YouTube has postponed a controversial plan to block certain record labels from its video platform, following an outcry from the creative community and growing scrutiny from European regulators.
Two weeks ago, the Google-owned company warned that "in a matter of days" it would start taking down videos from a number of record labels that had refused to sign its new licensing terms.
But the uproar that followed the revelations has prompted YouTube to make a last-minute U-turn. The world's largest video streaming company is allowing more time to negotiate a solution with labels, although it still intends to block them if they cannot reach agreement, according to people familiar with the matter.
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YouTube has already sent letters to a number of record labels giving notice that their existing contracts will be terminated.
"They're back-flipping and backtracking," said a member of the independent label community.
The dispute over licensing terms comes as YouTube prepares to add a number of features to its platform, including a subscription-based music streaming service that would rival Spotify and Deezer.
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In an interview with the Financial Times two weeks ago, Robert Kyncl, YouTube's head of content and business operations, said that record labels representing 95 per cent of the music industry had signed up to its new terms.
But he said the remainder would be blocked from the platform – meaning that the labels would lose the ability to generate revenue from the videos on their YouTube channels or to monetise their music elsewhere on the platform.
Impala, a trade body for independent music companies, last week filed a complaint with the European Commission, asking it to examine whether Google was abusing a dominant market position in its dealings with small labels.
"YouTube is insisting on extracting a package of rights that no other partner could get away with," Impala said in its complaint. The trade body sought "urgent interim measures" to prevent YouTube from removing content from its platform and from imposing "unfair" and "discriminatory" licensing conditions.
Joaquín Almunia, Europe's antitrust chief, fired a warning shot at Google on Monday, saying that he could investigate YouTube if it attempted to abuse its market position.
YouTube, which declined to comment on the latest developments, has said that it is offering all record labels a fair deal that is consistent with the terms of other streaming services.
Indie labels holding out for a better deal are understood to include XL Recordings, whose artists include Adele and The xx, and Domino, the label behind Arctic Monkeys.