YouTube will begin pulling indie musicians from the site in "a matter of days," blocking any artist on a label that refused the company's licensing terms for its forthcoming subscription music service.

The company plans to break music on the site into two tiers—free and paid—with the paid subscription tier allowing ad-free, off-line streaming, much like competitors Spotify, Rdio, and the Apple-owned Beats Music. YouTube hasn't been forthright with how the new service will look, but according to the Financial Times, labels are objecting to how little the company will pay them for the free, ad-supported streams.

One label boss said the big problem with YouTube's new licensing agreement was not to do with the paid tier, but rather that it allowed YouTube to make substantial enhancements to its free tier.

His fear is that the free tier will become so attractive that it will reduce the number of people willing to pay for subscription services such as Deezer or Spotify, which charges users $9.99 a month.

Fearing decreased revenues, many indie labels have decided to hold out for a better deal from YouTube. But rather than negotiate, YouTube decided to remove those labels' artists from the site. And it's not just a bunch of no-name garage bands getting axed. All musicians under labels such as XL Recordings and Domino will be pulled, which includes Adele, The XX, Atoms For Peace, Vampire Weekend, and Arctic Monkeys.

However, the ban on indie musicians is further complicated by YouTube's relationship with the music video service Vevo, which has signed onto YouTube's new terms. According to a Vevo spokesperson who spoke with TechCrunch, that means some recordings from Adele hosted by the service will be continue to be streamed, whereas the artist's other recordings will be blocked:

"To clarify, music videos from the indie labels and distributed by Vevo on YouTube will not be taken down," a spokesperson from Vevo told TechCrunch. In all, a measure of how confusing the licensing and royalty game for online content can potentially be. It seems like what would be affected would be other videos on the site, such as this recording of her singing "Someone Like You" live at the Brit Awards in London.

YouTube claims that labels "representing 95 percent of the music industry have signed up to the new terms." The rest is just a rounding error, as YouTube's head of content Robert Kyncl explained to the Financial Times.

"While we wish that we had 100 per cent success rate, we understand that is not likely an achievable goal and therefore it is our responsibility to our users and the industry to launch the enhanced music experience," Mr Kyncl told the Financial Times.

Indie labels dispute YouTube's minimizing claim of 95 percent acceptance. Merlin, a digital rights agency for independent labels, says indies make up 32.6 percent of the global music marketplace. Now, like many issues surrounding Google and their subsidiaries, this issue could be headed for European courts over antitrust concerns:

Impala, a trade body for independent music companies, is appealing to the European Commission for assistance, arguing that YouTube is using its market position to force small record labels into accepting unfavourable terms.

With the site poised to remove indie musicians within days, the damage will already have been done.

[Photo: Getty]