EMI Music, YouTube sing new tune

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British music label EMI Music has teamed up with Google Inc.'s YouTube to offer authorized music video content for the first time in an attempt to interact with a new audience and monetize online video content as CD sales continue to fall.

EMI has agreed to work with YouTube and Google to develop business models in which the YouTube community will be able to access user-generated content featuring EMI-owned and copyrighted audio and video works. The record label will be able to track and report on this content to monetize transactions and compensate its artists, including David Bowie, Coldplay, The Decemberists, Fat Boy Slim, Gorillaz, Lily Allen and Norah Jones. The content will be monetized through a revenue share model against advertising on the site.

"After this agreement all four of the world's major music groups are official YouTube partners as [are] a large number of independent record labels," said Chris Maxcy, business development director at YouTube. "Our work is not done, of course, and we hope to continue to forge deals with the music industry."

The deal comes after YouTube joined forces with other entertainment providers such as the British Broadcasting Corporation and Warner Music.

"I think it's a step in the right direction, that a service like YouTube that didn't used to care about hosting copyrighted material is making efforts to legitimately obtain the licenses they require," said Bob Kohn, chairman/CEO of RoyaltyShare, a San Diego-based digital royalty accounting service.

"It remains to be seen whether independent record labels will be getting equal treatment and get paid for their content, or if YouTube is only offering this to a company like EMI which is big enough to sue," he said.

YouTube is currently being sued by Viacom for $1 billion for allegedly infringing on Viacom's copyrighted material from MTV, VH1, Comedy Central and Nickelodeon. The suit was filed March 13.

In fighting the allegations, YouTube claims protection under the Digital Millennium Copyright Act, a law that protects Web hosts from copyright lawsuits as long as the hosts agree to remove the unauthorized material.

YouTube created the "Claim Your Content" program which places a content identification and reporting system for user-uploaded videos. This gives content partners the ability to remove content or share in the advertising revenue generated, if any.

This development comes at a time when record labels are looking for new ways to monetize content since CD sales - the music industry's primary source of revenue - have dropped off in recent years.

Despite the fact that online music sales doubled to $2 billion in 2006, representing 10 percent of the market, these sales have not made up for the shrinkage in CD sales. The music industry, as a whole, has shrunk by 3 percent in 2006, according to the International Federation of the Phonographic Industry.

"Content owners are seeking a variety of revenue streams from their content to replace the income lost for declining CD sales," Mr. Kohn said. "Online videos, ring tones and user-generated content are some ways to create revenue."

EMI recently released its entire digital library on Amazon's new online music store and partnered with Apple's iTunes to be the first major label to offer high-resolution digital rights management-free digital music downloads.

Ironically this partnership has happened despite a three-decade long legal battle over the Apple name and logo between EMI and The Beatles guardian firm, Apple Corps Ltd., whose catalog is represented by EMI Music.

In 1981, Apple Corps agreed to let Apple Computer use the name as long as the electronics firm promised to stay out of the music business. After a number of ensuing lawsuits, the two agreed on a licensing partnership this year. The Beatles catalog is still not available digitally, but EMI recently released Paul McCartney's entire solo collection digitally on iTunes.

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