Today YouTube will start placing advertisements into video clips (read Times Online article). Warner Music Group is one of the first group of 1,000 "content partners" whose videos will get advertisements.

Pictured is an advertisement placed on a video for "What I've Done" (YouTube link) by WMG's Linkin Park.

The initial cost for advertisers will be $20 per 1,000 views (whether or not the user clicks on the ad). Revenue will be split between the website and the content provider. The pictured Linkin Park video has been viewed over 19 million times. At $20 per 1,000 views, WMG's share would be just over $190,000.

For a major artist on a major label, that's a fair amount of money. Across a large video catalog, though, that revenue will sum to a considerable amount. For the labels, this is basically found money. YouTube videos do not cannibalize music sales in the same way downloading does. These ads mark the dawn of the new, ad-supported era. Rather than collect money from an end sale, other levels of consumer participation matter. Now there is a way to properly monetize the curious, the mildly interested and the more frequent viewers.

Claims of effectiveness are in this Telegraph article:

"YouTube claims the new advertising method is five to ten times more effective than any other display advertising.

A spokesman for YouTube said the group had been trialling various different ideas for weeks, revealing that video abandonment skyrockets as pre-roll adverts get longer in length, making it clear that they have a 'detrimental impact on users'."

From AdWeek.com:

"In its test, Google said the ads got click rates of 1-2 percent, with 75 percent of clickers watching the message all the way through. In shunning pre-rolls for targeted ad invitations, Google is borrowing a page from several startups, including VideoEgg and ScanScout, which have tried overlay video ad features."

The AP article mentions the new ads' effectiveness:

"Shiva Rajaraman, product manager for YouTube, said internal tests show more than 70 percent of people give up when they see a pre-roll. By contrast, less than 10 percent decide to close an overlay, which they can exit by clicking on an "X" in a corner. The overlay format also gives advertisers more flexibility, he said, because they aren't constrained to keeping a video ad at 15 or 30 seconds to avoid defection."

Posted by Glenn at 7:16 AM | Link
|Warner Music Group||YouTube|

• Tower Records founder Russ Solomon is readying R5 Records in Sacramento for a soft launch in the next few weeks. "There are things that need to be tried. And since I was preaching against a wall the last two years that what Tower was doing and what the industry was doing was misdirected and wrong, I owe it to myself and to the business to do it my way." (Sacramento Bee)

• Digital sales in India are higher than physical sales, a first in the world according to the article. Soundbuzz predicts that by 2009 Indian consumers will purchase nine times more mobile music (in terms of revenue) than any other format. (Deccan Herald)

• Here's an article about EMI's and Sanctuary's difficulties selling British music in America. Seems this article would have had better timing before KT Tunstall, Lily Allen and Corrine Baily Rae, but whatever. Here are some good stats from the article: U.K. artists accounted for 8.2% of U.S. album sales in 2006, up from 7.6% in 2004. That figure was 32% in 1986 and less than 1% in 1999. (International Herald Tribune)

• A profile on Integral, a UK company that offers marketing and financial assistance to independent labels and rights holders. (The Independent)

• Hollywood is getting more frustrated with YouTube and its continued level of infringing material. "Clearly, this is not a resource constraint," said one executive. "This is a function of will." (News.com)

Posted by Glenn at 7:28 AM | Link
|Brick-And-Mortor Retail||Digital Music||EMI||Marketing||YouTube|

• MySpace artist Tila Tequila removed her Hoooka widget after MySpace told her it violated her user agreement, which brought to the nation's attention the competition between third-party widgets at social networking sites. (New York Times)

• More Tequila: Her "modest" iTunes sales are a blow to her MySpace-based business model. (Digital Music News)

• Jersey City, New Jersey police made a drug bust at Block Royal Records yesterday. Twenty-three people were arrested and two pounds of cocaine and heroin were confiscated. (NJ.com)

• Douglas Lichtman, a lawyer on Viacom's legal team that has sued Google, has an opinion piece in today's Los Angeles Times. "Providers of a new technology will often be tempted to attract a customer base by allowing copyright infringement. ... To counteract this, the law must demand reasonable precautions both at the design and operational stages of a technology." (Los Angeles Times)

Posted by Glenn at 9:11 AM | Link
|Legal||MySpace||YouTube|

• US buyout firm Fortress is taking a look at EMI, as are Apollo and private equity firm One Equity. (AFX)

• Los Angeles gets a country station today. (Radio Ink)

• Story of a YouTube "star" who doesn't want to sign with a record label. The move could end up saving labels from themselves. If OK Go gets only 200,000 album sales from a YouTube megahit, why look use YouTube popularity as an indicator of future music sales? Who's to say YouTube popularity will translate to success at radio, television or touring? Right now, all indicators point to YouTube popularity existing in a near vacuum. (Billboard)

• A profile on DC-area indie retail chain cd.gameexchange. (Washington Post)

