For users, the deal means that if they upload a homemade video clip to Facebook or Instagram that has a part of a Universal song in the background, the clip can stay up without generating a takedown notice. That has obvious benefits for Facebook, as well (but to spell it out — Facebook wants to do anything it can to encourage people to make and share content on its services).
And for Universal, the deal means that the company now has a significant new revenue source — neither side is commenting on financials for now, but industry sources assume Facebook wrote the music a label a very large check as an advance, and that Universal can make more over the course of the multiyear deal.
Crucially, the deal does not give Facebook the right to create its own version of Vevo, the music video service owned by the music labels that generates most of its views on YouTube. On the other hand, now that Universal has its first licensing deal with Facebook, it opens up the door for other stuff down the road.
Perhaps most important for Universal is that it now has a credible bargaining chip when it talks to Google’s YouTube.
For years, the labels and YouTube have been in a symbiotic-but-strained relationship: The labels’ product generates lots of views for YouTube, which says it pays the labels plenty of money in return. But the labels have consistently complained that YouTube doesn’t pay them nearly enough.
Now Universal (and eventually the other big labels) can more credibly tell YouTube that they will take their product off the world’s biggest video platform and move it to the worlds’ biggest social network.
Not a coincidence: The press release announcing the deal quotes Tamara Hrivnak, the Facebook business exec who negotiated the deal with Universal. Up until last year, she was in charge of negotiating similar deals for YouTube.
