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This article was first published in the ABA’s Landslide® Magazine May/June 2017 issue (Volume 9, Number 5). Co-written by Franklin Graves & Michael Lee (@GeekAttorney).

It’s undeniable that, by generating billions of daily views and hundreds of millions of hours in watch time over the course of a single day, YouTube is the go-to destination for video consumption on the internet.1 Teenagers are now spending more time on YouTube than cable television.2 YouTube videos hold the top spot for video consumption by millennials when watching online video on smartphones, tablets, and computers.3 Over 1,000 YouTube accounts, referred to on the platform as “channels,” reached a million subscribers in 2016, more than double the number of channels in 2015.4 “YouTubers,” a term that refers to the content creators that upload videos to the video sharing platform, are rapidly taking over as the next generation of celebrities. Their sales potential spreads well beyond the YouTube platform to include dozens of New York Times bestselling book deals as well as crossover productions to more traditional mediums, such as cable television series and feature film productions.

YouTube, a subsidiary of Google Inc., is a unique platform in that anyone can create an account, and upload video content. YouTube currently offers direct upload options up to 4K video resolution and 60 frames per second (fps), as well as live streaming and multi-person Google Hangout streaming options. Through the YouTube Partner Program, anyone that meets basic criteria can opt-in to monetizing their videos with advertisements through Google AdSense. The criteria are currently: i) availability of the program within a YouTuber’s country or territory; ii) original ownership of content; iii) avoidance of sensitive or mature content; iii) acceptance of YouTube’s Terms of Service and Community Guidelines; and iv) review of YouTube’s copyright education materials.5 To get paid, YouTubers have to link their YouTube channel with a Google AdSense account and individually mark videos as monetized—a fatal oversight many creators miss out on until their video has gone viral. As of April 2017, YouTube requires a channel reach a minimum of 10,000 total views, across all videos uploaded to the channel, before ads will be served and revenues earned by the YouTuber.6 The move comes amid public backlash for the service placing ads on videos with hate speech and extremist messages resulting in more than 250 advertisers pulling ads from Google’s network.7

Copyright Infringement

Since its launch in 2005, YouTube has found itself at the center of several landmark copyright court decisions. Viacom filed a lawsuit against YouTube in 2007 claiming over 150,000 unauthorized video clips of Viacom’s shows were uploaded by users.8 Viacom further alleged that YouTube failed to take action in an effort to increase popularity of the platform. After a second appeal process began, the case was settled in March 2014.9 Another well-known case, Lenz v. Universal Music Corp., was filed by YouTuber Stephanie Lenz in 2007 after Universal Music requested that her 29-second video of her toddler son dancing be removed because it contained a portion of “Let’s Go Crazy” by Prince playing in the background. In March 2016, the Ninth Circuit Court of Appeals issued a controversial opinion which held that copyright owners must consider whether an allegedly infringing work constitutes fair use when they claim videos.10 Starting in 2009 with the expiration of a key licensing deal, YouTube faced concerns over the request for increased royalty payments by GEMA, the German performing rights organization, for music videos and user generated content that were being posted to the site. The conflict led to a lawsuit being filed in 2010, which YouTube ultimately lost when the German court held YouTube responsible for the content uploaded by YouTubers.11 As a result of growing legal concerns, YouTube recognized the need for an automatic system with the capabilities to detect potential infringement within content that is uploaded by YouTubers, and the Content ID system was created.

Content ID is a system implemented by YouTube to assist copyright owners with the identification, management, and protection their content. Copyright owners, usually limited to those with large catalogs of content, can register with YouTube and submit their works to be digitally fingerprinted, a processed referred to as Automatic Content Recognition (“ACR”) and included in the Content ID database. Whenever content is uploaded to YouTube, the Content ID system scans the new content and checks for matches of copyrighted content already within the Content ID database. The Content ID program, in theory, should help copyright owners prevent unauthorized use of their works, but if one’s work is used without permission, YouTube offers a website, separate from the Content ID system, for submissions of copyright takedown notices to be sent in accordance with 17 U.S.C. 512(c), referred to as Digital Millennium Copyright Act takedowns (“DMCA takedowns”).12

Many confuse Content ID claims with copyright takedown notices sent in accordance with the DMCA. The major difference is a DMCA takedown is governed by U.S. copyright law, 17 U.S.C. 512(c), while Content ID claims are not and are the result of self-monitoring by YouTube. Content ID claims also do not initially result in a copyright strike on a YouTuber’s channel, while a DMCA takedown notice directed at a channel will result in a copyright strike immediately until a counter notification is submitted. A copyright strike is a warning that is communicated to YouTubers in an effort to educate and help the creator understand they may be engaging in potentially unlawful activity. Too many copyright strikes on one’s account can lead to termination of the account.