• Broadcasters speak out for relaxed ownership rules at the FCC media ownership hearing in Harrisburg, PA. (AP)

• DRM lives on: BitTorrent to launch a movie download service today with files protected by Microsoft DRM. The press seems to be going a bit light on founder Bram Cohen even though media files will be wrapped in the same sort of DRM that gets online music retailers so much grief. (The News.com)

Posted by Glenn at 8:22 AM | Link
|Brick-And-Mortor Retail||DRM||EMI||YouTube|

• It's not just Doug Morris who has a beef with YouTube. Indie labels are reportedly angry over YouTube's attitude and terms offered. Said Simon Wheeler, head of digital at Beggars Group, "We fully expect to be compensated fairly and on par with the larger companies, we will not accept second rate terms because we are smaller companies. If we have to take legal measures to protect our rights we will do so." A post at Hypebot says some indies have delivered cease and desist letters to YouTube. Billboard's article makes it clear that Merlin, the new indie label trade group, is not behind the cease and desist letters. (Read article at Billboard.biz)

• XM Radio is moving online. The satellite radio company announced yesterday that XM Radio will be included with the new Windows Vista operating system. Web users will be able to sign up for a free, three-day trial. The regular rate for unlimited listening is $7.99 per month. Current satellite subscribers will receive XM Online at no charge. Why would anybody pay for Internet radio when so many free streams and podcasts are available? Programming and branding. (Read press release)

• Billboard asks which artists will jump to larger venues in 2007. The short list: Gym Class Heros, Mute Math, Joanna Newsom and Paolo Nutini. (Read article at Billboard.biz)

• Controversal online music store Burnlounge is preparing to launch the next version of its software. (Read press release)

• Warner Music Group will release earnings its fiscal first quarter ending December 31, 2006 on February 8, 2007. With so much pain felt over the holidays, I'm curious to see how WMG fared. (Read details at press release)

Posted by Glenn at 9:31 AM | Link
|Touring||XM||YouTube|

• EMI's restructuring has eliminated an "indefinite number of positions" at EMI Christian Music Group. Regional sales offices in Atlanta and Chicago have been closed. EMI CMG's will continue with its deal with Midas Records, which gives EMI CMG worldwide rights to to general market, Christian and digital distribution of Midas' Christian roster. One of the label's highly touted new acts is Rush of Fools. (Read article at Christian Post)

• Sanctuary Group reported an operating loss of £56.7 million ($111.7 million) for the year ending September 30, 2006. It included £8 million for refinancing and restructuring. Revenue was down to £133.2 million from £148.1 million. That was quite an improvement from the previous year's loss of £136 million. Rough Trade, which is partially owned by Sanctuary, posted a loss for the year. The company said it is considering selling off some assets. Management sees a return to profitability by "2008 or later." (Read article at The Guardian and the press release)

• According to co-founder Chad Hurley, YouTube will start sharing revenue with its users. This applies for videos for which the user owns the copyright. Sounds like a lot of police work to make this happen. (Read article at BBC, via paidContent)

• Must be a lot of paperwork involved: The University of South Carolina has hired a full-time employee to receive the RIAA's copyright complaints. (Read article at The Charlotte Observer)

Posted by Glenn at 7:55 AM | Link
|EMI||Earnings Releases||Indies||P2P||YouTube|

The quest to monetize YouTube's traffic continues as Sony BMG and Warner Music Group start tests of Google's AdSense online ad system (read Reuters article). A four-week test is reported underway now. Advertisements will run next to videos from the labels.

Said Google in a statement, "Over the past few months, we have run tests to figure out how we work with our partners and advertisers to combine high quality video content with ads and then distribute them (over) the Google AdSense network." Advertisements will be billed using the CPM model.

As a test, I went to YouTube and chose the vidoes of popular artists on all four majors. There was no difference in the advertising on any of the pages.

Posted by Glenn at 11:00 AM | Link
|YouTube|

• Touchstone TV has formed a music department to handle music management for the studio's television shows, which include "Grey's Anatomy" and "Lost." Dawn Soler, music supervisior and former head of music at PolyGram Pictures, will run the new operation. The move is another indication of music's integration with television series. CBS Records was recently re-launched as a digital label that will integrate its music into CBS's television shows. (Read article at Hollywood Reporter)

• Producer J.R. Rotem gave some details to Billboard about his joint-venture with Sony BMG. "t's a multimillion-dollar, joint-venture label deal with Sony/Epic. Beluga Heights is the name of my label. It's the parent company, including the label, publishing company, clothing line and a bunch of other things. A lot of labels were interested, but we went with [Epic president] Charlie Walk because he was so excited about the music." (Read article at Billboard.biz)

• Influential and entrepreneurial MP3 blog Music For Robots released its second compilation CD yesterday. Music For Robots Vol. 2 has new tracks from Simian Mobile Disco, The Long Winters, Pela, Lo-Fi-Fink, These United States and others.

