own the content. But it's a significant... I mean, the vast, vast, vast majority is now at this point automated rather than manual.

Alex Davies-Jones [00:19:37] OK, so hypothetically then, if a user was able to upload music that they didn't have the copyright to and they were able to monetise this on your platform, but that's before it was identified or flagged to you, what then happens to that music, that money that's generated by you and them once it's been flagged for copyright infringement or finally taken down?

Raoul Chatterjee [00:20:00] So the monetisation programmes for the creators, that's not open to everybody. We have a number of different programmes and there is a selection criteria that's in place in order to join those. So we assess the suitability of people who are joining that programme. And so not anybody can just join and use somebody else's content. They have to provide original material. There are extra checks that are provided, just even further checks that are provided. By the way, we also distribute content onto other platforms. We distribute content onto YouTube on behalf of creators and Spotify and other places. So we're very used to looking at that content, working with those creators to make sure that it's quality control and in good standing to be monetised.

Alex Davies-Jones [00:20:46] OK, Katie, if that was to happen to YouTube, what would happen to the money?

Katherine Oyama [00:20:49] I mean, generally on content ID because we are licenced with all the major labels, with the Indies, with the publishers, with collecting societies, generally It would be notified at upload because we are working with those different partners. It is possible... We do have a dispute system where there can be a claim and then there can be a dispute. And actually, in the case of music, it's very rare that there are disputes. But in half the time that the disputes happen, actually the rights holder themselves will say, sorry, I didn't understand. You know, they have the conversation and they actually release the claims.

Raoul Chatterjee [00:21:24] Probably also worth saying that the way that publishing works is very different from sound recording, certainly VAT, SoundCloud and a lot of the other ESPs, maybe not YouTube, but content is in our programmes. It's under a licence is being monetised. And then with the publishing world, the reports are sent to the various back office companies. There's a whole variety of them. And then they analyse everything that's been used on the platforms and they claim the content that for the copyright to the songs and the composition. So everything is monetised gets reported to those publishing entities in order to collect the royalties.

John Nicolson MP [00:22:14] Can I just pursue that for a moment? Katie, I'm interested in finding out what happens if, for example, somebody uploads some music that they don't own the copyright to and then they make money from it and you're alerted to that. How does the person who's entitled to get the money end up getting the money back that's being wrongly allocated to somebody else?

Katherine Oyama [00:22:41] I mean, I think generally because content ideas that upload that would be very rare. I think on the specific question you're asking, I'd have to follow up with you in writing. And if there is a dispute and there has already been monetisation, I'm happy to follow up with you on that in writing.

John Nicolson MP [00:23:00] What we're asking everybody this who appears before the committee, what particular challenges do you think there is for musicians and for composers at the moment with the streaming model? And how do you think this committee could recommend the best possible reforms that would drive more money into the musicians and composers pockets?

Katherine Oyama [00:23:29] I'm happy to start I think it's such a you know, of course, an important question, obviously, the most songwriters or artists that we know today are working across a number of platforms that are also incorporating live. I think one area where we've seen concern raised throughout your enquiry and we hear it ourselves in the industry, is this lack of transparency or the need to have more transparency? I know, you know, the UK ICO office had kickstarted an effort to paper around twenty twenty-five and modernisation. But from I'd say from our side, from the services side, the lack of a comprehensive database about ownership adds a lot of complexity, because in the music space, as you know, you can have four songwriters sitting around one night they develop a song. There's nothing in copyright law that says they have to record it at that time. And we on our platform truly want to know. We want to know who to pay. We want to know how to split it up for a 90-second song. We often are having to divide that across maybe 14 different entities and different rights holders. So I think both on this ownership side, I think having more transparency into ownership. And then obviously on the payout side, you know, we're sending the majority of revenue out. If you're an artist who's working directly with us, you would see in our artists analytics a lot of data about how your works are performing, what your ad rates are, what the total revenue is. But I have heard throughout this enquiry a real call for more transparency about what happens to the dollar, you know, as it goes, works through the system and works through a number of different entities. I think that would be only fair that there's more transparency there. And I'd say on the business side, a piece that we've been looking at continuously is how do we diversify revenue streams, especially I mean, this last year there has been an even bigger shift to digital because of the immense hardships and in the live industry. So we've been spending a lot of our time thinking about are there other ways we can think about how to attract users to pay more for this service? We've been looking at live streams. So in the last couple of months, we've had live-stream concerts where artists Black Pink is a good example. They just sold tickets to a live concert on YouTube. They sold out about 20 X the capacity of the O2 Arena for one concert, I think. Now Horizon did one recently in the UK as well from Royal Albert Hall, where he had about one hundred fifty thousand customers that maybe twenty dollars each, where he was able to do that. So diversifying, looking at can we monetise live streams more. A lot of artists are turning to their channels to sell their own merchandise or even their own vinyl records. Some are experimenting with memberships on their channels. I think more opportunities like that.

