An organisation representing the music industry’s biggest record labels have complained that YouTube is exploiting copyright law to host music, causing them to lose out on millions in revenue, and called on European policy makers to reform the system.

The International Federation of the Phonographic Industry (IFPI), which represents over 1,400 record labels from around the world, said on Tuesday that the Google-owned video sharing website should be subjected to the same rules as sites like Spotify.

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The organisation alleges that other platforms such as Dailymotion and SoundCloud have been exploiting loopholes that give it an unfair advantage when it comes to licensing negotiations.

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Despite the explosion in streaming over the last five years, the new revenue sources have been unable to compensate for the decline in traditional physical sales, according to the IFPI’s own report. It suggested that worldwide revenue had fallen from 2014, down 0.8% to $15 billion.

The “flaw in the legislative environment”, in the eyes of IFPI’s chief executive Frances Moore, is the one that prevents ISPs (Internet Service Providers) and hosting companies from being liable for copyright infringement by its users. “It's not something the industry can fix, it's something that government can fix,” she said.

YouTube responded by saying that it operates a Content ID system that allows record labels to identify their works on their site and then choose to take them down or monetise them.

It said: “We pay hundreds of millions of dollars to the music industry every year, have deals in place with hundreds of independent and major labels around the world, and provide rights holders with tools to control their copyrighted work.”

A representative of a large internet company is quoted in the Financial Times as saying that removing the ‘safe harbour’ provision over user-generated content would be “absolutely catastrophic for digital services”.

The IFPI’s report also revealed that revenue from digital sales of music matched those from physical sales for the first time in 2014. The much vaunted revival in vinyl sales continued, with revenue accounting for 2% of the total.

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