• An interview with David Eun, Google's vice president of content partnerships. "If content owners have concerns about what happens to their business or their content, they're also really impressed and attracted to the distribution and promotion YouTube can offer. We know for a fact that there were some companies that were very vocal about the legal concerns, whose own marketing departments were uploading content to YouTube. It's a complicated thing." (Read article at LA Times)

• RIP Pete Kleinow, original member of the Flying Burrito Brothers. (Read AP article)

Posted by Glenn at 9:22 AM | Link
|Sony BMG||YouTube|

Mentioned here a few days ago was Google's tardiness in offering media companies a capable content filtering system that nabs infringing material. Google had given a self-imposed deadline of the end of 2006. Then it missed the deadline.

A case in Brazil shows not only big media companies have legal recourse over aggregators like YouTube. The AP reported a Brazilian judge has ordered Google to find a way to stop a video of a Brazilian model and her boyfriend from repeatedly showing up on YouTube. Now a three-judge panel will decide either to make the order permanent or impose a fine -- up to $119,000 per day -- for each day the video was viewable.

The new year was expected to bring solutions to content issues and better relationships between YouTube and content owners. Granted, it's only the first week of 2007, but it's clear the issues of 2006 are still far from being resolved. Pity for record labels. They could stand to start making some money off their YouTube content.

Posted by Glenn at 10:44 AM | Link
|YouTube|

YouTube has yet to make good on its promise to have anti-piracy technology ready by the end of 2006. Journalist Richard Waters pounced on the delay just two days into the new year.

"Known as a content identification system, the technology is meant to make it possible to track down copyrighted music or video on YouTube, making it the first line of defence against piracy on the wildly popular website.

YouTube's offices were closed for the New Year holidays. While providing no further details about when the system would be made formally available, it said tests of the system had been under way with some media companies since October 2005 and the system remained on track."

All the YouTube-media industry warm fuzzies could be a thing of the past. Gartner analyst Mike McGuire expects little patience for the missed deadline. "The technology industry really has to start living up to the media industry's expectations," he said. "If the delay lasts for more than a week or two into the new year, suggesting more than just a slight technical hitch, this is certainly going to be a serious issue."

Posted by Glenn at 8:16 PM | Link
|YouTube|

John Pareles' "2006, Brought to You by You" in yesterday's New York Times, in which he talks about Web 2.0 portals and their glut of user-generated content, is sure to cause a stir. Pareles may have the business side wrong ("empty vessel" does not accurately describe the valuation of either company) but some of his comments ring true in the music arena.

Some thoughts on Pareles' article.

1. The claim to fame of user-generated websites has been sheer volume, not any meaningful enablement of commerce. YouTube views have rarely translated to a meaningful increase in music sales. It is for this reason that labels are wise to pursue revenue-sharing deals with YouTube. While radio and television have palpable effects on sales, YouTube has not yet exhibited a similar impact.

2. Message to labels: Keep trying new ideas, one of them may work. Warner Music Group won kudos for its forward-thinking strategy of creating branded channels at YouTube for two of its priority releases, Paris Hilton's self-titled debut and Diddy's Press Play. The problem is that YouTube obviously did not help either title. Hilton's album will be remembered as The Flop of 2006, and Diddy's Press Play had an extremely short stay in the Top 50 and is well on its way to flop status.

3. As with P2P, much of YouTube traffic is driven by other promotional efforts. For YouTube to best enable commerce, it needs to be synthesized with other marketing ingredients.

4. Pareles is one of the few journalists to highlight the need for filters and portals. While there has been an incredible increase in online content, there are still only 24 hours in a day. Time-starved people will require more efficient means to discover quality online content. Of long tail content, Pareles, wrote, "Face it: Song for song, most of them just aren’t as good." How very true. Existence does not guarantee a listenership.

Media critic/blogger Jeff Jarvis took Pareles' article to task. Others will surely bash Pareles for daring to diss Web 2.0. Jarvis wrote that Pareles is complaining about choice. But I think Pareles, who has made a career of highlighting music, worries about a lack of quality in all that quantity. (Think of a music critic getting 500 CDs in the mail every week when he used to get a more manageable 50 per week. ) The quality is there. Somewhere. Finding it is the problem.

The article is a comment to those who underestimate the work and skill involved in Web 2.0 success. Distribution is now like turning on a water faucet. How do artists use ubiquity to their advantage? The new system is "one that requires just as much hustle and ingenuity as the old distribution system," Pareles wrote. True. It's no coincidence that music's finest YouTube and MySpace success stories, OK Go and Lily Allen, are both signed to major labels. Even in Web 2.0, success takes a village.

