Korea music group withholds $18 million in YouTube Shorts royalties amid fraud probe

Four music copyright holders are suspected of generating tens of billions of won in royalties by inserting their songs into YouTube Shorts videos, sometimes at volumes too low to hear, spurring Korea’s main music copyright group to withhold payment.

The four rights holders have registered 802 songs and are seeking about 24 billion won ($18 million) in royalties, according to the Korea Music Copyright Association (Komca) on Thursday. The total is estimated to exceed 30 billion won when including the payments already distributed.

Komca said it has put those payments on hold and is reviewing the case further after the allegations surfaced during a parliamentary audit last week by the National Assembly’s Culture, Sports and Tourism Committee.

At the heart of the case is whether the rights holders artificially inflated the use of specific songs to drive up their royalties. Rep. Jin Sun-mee of the Democratic Party raised the issue at the audit on Oct. 12, warning that a practice in which rights holders pay Shorts channels a cut of royalties to use their songs could be open to abuse.

According to Komca, some Shorts channels used specific songs in their videos, and the rights holders of those songs then returned part of the royalties they received to the channel operators. In the process, some channels reportedly used music unrelated to their videos’ content or inserted songs at volumes so low they were virtually inaudible. 

Komca is examining whether people were actually listening to the songs, or whether the plays were faked to collect royalties.

YouTube pays a set pool of royalties, which is then divided among songs based on how much each one is used. Thus, if usage of certain songs is artificially inflated and their share grows, other music creators could receive less, Komca said.

The association sees the case as going beyond payments to a few rights holders and could affect all music creators and the fairness of how royalties are shared. 

It said it is currently reviewing how the Shorts channels operated and their contractual relationships, and sharing information with overseas copyright organizations.

Komca is also checking whether the songs were generated by AI. It sent 791 of them to an overseas AI music analysis firm, which found that some may have been AI-generated, and the association is now looking into the matter further.

The case has been through criminal proceedings as well. A Komca member filed a complaint with the police in February on charges of fraud and obstruction of business, but police decided on June 30 not to refer the case to prosecutors, citing insufficient evidence. Komca has since requested a review of the investigation.

At a board meeting on Sept. 29, Komca decided to keep withholding the royalties from the rights holders in question, saying further fact-finding was needed.

Explaining the decision, a Komca official said royalties that were legitimately earned should be paid, but the association needs to be cautious about paying out large sums without proper verification when serious questions have been raised about how they were distributed.

The official added that Komca must examine not only the rights holders’ payment demands but also whether the practice has reduced the royalties other creators are rightfully owed.

BY JEONG JAE-HONG [[email protected]]