Facebook Inc (NASDAQ:FB) has struck major deals with a number of large record labels as of late.
The idea is to allow users on Facebook and Instagram to share music with one another, and also to allow them to use popular songs in their own video uploads. It’s a win-win for both sites: Facebook no longer has to constantly take down content that features copyrighted music, and record labels get paid.
Now, as Bloomberg reports, the labels could use these new deals to try and get more money from YouTube — which for years has been able to skirt traditional royalty payments:
Many popular music videos on YouTube are uploaded there by Vevo, a joint venture of the record industry’s big three, which are Universal Music and Sony in addition to Warner Music. At least some people at those labels love the exposure that their music gets on YouTube.
But the music industry also hates YouTube. It has complained that YouTube — unlike Spotify, Apple Music or Pandora — doesn’t pay per-song royalties. Instead YouTube sells advertisements that appear in or adjacent to some of the music videos and shares that revenue with the record labels.
Critics claim that YouTube represents too big of a piece of the market when it comes to online music listening, but contributes very little in terms of revenues. Considering the handsome sum that Facebook just ponied up for music rights, those days may be nearing an end for YouTube — and that could push more listeners to Facebook for their music fix instead.
Facebook Inc shares fell $0.18 (-0.10%) in premarket trading Tuesday. Year-to-date, FB has gained 4.70%, versus a 4.37% rise in the benchmark S&P 500 index during the same period.