Posted by Glenn at 12:39 PM | Link
|Web 2.0||YouTube|

• Austin City Limits Studio Theater will be a $15 million, 2,000-seat venue that will be part of a larger, $225 million project in Austin, Texas. Forty nights a year it will be a soundstage for tapings of "Austin City Limits." Willie Nelson and his nephew Freddy Fletcher are co-partners with Stratus Properties Inc. (Read AP article)

• Fontana Distribution beefed up its roster by signing an exclusive distribution deal with Six Degrees Records, which celebrates its tenth anniversary in 2007. Next year the label plans to release albums by Bebel Gilberto, Ojos de Brujo, Spanish Harlem Orchestra and CéU. Six Degrees also announced a new digital only series of albums that will aim to break new artists. The series' first release will be the five-track Emerging Artists Sampler Vol. 1. It has songs by Rara Avis, DO (featuring Omar Sosa & Greg Landau), ZAMAN 8 and Hafez Modir, MNO, and Jef Stott.

• Sirius reports holiday sales are slower than expected and now expects 5.9 million to 6.1 million subscribers by the end of 2006, which would equal 2.6 million to 2.8 million new subscribers for the year. (Read article at MarketWatch)

• BusinessWeek's Olga Kharif on the new generation of software meant to help sites like YouTube identify prohibited content. MySpace is testing an automated take-down tool, and Google is expected to have a similar technology installed in YouTube by the end of the year. (Read article at BusinessWeek.com)

• Pontiac has a partnership with Virgin Megastore. The auto manufacturer is sponsoring Virgin Recommends at ten Megastores. In return, Virgin will act as musical expert to Pontiac. (Read article at Billboard.biz)

• EMI became the first major label to sign up with eListeningPost, a new viral marketing service that allows bands to send out secure versions of songs or videos to distribution lists. After a one-time set up fee, the service costs $9 per month. (Read press release)

• Reminder: The FCC will hold a public hearing on media ownership in Nashville, Tennessee on Monday, December 11 at 1pm. The event will be held at Belmont University's Massey Performing Arts Center.

• RIP Logan Whitehurst, drummer for The Velvet Teen, and Ronnie Lipin, famed music publicist and manager.

Posted by Glenn at 9:49 AM | Link
|Brick-And-Mortor Retail||Distribution||Satellite Radio||YouTube|

• Borders filed its 10Q report yesterday. Bad news for record labels. Comparable stores sales in the music category were down 17.8% for the 13 weeks ending October 28, 2006. Total sales were up 1.8% over the same period last year. Net loss improved to $39.1 million over $14.1 million last year. (Go to Borders SEC filings page)

• This is a week old but I just saw it: Iceland cut its Value Added Tax on recorded music to 7% from 24.5%. Who's next? (Read IFPI press release)

• A patent application is the smoking gun for speculation that Apple is moving to launch a mobile phone. (Read Financial Times article)

• There's some music- and entertainment-related issues in this debate between Dave Winer and Robert Scroble over whether Microsoft is an innovator or is playing catch-up. (Read article at Wall Street Journal)

• A Disney executive said YouTube needs a more efficient procedure for taking down infringing content. (Read Reuters article)

• Universal Music Group's Doug Morris was such a fountain of information and opinion at the Reuters Media Summit. Here's another UMG tidbit: Mariah Carey is slated to release two albums in 2007. (Read post at SOHH)

• Musicnotes sold its 2,000,000th sheet music download. It hit the 1,000,000 mark 15 months ago and sold its first in 1999. (Read press release)

Posted by Glenn at 10:43 AM | Link
|Apple||Brick-And-Mortor Retail||Universal Music Group||YouTube||Zune|

• If there had to be only one reason why you're glad YouTube wasn't sued into submission, it's this fantastic clip -- replayed in Zapruder-like fashion -- from last night's Country Music Awards that shows Faith Hill's outrage when Carrie Underwood won Female Vocalist of the Year. That's one for the books. Naturally, Hill said it was a joke. (Via Idolator)

• EMI Music Publishing is moving to the Chelsea Market building in Manhattan. Enjoy the crosstown bus, folks. (Read article at the NY Post)

• The media finally put two and two together; amazingly, I haven't seen the word ironic used yet, though this certainly qualifies. Word broke that Microsoft's Zune will not play protected WMA tracks purchased from the soon-to-be-defunct MSN Music store. This is old news that just hadn't been spelled out yet. Besides, given MSN Music's market share, this news directly touches few consumers. (Read article at FMBQ)

Posted by Glenn at 5:36 PM | Link
|EMI||YouTube||Zune|

Financial Times has a story about Warner Music punked Universal Music Group by signing a licensing deal with YouTube days before UMG filed an infringement lawsuit against YouTube. Had the lawsuit been filed, YouTube may not have been acquired by Google.

"Fortunately for YouTube, another music company came to the rescue. Warner Music, led by its young digital chief, Alex Zubillaga, swept in days before the suit was to be filed and clinched a deal with YouTube to distribute its music videos on the site in exchange for a licensing fee and a share of advertising. In so doing, Warner upstaged a rival, and appears to have given YouTube breathing room to become legitimate."