John Nicolson MP [00:26:28] That's interesting. And so when a concert like that takes place, what percentage of the money do you get and what percentage does the artist get?

Katherine Oyama [00:26:36] It should be around 70/30. It's the majority goes up to the artists. Of course, you know, hosting those is also expensive and a complex system of licencing. So we do, you know, have a share. But the majority goes back out to the artist or the rights holder of that content.

John Nicolson MP [00:26:55] OK, I'll ask the same question to Raoul. Exactly that what can be done, do you think, having listened to so much of the evidence that we've heard to give a clearer and better deal or justice?

Raoul Chatterjee [00:27:12] I've been watching the sessions with great interest. It's been very interesting to see how many different things have come up. There's clearly a lot that is causing difficulties for the artist community. There's been such a volume of submissions, powerful submissions, and anyone watching, whether you're involved in the industry or not, knows that being an artist in these times when the main source of being able to perform in front of your fans is taking it away from you is incredibly challenging and difficult. So but it's complex. So there's so many different issues that come up. I think streaming should be defined as streaming. I don't think we should be looking to try and apply old business models to what is now the dominant format. I think we should be looking at how we can consider more equitable ways to allocate the royalties to the artists. That is something that could come up and come up what has come up but could be investigated further. I don't think the answers have been given on these sessions, but whether they want further investigation, I think that's a good cause to do that. And, you know, the songwriters face it's come off a lot in the previous session. There are incredible challenges around data for songwriters. If we can fix the challenges around data, the DSP, the platforms like ours, can have great data to work with, to provide to the collection societies and the publishers that I can actually collect and pay out in full. That would eradicate a lot of problems as a huge time lag as well. On the publishing side, we can pay out to record companies and distributors. You know, at the end of the month we can put money in their banks. When it comes to the publishing side, it takes many, many months, even years in many occasions for the songwriters to get paid because of the lag in being able to process rows of data, be able to collect completely safe. From my perspective, there isn't one thing, but there are many things that we should all be doing to improve the situation for the creators and the artists.

[00:29:16] Would you agree with great Graham Davis of the Ivor's Academy from the last session, when he came out with what I thought was a memorable phrase when he said 'song value has been suppressed'?

Raoul Chatterjee [00:29:30] It's hard to understand and agree with that when, as you heard from Rupert from Beggars Group on the previous session, the value of the song to the dominant format or the proportion of the payment for the songwriters and the composers is pretty much gone up 50 percent. It was about eight percent of wholesale in the CD era. And now we're talking about 15 percent of retail.

[00:30:00] I work in an area where we operate a fully interactive On-Demand ad-supported service and we pay out more than 15 percent to the songwriters. So not everyone has one of those. Not many companies can afford to run one of those services. SoundCloud is very proud of what we do, but we also operate a business that's been growing and improving. But it's hard to make money in this business. If you look at our company accounts, we still run a loss. So we're certainly not generating excessive profit margins and paying excessive salaries. Thankfully, we have great support from our investors.

John Nicolson MP [00:30:40] Right. How much of a loss you're on that?

Raoul Chatterjee [00:30:43] Our company accounts for 2009, say the public, so you can take a lot of it today. So I think it was about 16 percent in 2019 and it has come down over the years.

John Nicolson MP [00:30:54] What are you predicting and breaking even?

Raoul Chatterjee [00:30:57] I'd like to think we'd be breaking even present. I think we announced recently that we have had some quarters where we've broken even so, I think that things are moving in the right direction. We turned over in that year 147 million euros.

John Nicolson MP [00:31:21] OK, could I come back to you, Katie, because we've heard a lot about Spotify in the course of this enquiry and Spotify subscription prices haven't increased for more than a decade. Why do you think that is?

