Facebook Steps Onto YouTube Turf With Universal Music Deal

(Bloomberg) -- Facebook Inc. signed a multiyear licensing deal that lets the social network carry songs and artists from the world's biggest record label, Universal Music Group, across its platforms.

The deal announced Thursday solves a long-running dispute, with Facebook agreeing to compensate the company and artists including Taylor Swift when users post videos that include copyrighted material. The accord includes Facebook, Instagram and Oculus virtual-reality technology, with Universal saying the company would become a “significant contributor” to the industry.

The deal sets Facebook up as a more direct competitor to Google's YouTube, the most popular destination online for listening to music. Both technology giants are battling for a bigger share of people's time, and music rights could help Facebook give users new ways to engage with its services.

Striking deals with Facebook also gives record labels a way to put pressure on YouTube, which has become a powerful force in the music industry as a marketing tool and a way to introduce new artists. Google's video site signed its own new long-term agreement with Universal Music, owned by Vivendi SA, and with Sony Music Entertainment this month, promising stronger policing of user uploads of copyrighted songs and paving the way for a new paid service after two years of tumultuous negotiations.

The online world has become the source of growth for the music industry, with services like Spotify and Apple Music driving increased consumer spending for the first time in years. Facebook was offering labels hundreds of millions of dollars for music rights, people familiar with the matter told Bloomberg earlier this year.

“Our deal with Facebook leverages the experience we've gained and the wealth of data we've amassed to win both greater flexibility as to how our music is offered to the public as well as fairer compensation for our artists,” Lucian Grainge, Universal Music's chief executive officer, said in an internal note.

Up to now, music companies haven't been compensated when fans posted clips with music -- a source of dismay as video viewing on Facebook mushroomed. The social network tried to respond by taking down material. But the result pleased no one. Users lost their video postings, and label didn't get paid.

The accord announced Thursday could lead to deals with other music labels and wider use of music and related videos in social media.

Facebook in January hired Tamara Hrivnak, a former music industry executive who held positions at Google and YouTube, to lead its music development efforts.

To contact the reporter on this story: Lucas Shaw in Los Angeles at lshaw31@bloomberg.net.

To contact the editors responsible for this story: Crayton Harrison at tharrison5@bloomberg.net, Rob Golum, Bruce Rule

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