Don't look now, but WMG may have helped shape the near future of online media. Since WMG is signing a deal with everybody, its effectively marking its territory and encouraging its competitors to join in the deal-making. At the same time, this maneuvering shows how the majors differ in their digital strategies.

Not all media companies are lining up to sign with YouTube. Bob Wright, chairman of NBC Universal, underscored the importance of copyright to the company's future. Viacom has an agreement with Google but not with YouTube, and last week the media company ordered YouTube to pull clips of Jon Stewart.

Posted by Glenn at 7:54 AM | Link
|Universal Music Group||Warner Music Group||YouTube|

• Rob Thomas is starting a record label called R Tel Records. I saw this article and then located Rob's mention of the label in an August 31st post at the Atlantic Records message board. Wrote Rob: "one of the first artists is HODGES who some of you saw open for me in portland. it's something that we are keeping under wraps until we're done recording, but i thought you would want to know." Hodges is Hodges Taylor, a Los Angeles-based singer. He is recording his debut album, My Side of the Story, with producer Aaron Kamin.

• Great use of YouTube #1,476: Working the kinks out on new material. Brett Anderson (former singer for Suede/London Suede) posted on YouTube his new song "Scorpio Rising." It's just Brett, a mic, a guitar and a messy desk in the background. Says the text at the clip: "The first in a series of solo performances by Brett. Material will range from brand new songs to very old songs. The season kicks off with an exclusive world premiere of 'Scorpio Rising', a song from the new album ,'Brett Anderson', released in early 2007." (Via Chromewaves)

• Billboard professional rates are currently $99 for 26 weekly issues. It's not a bad deal, really -- if you can expense it.

Posted by Glenn at 7:30 PM | Link
|A&R||YouTube|

• The Future of Music Coalition filed comments in the FCC's broadcast ownership proceeding. Its stance: "Large station groups do not offer more format variety." For the long version, read the executive summary and/or the 19-page PDF.

• Victory Records will make its catalog available at eMusic starting October 31st. (Read article at Billboard.biz)

• Analyst Simon Wallis finds some positives in the EMI accounting fraud. The drop in share price exceeded the per-share impact of the restatement, which presents a good buying opportunity. Also, he believes it could have opened a door for Warner Music Group to bid on EMI. (Read article at The Independent)

• Should YouTube worry about lawsuits from media companies? Not really, wrote Columbia law professor Tim Wu. How so? In the '90s, he wrote at Slate, the Bell companies lobbied against Hollywood's requested reforms. The result was the Online Copyright Liability Limitation Act, part of the Digital Millennium Copyright Act of 1998. Section 512 (c), he claims, is the Magna Carta of Web 2.0 because it provides web companies a safe harbor. Copyright content hosted unknowingly by those companies falls under "tolerated use," a cousin of "fair use." Further, it gives media companies the dual benefits of exposure and control (in the form of "notice and take down" requests). (Read article at Slate)

• FoC Alec Hanley Bemis interviewed Pedro Winter, manager of Daft Punk and owner of Ed Banger Records. "We sell between 2,000 and 4,000 vinyls — a small amount, but still a good score for vinyls when you can’t even find record stores. They are all closing!" (Read article at LA Weekly)

Posted by Glenn at 11:00 AM | Link
|EMI||EMI WMG Merger Talk||YouTube||eMusic|

•Attorney Chris Castle on safe harbor and YouTube: "The current problem for the acolytes of Professor Lessig is that this time it's not some thinly capitalized revolutionaries who are going to take the fall for following his advice." (Read post at Music • Technology • Policy)

• Strollin' down memory lane: More articles on Tower Records back in the good ol' days. One at the Nashville Scene, another at the SF Chronicle.

• CBS agrees to pay $2 million in Spitzer payola probe. (Read AP article at IHT)

• Some bloggers got their hands on the new My Chemical Romance album today. As Stereogum tell us, the advance CD has the name "Mark Carson" printed on it to throw off sinister interns who would otherwise snatch it from a desk and let it loose on P2P networks. Idolator posted the track "Teenagers." Get it before the C&D letter shows up.

Posted by Glenn at 6:09 PM | Link
|YouTube|

Boston.com (via Kings of A&R) wrote about Dresden Dolls YouTube viewership. The band has 300,000 views of its video "Backstabber," which the band created without support of its label. "The wonderfully democratic thing about YouTube and the Internet in general," said Dresen Dolls' singer Amanda Palmer, "is that all you need is a good idea and a way to execute it."

(No mention was made of Moby's cheaply made videos (here's one, "New York, New York"), which were released to YouTube and attracted no buzz whatsoever.)

"We're looking at a changing economy, in which music is free, and artists are going to have to learn to make their living through touring and merchandise sales," says Palmer. Now that's very true. For a band that chooses to live off small nightly takes and merch sales, YouTube and MP3s will suffice. They'll have their pick of about a dozen or so U.S. cities in which people actually go out to shows on a Monday night, but it'll be possible.