Katherine Oyama [00:31:43] That's hard to speculate on their business, I guess I would give them credit that they have smart people looking at the overall economics and that they're also motivated to kind of grow the business as a whole. You know, I think we are... And there may be an assumption that if you increase the subscription price, the output would only be a growth. But it's also possible I mean, as we've seen, not every user can pay a subscription. Not every user is ready today to pay a subscription, are willing. And so I'm sure that they're looking at, given how competitive the market is, what is the right price point to run the business.

John Nicolson MP [00:32:22] But you're competing, aren't you, because you're offering a premium service for yourself. I guess you're watching very closely what Spotify are doing and charging. What will you be charging for the public service?

Katherine Oyama [00:32:38] I believe that our price is the equivalent. So we have a premium model where it's music and other content and we have just the music subscription, which I believe is also 9.99, and that is the licence service that we entered probably only a few years ago. But we're already at 30 million paid subscribers. So that's exciting to us. And I mean, our goal obviously is to continue to drive, drive more and more subscription and into that funnel. Yeah.

John Nicolson MP [00:33:09] All right. Before I get to the Chair, because I'm a journalist by profession, I'm gonna ask you a human interest question. You worked in the White House. Didn't you vote for President Biden when he was vice president?

Katherine Oyama [00:33:21] That's right. For then-Vice President Biden.

John Nicolson MP [00:33:25] Does he have good musical taste.

Katherine Oyama [00:33:27] He does. He's wonderful. And I think he has a very broad and eclectic... He has a lot of grandkids that keep him updated on modern music. Yes, of course, that Irish music. And he has excellent taste and close relationships, as you probably know with the music industry.

John Nicolson MP [00:33:45] Yeah, because I do a radio show on a Sunday when he was inaugurated, I played his choice of music. Not that he called me up directly and told me the Billboard magazine had collated from various interviews about his choice of music is and the people who supported him in the music that he played at rallies. So it's actually eclectic. He likes Harry Styles and Coldplay, Adele and Bruce Springsteen. So there's something for everybody. I wonder if he did any kind of image consultancy in order to come up with that list.

Katherine Oyama [00:34:24] Maybe we can encourage them to release a playlist, you know, a summer playlist or something like that.

John Nicolson MP [00:34:30] I actually do, actually. As a matter of fact, I'm not sure. Of course, we have a programme called Desert Island Discs. And politicians, you can tell whether they're being entirely truthful about their musical choices or of whether or not Gordon Brown famously chose the Arctic Monkeys. He's the least Arctic Monkeys that never met in your life.

Steve Brine [00:35:01] Katherine, thank you for your evidence. Interesting insights into the Biden White House. You're quite... A lot of talk in your evidence about the foundry programme. Seems interesting to me. How many artists, foundry programme support? What actually does that support look like?

Katherine Oyama [00:35:42] So Foundry is a programme... I mean, one of our just bigger strategies is just to kind of work with young people and the industries that are interested in music along with their career. So we start kind of earlier with music education office, Manchester, Bristol, working with schools. Foundry comes in more when someone's already expressed the interest to be an artist kind of full time. It's a programme, I believe it has maybe 10 to 15 participants every year. So Dua LIPA was in that initial class that she had maybe fifteen hundred subscribers.

Steve Brine [00:36:15] She was a user. Yes, she was a user of the platform.

Katherine Oyama [00:36:18] Yeah. And she's now been the first UK female to head a billion and views on a single video. She's won awards, Grammys, you name it. Dave was I think possibly in the second class. I know he's talked quite a bit about the importance of YouTube to his career from the very beginning. So it is a smaller programme. The idea is to kind of really work and to. And we think just yesterday launched another annual programme with Music Managers Forum, where we're working with that side of the industry, again, with managers who they generally kind of are at the tipping point of their career. So they're working maybe another job, but they also want to do management full time for artists. And it's an extensive programme. So Foundry's critical. I think we've seen huge successes come out of that programme and it has many.

Steve Brine [00:37:09] Artists coming into the foundry, so new artists coming into it, that that is all obviously available for us to see. For our growing playlist. Do you receive any benefits for your support for these artists then? So, you know, preferential licencing agreements, for instance, as a result of nurturing talent wouldn't be unreasonable for you to do so?

Katherine Oyama [00:37:34] I think so. On the licencing side, of course, artists can always choose to be on the platform or not. I do think the benefit to us is that you know, we do cultivate a truly personal relationship and we're just much better able to serve the individual artists once we understand what their goals are. We understand the kind of their genre of music. So there is it is absolutely mutually beneficial. But there's there's it's not transactional, I guess, if that's okay.

