After a lengthy negotiation period, Facebook and Universal Music have signed a multiyear agreement to integrate licensed music into the social network’s website and mobile apps.
Prior to this deal, music labels like Universal received no compensation when a Facebook user shared an audio or video clip that contained a piece of licensed music. The music labels were pushing for Facebook to issue takedown notices whenever users violated copyright policy, but Facebook was eager to find a way to allow music clips to remain on their network without interference.
As part of the agreement reached between Facebook and Universal Music, the label will receive payment from the social network each time a song by one of their artists appears on the Facebook website or mobile app. No takedown notices will be issued by Facebook and no fees will be passed down to individual users. Representative from Universal have indicated that revenue received from Facebook will be shared with artists whose copyrighted content appears on the network.
Details of the deal have not been released, so the fee structure for song usage is unknown at this time. But given that Universal is the largest recording company in the world, it’s expected that the Facebook deal will represent a major new source of revenue. The agreement reportedly includes a large upfront payment from Facebook to Universal, with more financial assets exchanging hands over the course of the multiyear deal.
Facebook’s new agreement with Universal Music also covers the social network’s other major entities, including Instagram and the Oculus virtual reality platform. This means that songs from Universal artists, including major acts like Taylor Swift, can be used in videos posted to Instagram or VR apps running on the Oculus platform.
Industry experts suggest that Universal Music was eager to reach an agreement with Facebook in order to put pressure on negotiations with Google’s YouTube business. Music labels do receive some royalty payments from YouTube based on the number of views that their official licensed content gain, especially from music videos. However, Universal and the other major recording companies believe their artists deserve more of a profit share from advertising revenue on the YouTube website and mobile apps.
If Facebook is able to strike agreements with the other major music labels with similar terms to the Universal deal, the social network may be able to establish itself as a viable competitor to YouTube. The labels could threaten to pull their licensed content from YouTube entirely if they believe they could generate equivalent exposure through the Facebook platform alone. However, the deal with Universal does not allow for Facebook to build its own version of the Vevo service, which is what the large music labels use to distribute their content on YouTube.
Facebook’s announcement of the deal came through Tamara Hrivnak, who previously worked as a music executive and negotiated deals with internet companies in the past.
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