Sonicbids also gets a mention in the article. It's a company that aims to lower the cost involved with hooking up artists with promoters.

Posted by Glenn at 3:58 PM | Link
|YouTube|

Some people -- namely Mark Cuban and Jason Calacanas -- aren't on YouTube's bandwagon. Cuban made waves when he said only a moron would buy YouTube. Weblogs Inc founder Jason Calcanas has ridiculed YouTube's business model a number of times ("Quick, someone (Newscorp?!) buy YouTube for $1B.... these guys are on fire!" he joked back in March.)

YouTube's business model was good enough for Google. Whereas P2P draws the ire of the music industry, a battle against YouTube would have been the ultimate Pyrrhic victory. Warner Music Group, Sony BMG and Universal Music Group -- and CBS Corp -- have inked deals to (eventually) share ad revenue generated from videos containing the companies' content. It only takes one lawsuit, Cuban insisted, to bring down YouTube. Who's it going to be? The only recorded music holdout with enough money to bring a lawsuit is EMI. One has to wonder when and if that deal will get done. (Munns? Levy? You've been awfully quiet.)

Bad investment? Labels don't care. They're signing deals with YouTube and happy to let Google some of those billions in cash reserve defending whatever lawsuits might arise. WMG, UMG and Sony BMG will sit this one out. Good move on their part.

It was fun to scan the Internet yesterday and read the reactions.

Bob Lefsetz is dreaming. "If we can have a legal YouTube, we can have a legal P2P service," he wrote. Nope. The former is a complement, the latter is a substitute. Besides, any legit P2P service will be so hamstrung by restrictions it will turn away all but the most curious of the early adopters. Lefsetz is really selling it. "Yes, now is the time. For Edgar Bronfman, Jr. to authorize a P2P service. He should take an ownership position. And allow trading of Warner product."

The Financial Times focused on contingencies. Its article featured analyst quotes that foretold of copyright problems. "This deal makes no sense," said Allen Weiner at Gartner. Well, there's copyright violation and there's copyright violation. Here's how the entertainment industry rates severity of infringement: YouTube is to jaywalking as BitTorrent is to manslaugther.

Music attorney Chris Castle has a solution for fixing YouTube's copyright problems: Ask the artists for permission. "But of course YouTube can’t do that," he wrote. " Asking permission doesn’t 'scale'. ... It’s like saying, yes I know I may be stealing from you, but it’s too inconvenient for me to find out."

Posted by Glenn at 12:30 PM | Link
|YouTube|

• Universal Music Group and Sony BMG signed ad revenue-sharing deals with YouTube. (CBS Corp inked a deal as well.) The article mentions the "new YouTube technology" that will allow companies to find restricted content and remove it, or leave the ad and share ad revenue generated from views of that video. Sony BMG said it will allow users to include some of the music group's catalog songs in their videos...which implies new releases will be forbidden. (Read article at MSN Money)

• More video deals: Sony BMG and Warner Music Group inked an ad revenue-sharing deal with Google. In the near future, the companies' audio-video content will be accessed through Google's Ad-Sense network. (Read article at Forbes.com)

• Brit music magazine NME is working on a greater presence in the U.S. through a US-oriented website (it figures it would be too expensive to launch a print magazine), an American news service and club nights to really hammer the point home (one done in LA, one coming up in NYC). (Read post at paidContent)

• It's not music, but it'll sell: EMI is going to release a limited editiion DVD of Steve (The Crocodile Hunter) Irwin's memorial tribute service. (Read press release)

• A Piper Jaffray survey reveals 79% of U.S. teens own an iPod, up two points in six months. Interest in music-playing mobile phones increased to 74% from 70%. (Read post at Digital Music News)

Posted by Glenn at 9:43 AM | Link
|Research||Sony BMG||Universal Music Group||Warner Music Group||YouTube|

• Today's Wall Street Journal reveals Google is in talks with YouTube for about $1.6 billion. From a music perspective, there is a lot of potential in a Google purchase of YouTube. (The video angle is obvious: YouTube owns Google Video.) While Google has mastered free email, maps and text ads, it has yet to reach success in entertainment. Though its deep pockets may be tempting, I could imagine labels working with Google to promote their music on MySpace. (Read article at Wall Street Journal)

• The Future of Music Summit in Montreal started yesterday. cleverLazy, Fluxblog, Chromewaves and other bloggers will be there. Check their blogs for comments on the Summit, and check for Future of Music posts at Technorati.