A claimant has four options when a newly uploaded video matches to their copyrighted content: they can block the video, mute the audio on video, monetize the video with ads, or track the video.13 The four options can be further customized to include territory-specific restrictions, such as a viewer from Germany being blocked from the video entirely, while a viewer from Japan may see the video, but with an advertisement. A YouTuber whose monetized video is claimed has a few options: leave the claim alone and, after five days, revenue will begin to be sent to the claimant; file a dispute within five days of the claim and revenue will be held in escrow from the day the claim was issued; or file a dispute after five days and the revenue from monetization will then be held in escrow from the date the dispute was filed. Before this system of disputing monetized videos was active, when a claim was placed on a video, the claimant essentially had a fourth option to allow the use of their alleged content while monetization is placed on the video and delivered to the claimant. Now, assuming the video has monetization activated, the money accrued during the Content ID dispute process is held in escrow based on the aforementioned five-day window stipulation. From the moment a YouTuber disputes a claim, it gets more difficult for them to deal with the issue directly within the YouTube platform and often, the YouTuber must seek options for handling the dispute with outside measures. Of course, content owners that find their content being used on YouTube are free to pursue legal action outside of these built-in options.

From the perspective of YouTubers, the newer “escrow system” for disputing Content ID claims on monetized videos is a major step in the right direction for YouTube. Content ID remains one of the hottest topics surrounding YouTube because Content ID is often abused much like DMCA takedowns are sometimes abused.14 Early issues with Content ID surrounded mass, illegitimate claims sent by Russian companies in an effort to hijack revenues from popular videos.15 When Content ID automatically claims a video on behalf of a legitimate rights management or media company, the video is often uploaded by a small or hobbyist YouTuber. Most YouTubers do not have the time or resources to dispute claims. Additionally, a YouTuber that received a notice one of their videos has been claimed must take fair use into account before they submit a dispute to the claim. Fair use is complex and varies by jurisdiction and will likely require an attorney who specializes in copyright law, which is an expense some YouTubers are not willing to incur. This makes disputing Content ID claims a daunting and sometimes scary process because the YouTuber disputing a claim risks receiving a copyright strike on their channel if they get their fair use analysis wrong. As a result, the YouTuber who receives the claim will usually not risk having a strike on their channel because with that comes YouTube Copyright School, restrictions, bans, or even termination of a channel if 3 strikes are received. After a YouTuber receives a strike on their channel it will expire in three months as long as they complete YouTube’s Copyright School, which consists of four basic questions about copyright law and a video.16 It is clear that the Copyright School video is viewed as unpopular, having nearly 60,000 “dislikes” by the more than 6.6 million viewers at the time of this publication.17 It remains unclear whether Copyright School serves as an effective method of teaching YouTubers about copyright law or helping them understanding how those laws impact both their creative process and business.

 

Back in 2014, Michelle Phan, a YouTube makeup personality, was sued by Ultra Records for the use of their artist’s songs as background music to her videos.18 Phan’s videos were claimed via Content ID. However, she alleged that had an agreement with Ultra whereby she would credit the artist and put an iTunes purchase link in the description of the video in exchange for the use of the music. She alleged that she came to this agreement with a senior manager at Ultra and the agreement gave her a license to the songs. Ultra Records continued to issue DMCA takedowns, alleging infringement by Phan, and ultimately filed a copyright infringement suit. Phan countersued and alleged licensing fraud. The two parties reached an undisclosed settlement in 2015, but the ripples from this case have been felt throughout the YouTube and music industries.19 Even the artist whose music she used, Kaskade, spoke out against the infringement suit.20 The situation serves as an important lesson in how YouTubers, and content creators in general, both misunderstand music licensing and view it as a difficult area of the business. One way attorneys can assist is by taking proactive measures to educate their clients on important issues with running a media business, such as master use and synchronization licenses. Music licensing issues, specifically for background music on YouTube and Twitch, continues to be a major problem in the industry.21

