Why record labels are so angry with YouTube for underpaying on royalties for music video streaming

With the income from CDs and digital downloads disappearing, the music industry has pinned its hope for the future on online song streaming, which now accounts for the majority of the US$7.7 billion US music market, the largest in the world.

But the biggest player in this future isn’t one of the names most associated with streaming – Spotify, Amazon, Pandora or Apple. It’s YouTube, the site best known for viral videos, which accounts for 25 per cent of all music streamed worldwide, far more than any other site.

Now, YouTube is locked in a battle with music labels over how much it pays to stream their songs – and at stake is not just the finances of the music industry, but also the way that millions of people around the world have grown accustomed to listening to music: for free.

Music labels accuse YouTube of using a legal loophole to pay less for songs than traditional music-streaming sites, calling it the biggest threat since song piracy crippled the industry in the early 2000s.

The industry has pressed its case to regulators around the world hoping to force a change.

“I do think YouTube is starting to panic a little bit,” says Mitch Glazier, president of the Recording Industry Association of America.