• Partnerships about: Best Buy is the retailer of choice in the Rhapsody/SanDisk partnership and Samsung is working on an online store with MusicNet. Plus, Target is rumored to be working on an online music store. That's it, the market will officiallly be satiated when Target enters. (Read article at Red Herring)

Posted by Glenn at 12:38 PM | Link
|Conferences||Rhapsody||YouTube|

YouTube has been one of the stories of 2006, but it's been especially interesting since two major music groups have addressed the website. On one hand, Warner Music Group has been lauded for extending a revenue-sharing olive branch to YouTube. Universal Music Group has been widely ridiculed for its insistence that YouTube owes it millions of dollars. (One exec, quoted in a new article at Newsweek, pointed out a problem with WMG's deal: "YouTube has no ad revenue to split.")

It's certainly possible UMG is sending signals to the market. Reports have said UMG is negotiating with YouTube, but UMG chief Doug Morris took a hard-line stance a few weeks ago. EMI and Sony BMG may look to UMG's stance and hold out for a better deal.

The hold out may be a good negotiation tactic, but the remaining three majors really need to consider joining WMG in working with YouTube. It's imperative that the majors embrace experimentation. YouTube is that experiment. It's time to start throwing things against the wall to see what sticks.

If you're to believe Mark Cuban, who thinks YouTube will be sued, and Forrester analyst Josh Bernoff, who guarantees YouTube will be sued and lose, you view YouTube's infringement as analogous to Napster's infringement. In the halls of justice, YouTube might be just as guilty as Napster, but there's a huge difference between the two: YouTube does not offer a near-perfect substitute for anything the labels currently sell. Its videos cannot be downloaded, the video is poor and the audio is regularly out of sync. (Streams of many of the videos on YouTube can be accessed at no charge at the websites of record labels and bands.) In contrast, Napster allowed people to download files that were near-perfect substitutes for commercially available tracks.

Though major labels are hesitant to pass on an opportunity to set a legal precedent, they should view YouTube as a complement rather than a substitute. YouTube videos complement products -- audio, video, ring tones -- sold by labels. YouTube increases awareness of labels’ products and facilitate access to their catalogs. Substitutes should compete against each other. Complements should work together.

Posted by Glenn at 1:12 PM | Link
|Warner Music Group||YouTube|

• Citigroup is optimistic for the second half of 2006, upgrades EMI to "buy" from "hold." (Read article at NewRatings.com)

• Newsweek's Brad Stones asks of YouTube: "Is it worth a billion dollars, or is it just another company in need of a business model?" He covers the usual Warner Music Group v. Universal Music Group angle, then digs into what one analyst called YouTube's "winner's curse." (Read article at Newsweek)

• Here's a mobile music news bit that I actually find interesting: Motorola iRadio will preview J Records/Arista Records albums. The first offering is Monica's latest single, "Everytime Tha Beat Drop," and other songs from her album The Makings of Me. (Read Press Release)

• Bridge Ratings reports "sluggish" satellite radio sales, especially to the youth market. The research company has lowered its third quarter estimates for new subscriber acquisitions. (Read article at Radio & Records)

• Napster and Tower Records Japan introduced the first subscription-based service for the Japan market. NTT DoCoMo will offer the service to mobile subscribers. The service offers over 1.5 million songs. (Read press release)

• The tail just gets longer and longer: Shout! Factory will release two catalogs, Biograph (early jazz and blues) and Black Top (blues), comprising 10,000 tracks through digital distributor Digital Music Group.

Posted by Glenn at 8:18 AM | Link
|Digital Distribution||EMI||Mobile Music||Online Stores/Services||Radio||YouTube|

Mark Cuban's comments about YouTube's impending legal problems grabbed a good share of headlines. Journalists and bloggers went haywire when Cuban said "only a moron would buy YouTube" because the website is "just breaking the law." His blog post "Riddle Me This Copyright Gurus..." describes a future with man YouTubes and no control over what is uploaded.

Another sanguine comment was made by ZDNet's Donna Bogatin. Her post about a Wall Street Journal article by drama critic Terry Teachout was a rebuttal to a criticism of Universal Music Group's Doug Morris. In response to Morris's claim that YouTube owes UMG "tens of millions of dollars," Teachout called for a "high-culture TV and radio programming" to be distributed free of charge on the Internet. "Supply creates its own demand," Teachout wrote.

Bogatin didn't miss the fact that Teachout's article was available to non-subscribers only as a free sample. "Perhaps Teachout’s next content democratization project will be to help tear down the pesky Wall Street Journal pay walls so that all Wall Street Journal stories can be read 'free, whenever you want.'"

Yes, how dare Doug Morris protect have an interest in securing what he considers proper compensation for use of his company's copyrighted material. Some nerve. Teachout, who lives in a world where the arts survive largely on public funding and charitable donations, needs to understand that in this case writing grant proposals is not the road to a successful business model. There exists a market with a buyer (YouTube) and sellers (UMG, and others). The market is going to need to work this out.