YouTube does offer a library of pre-licensed royalty-free music to all YouTubers. Additionally, YouTube created a tool, called Music Policies, that allows YouTubers to research songs and find out whether a song’s sound recording or publishing rights have been licensed or pre-cleared by the copyright owners for the YouTube platform. The Music Policies tool specifically helps YouTubers that upload cover songs to determine whether their uploads will be allowed or blocked in specific territories due to the underlying publishing rights. The tool also gives YouTubers the aforementioned details for situations where they may choose to use the original recording as background music.

Although copyright holders and YouTubers seemingly have an adversarial relationship, there are occasions where they can get along. Sometimes, copyright holders realize that the YouTuber using and tweaking their copyrighted material may actually give them exposure. Take, for example, the recently released unauthorized short film based on the “Mighty Morphin’ Power Rangers” children’s franchise, but approached from a darker, more mature tone.22 The short film was created as part of an on-going “Bootleg Universe,” wherein the film’s producer, Adi Shankar, releases “bootleg” versions of films on YouTube, largely based on existing superhero feature films and comics. Saban Capital Group, Inc., the company that owns the rights to the Power Rangers, tried to have the video removed from YouTube. After months of animosity and back and forth negotiations, Saban and Khan/Shankar reached an agreement and the film was put back up on YouTube.23

Around the same time, another fan film resulted in a high-profile lawsuit challenging the boundaries of fair use and the previous toleration of fan art by a media company. Axanar Productions raised $1 million on the Kickstarter and Indiegogo crowdfunding platforms to create a fan film set in the Star Trek universe and, in August 2014, proceeded to upload a 20- minute trailer, called “Prelude to Axanar,” in an effort to raise additional funding for a feature-length film. The owners of the rights to the Star Trek franchise, Paramount Pictures Corporation and CBS Studios, filed a complaint in federal court in California in December 2015 alleging copyright infringement by Axanar.24 In January 2017, the parties announced a settlement had been reached allowing the existing video to remain on YouTube, without advertisements, and the production of two more fan films with a maximum length of fifteen minutes each.25 Paramount and CBS continue to allow fan films and provide a website dedicated to providing guidelines for fans.26

 

Anatomy of MCN Agreements

Multi-channel networks, or MCNs, are third-party companies, not endorsed by Google or YouTube, that partner with independent YouTube channels to provide additional services in exchange for a revenue share. MCNs are commonly based around a particular content style or topic, such as education, beauty, or “let’s play” gaming videos, a newer format where YouTubers record or live stream their screen as they play video games. Some of the more well-known MCNs include: Maker Studios, acquired by Disney Interactive in 2014 27; Machinima, acquired by Warner Bros. in 2016 28; AwesomenessTV, a joint venture between DreamWorks Animation, Hearst and Verizon 29; VEVO, a joint venture between Universal Music Group, Sony Music Group, Abu Dhabi Media, Google, and more recently Warner Music Group30; Fullscreen; and My Damn Channel. As with any specialized area of contract law, there are specific terms and provisions to keep in mind during review.

The YouTuber gives up anywhere from 10% to 30% of their YouTube revenue in a standard MCN deal. The variation in percentage largely depends upon the social rank of the YouTuber, calculated by analyzing statistics such as video views, channel subscribers, and viewer comments. Key considerations by MCNs include the number of subscribers, monthly viewership statistics, lack of copyright violations on a channel, and other related metrics.

The basic terms of a YouTuber’s MCN partnership should include: higher cost per thousand impressions (known as “cost per mille” or “CPM” and which refers to a measurement of potential viewers to an advertisement) opportunity, brand deals, copyright strike support, production support, and channel optimization experts. Some of the more established MCNs offer access to sound production libraries, enhanced analytic dashboards, and productivity tools for managing content on YouTube and responding to fan communities.

Read the full article on the ABA Landslide® Magazine website. Or, download the article from SSRN.

Franklin Graves is the founder of Frankly Legal. He's an internet creator and practicing attorney based out of Nashville, TN.

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