Steve Brine [00:38:03] That that just what I've got you. We were talking to the BPI earlier, and you mentioned the 12 billion dollars that the right of took to rights holders as of January last year. You mentioned at the start of your evidence, you say that you'll be the industry's main source of revenue in five years time. BPI said that trajectory does not suggest that that is the case. Tell me why that's wrong.

Katherine Oyama [00:38:29] Yeah, I honestly was surprised and a bit disappointed by the testimony that I heard. Frankly, it does not reflect at all the individual relationships that we have with the individual members of the BPI. I think we are Culinarians, our global music business and commerce is leading the UK. I think they both say that the relationships that they have with the UK music industry has never been better and say the numbers that I've seen in twenty nineteen we sent three billion to the music industry. We don't yet have our 2020 numbers done, but it's been growing every year. So we and we've no reason to think it has not grown quite significantly. Last year, Spotify, the last press release I saw for them for Q4 of last year, so 20 20 is that they're sending one billion per quarter to all rights holders. So music, I'm sure, is a significant portion, but also podcasts and others. So, I mean, if you just look at that data, we are close and we're absolutely want to get there. We want to be the best partner possible to the industry. If we make money, artists make money. I mean, I think our interests are very aligned and that's where we want to be. We want to grow the business.

Julian Knight [00:39:43] Katie, how can you say you want to be the best partner possible when you pay 0.05 pence for every song whereas Spotify a penny?

Katherine Oyama [00:40:00] That's just not a metric I have ever seen, so I can't confirm the metric, I think on the subscription side, the business models work very similar they are on par.

Julian Knight [00:40:13] Forgive me, Katie, but but you were watching the first session. Are you telling me that they were untruthful or what is your explanation for why you pay a 20th of what Spotify do?

Katherine Oyama [00:40:26] I think there's a couple of things happening. So some of the testimony is what artists are seeing and their ultimate payouts. And we see what we're sending to representatives. So we're seeing what we send to the labels or publishers. We do work directly with some artists and then they would see all of it in their analytics. But, you know, there are many and many artists who choose for there are good reasons to be represented. And so I think one piece that's happening is we're not seeing exactly what's happening from the payout to what the artists are seeing. And I think that's a big reason why we're calling for additional transparency. I think the other pieces on the ad side, the enormous opportunity, is this totally blown up in the music industry. It's given artists an ability to upload. They don't need to live in London. They don't need to know specific people in the industry. We have models again and again where artists have uploaded and become successful, but they're reaching a global audience. And so the ad rates do differ. You know, if you're in a developing economy or you're in North America, you're in the U.K., the rates will differ because you're getting the majority.

Julian Knight [00:41:34] Forgive me, but I mean, we heard evidence from the Musicians Union who thought that because of the economics of music streaming, that actually they were finding that the demographic, the demographic profile of those who were actually to help being a musician has become more narrow. I mean, you mentioned, in fact, that many were from public school and that's a public school in the British sense. Not in the American sense. Of course, I would like to comment on that one, because I know I'm just my question to Katie, actually, on another matter now, in terms of what you just stated, that you did skirt around the issue in terms of the amount of money that YouTube pays for playing music on your platform or your streaming service. You've been talked about as the number one streaming service, 0.05 pence. Is that figure right or wrong?

Katherine Oyama [00:42:25] It does not sound right to me. But it fluctuates based on where that where the ads are happening for the majority of the revenue, any ad revenue or subscription revenue...the consistent piece is the majority of that revenue goes out to the music.

Julian Knight [00:42:41] What does it what does it fluctuate between? They have said it's 0.05 pence. OK, now you said that that is not correct. What I'd like to know is what band, what area effectively of pence - is it like nought point one pence. Is it nought point two pence. Is it no point to two nought point five pence or is it less than that? What is the banding for paying out when music is played to your platform.

Katherine Oyama [00:43:28] And I'm sorry but we don't have a stream rate like that. It's an ad. It's an ad share...

Julian Knight [00:43:33] It's quite ironic. You complain that they've got a lack of transparency and obviously you've honed in on that as that was on there that we've looked at. But yet you're not being transparent with this committee.

Katherine Oyama [00:43:48] The look at their own dashboard. They see where their views are coming from. They see the ad rates and they see the amount that's being paid out. What we don't know is if they're represented by another entity as YouTube, we don't have visibility into what happens to that royalty after it leaves the platform.