Posted by Glenn at 10:34 AM | Link
|YouTube|

• A fascinating article about the nebulous OCD International, marketing company World's Fair and a Dr Octogon album that only loosely meets the definition of an album. Long story short: OCD cobbled together The Return of Dr. Octagon with throwaway Kool Keith tracks and the help of three producers. The album's original producer, Fanatik J, fought the release of the album. Keith signed with OCD "without fully understanding what he was doing." (Read article at East Bay Express)

• Best Buy didn't report last week's sales to SoundScan. Near-chaos ensues while statisticians rework the data. The numbers will be reprocessed tomorrow evening. (Read article at FMBQ, via Hypebot)

• The Wall Street Journal reports today on a tiff about videos, the revenue stream that has been a greater focus in the last year. Universal Music Group pulled its videos from cable channel Fuse, and Warner Music Group pulled its videos from Yahoo. In the Fuse case, the argument is over the value of payments to UMG. In the Yahoo case, WMG felt the Internet company was not going enough to promote its videos.

• Moses Avalon takes a long look at the MySpace user agreement. (Read article at MusicDish)

Posted by Glenn at 10:30 AM | Link
|Indies||MySpace||Warner Music Group||YouTube|

Just days after YouTube was publicly chastised by Universal Music Group's Doug Morris, Warner Music Group announces a revenue sharing deal with the video website. From the press release:

"In a first-of-its-kind arrangement, YouTube users will be able to incorporate music from WMG's recorded music catalog into the videos they create and upload onto YouTube. WMG thus becomes the first music company to harness YouTube's leading video entertainment service to commercially distribute its music video catalog."

The deal makes sense. WMG could have forced YouTube to police its users and weed out WGM content, or it could find a way to collaborate and build a new revenue stream. (The size and speed of that stream is unknown at this point. YouTube and its peers could eventually be a considerable source of revenue.) In contrast to P2P networks, YouTube's product is not a substitute for music and video sold at online stores such as iTunes. Maybe YouTube views won't result in additional sales, but they're not going to take anything away. WMG's best decision was to get a cut of the ad revenue.

Posted by Glenn at 10:45 AM | Link
|Warner Music Group||YouTube|

The case study continues. Here are some graphical representations of the impact of OK Go's YouTube viewership and MTV Video Music Awards performance. The graphs are provided by Infofilter.

This graph shows the ranking at iTunes' album (lighter) and singles (darker) charts. Notice how the album picked up steam a week before the single. The album spiked after the video hit YouTube but the single didn't spike until after the MTV Video Music Awards.

This graph shows the rise in total files of "Here It Goes Again" shared on Bittorrent P2P.

And here's the total plays on YouTube for the "Here We Go Again" treadmill video.

Posted by Glenn at 12:33 PM | Link
|Marketing||OK Go||YouTube|

Since OK Go is a favorite topic at Coolfer, I had to post about the band's performance at Thursday night's MTV Video Music Awards. The "treadmill dance" that has been a huge hit on YouTube was performed to an enthusiastic audience (view clip here). Jose Antonio Vargas of The Washington Post called it a "quintessential MTV Video Music Awards moment." (Check Rolling Stone's interview with them after the performance.)

Beyond the fun of it all, OK Go's first and second YouTube hits are excellent case studies on DIY marketing, emerging technologies and the viral effects of online media. While YouTube alone might not be enough to make a band a household name, we're seeing that there are after effects: A high-profile performance on national television and the kind of press coverage that simply cannot be bought.

Posted by Glenn at 11:21 PM | Link
|OK Go||YouTube|

Slow down, Reuters. In an article about the online popularity of OK Go's treadmill video, Yinka Adegoke wrote that people "can learn from OK Go's experience, which shows that Web users can catapult a band to fame, challenging the popular assumption that videos need to cost thousands of dollars or be directed by Hollywood film directors."

Millions of YouTube views does not equal fame. The definition of fame is better defined by the demand for a non-free good (album, song, concert ticket, T-shirt). What does a few million no-charge YouTube views give an artist? Notoriety maybe. Visibility definitely. Not fame.

Further down in the article, Adegoke focuses on the ability of YouTube to increase fan interaction. Very true, but the level of fan involvement is certainly not a measure of fame. Ask any cult favorite. Bottom line: there's just too little cost involved (a few minutes of one's time, the neglible cost of bandwidth) in viewing a video at YouTube to assign much value to it.

Now, doing that treadmill routine on the MTV Video Music Awards -- which will happen because of YouTube popularity -- is a whole different ballgame. That carries some heft.

Posted by Glenn at 12:21 PM | Link
|OK Go||YouTube|

Can you teach a record label new tricks? Maybe so. The cross promotion Warner Bros has undertaken with YouTube is a good example of a company showing flexibility and adaptibility in marketing. The label launched a Paris Hilton channel (on right side of screen shot above) that coincides with the release of Hilton's debut album, Paris. The channel (click here to view) carries is sponsored by the Fox television show "Prison Break." Rather than fight each other, YouTube and the industry are engaging one another. Next step for labels: Negotiating for a share of the ad revenue.

But is the channel concept connecting? One