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Business Comment

YouTube's new contract looks like a dominant player applying the squeeze


Outlook Is YouTube going to finish off the "don't be evil" motto of its parent Google with its treatment of independent music companies?

On the face of it, the row over the new contract that the video streaming service wants the indies to sign up to resembles Amazon's spat with the publisher Hachette: an increasingly common pricing dispute between internet platform and supplier in the new media age.

In reality, it is very different.

Amazon has real clout in books, and has stopped taking pre-orders for Hachette titles including JK Rowling's forthcoming detective novel, The Silkworm. Queue a chorus of outrage, including from Hachette, its authors and its allies, who have portrayed Amazon as a big bad bully.

But let's be clear, Hachette is no shrinking violet. It is one of just big five publishers and a part of a multibillion euro enterprise (Lagardère Group) to boot. There may well be issues with how Amazon operates, but this is hardly a case of noble David versus nasty Goliath.

What's more, Amazon, perhaps with a nod to the competition authorities, has pointedly and very publicly made it clear that customers can use external retailers who actually sell through its website, and competitors if they want to pre-order Hachette titles. Or, which has also come up as an issue, if they're concerned about delivery times for Hachette titles. You can bet Tesco and its ilk will be featuring the latest work from Rowling, via her pen name Robert Galbraith, prominently as a result.

By contrast, YouTube's opponents are largely small independents like XL Recordings, which discovered Adele. Many of them live hand-to-mouth existences. The company had previously done a fine job of assisting them by providing a portal, and even some revenues, for them and the new and left-field talent they support – talent which has previously found it hard to get exposure (and cash).

It says its new subscription service, which necessitates new contracts with suppliers, is about providing "our music partners new revenue streams in addition to the hundreds of millions of dollars YouTube already generates for them each year". Au contraire, say the independents' trade bodies. You're imposing new, and significantly worse, terms on our members. And we suspect that they aren't anything like as good as those you've offered to the music majors, which have greeted the development with equanimity.

Given the importance of YouTube to their businesses, cutting them off is far more harmful to indie music labels than Amazon being awkward is to Hachette. There's no Tesco out there to promote their work. And YouTube isn't offering openings to rival portals through its website. No wonder, then, that some have decided to reluctantly accept.

This really is David vs Goliath, and David's getting battered. YouTube/Google is a commercial outfit and has the right to negotiate terms with suppliers. But there doesn't seem to have been much negotiation here

Evil is an emotive term. But what YouTube is doing is certainly unpleasant, even if it isn't found to be anticompetitive – and there is surely a case for the EU authorities to accede to the indies' requests and take a look. It is also desperately sad, given the positive role the company has previously played.