Julian Knight [00:44:04] But I'd have thought you'd come before this committee and you'd actually know how much you pay artists when you use their content on your platform when it's uploaded by users. This is astounding. You don't actually know the level or is it can we read into this that you do not want to say? Because frankly, it would expose the fact that you are making an absolute fortune from other people's work. At the start of this session - I asked the BPI I think it was - what is the risk and reward here? And they stated the risk and reward effectively for YouTube compared to artists and the record labels are completely out of kilter. Do you recognise that fact?

Katherine Oyama [00:05:49] Because we're sharing revenue, if we make any money, the majority of the revenue is going out to the music industry. So respectfully, I do think that it is a partnership.

Julian Knight [00:06:03] It's the majority of the revenue that you're paying per stream effectively is going out to the music industry. But the total you're paying is minuscule. And Spotify, if you were paying the same as they were, for instance, then you wouldn't be giving a billion, a quarter to the music industry. Was it three billion a year last year? You wouldn't be giving that. You'd be being giving many multiples of that, would you not?

Katherine Oyama [00:06:30] So all the evidence I've seen is that we are on par with those other services, including Spotify that you mentioned.

Julian Knight [00:06:35] In terms of total, but not in terms in terms of total. You are, yes, but not in terms of the amount of money that you are paying out per stream.

Katherine Oyama [00:06:46] Even on that analysis, although it's not a metric that we rely on, the research that I have seen in that it does analyse that has had us absolutely on par with them.

Julian Knight [00:06:55] Not a metric you rely on. That's because it's inconvenient in that respect. Isn't the truth of the matter, frankly, that you are effectively in front of a committee that deals with YouTube and Google on a regular basis. You're an enormous company. I mean, you are literally almost a state unto yourself in many respects. You are absolutely enormous. And isn't this another example of where you are just so big and the way you are making such huge profits, that effectively, you are dampening down an entire industry. You are becoming effectively - I don't know how to put it - like gangmasters. You are a huge entity and you are taking huge sums of money out of the creative sectors, and yet you are effectively having a hand-to-mouth existence with yourselves. It's true for journalism and it's true for music streaming, is it not?

Katherine Oyama [00:08:07] I don't think that's the case. I think that we have seen artists - Stormsy is a great example - and signed on the platform for many years now, a global success. I think we're seeing YouTube being used as a platform for creativity from the music industry, from many UK based creators, were so excited to work with them. And when they upload to YouTube, they're reaching a global audience. They have the opportunity to be discovered to build their business, to hire others for their team. We're seeing success stories like that again and again.

Julian Knight [00:08:41] Why is everyone pointing the finger at you then? There's an English phrase, your ears must be burning. Why is it you think that throughout the entire first two panels they wanted to rubbish YouTube in the amount of money that they actually give to the music industry for the streams, and they feel as if, frankly, you're gaining profit and they're not getting a share of it. What do you think that is?

Katherine Oyama [00:09:07] It's a very fair question. I mean, I've heard different things about YouTube throughout. I think of the Beggar's testimony mentioned earlier. I think maybe part of what was happening in the first panel today was a little bit of a distraction to alleviate hard questions about their own industry, frankly. And and it is true that not every artist is having the same experience. We would love for every artist on YouTube to receive a Brit award and be successful. We know that that's not the case. What our job is to empower as many artists as possible who have creativity, who have access to broadband to get a chance.

[00:09:45] And I do think that there has been a lack maybe of some other voices. That's part of this process would be so happy to recommend somebody who can share some best practices about things that they're doing. The Royal Opera House is actually a good example. So not just these kind of modern artists, but there are many traditional institutions across the country who are hosting backstage content, who are trying to reach a younger audience, who have themselves amassed a million subscribers. I do think there's tremendous value in what we offer. It's unique, it's different. It doesn't necessarily fit the model that maybe you've heard from some of the other services, but from the partnerships that we have, including many indie labels in the UK, including the major labels, I do think the partnerships are in a better state and that folks are more hopeful about what the next two years look like them than we have ever seen them before.

Julian Knight [00:10:39] I have to say that the Royal Opera House doesn't really generally have to worry about making ends meet in my experience. Katherine Oyama, thank you very much for your evidence today, Raoul Chatterjee. Thank you as well. And also Steve Bené. Thank you very much.