Surge in Online Video Challenges Music Industry
on Wall Street Journal
by Kevin J. Delaney and Ethan Smith, June 10, 2006
The music industry is grappling again with how to protect its copyrights on the Internet, as amateur videos featuring commercial songs flood the Web.
Some of the most popular videos on sites such as YouTube and Google Video show amateurs lip synching to music by the Backstreet Boys, *Nsync and other pop artists. Many home-videos posted on such sites include songs as soundtracks, as well as snippets of concerts captured by music fans with their cellphone cameras. Virtually all this material is put online without securing permission from the owner of the rights.
The concerns have taken root as the popularity of video sites -- which allow users to post their own and view others' videos -- has exploded, thanks in part to the spread of high-speed Internet connections and the rapidly expanding amount of amateur and commercial content online.
One of the most popular video sites, YouTube Inc. of San Mateo, Calif., was founded only in February 2005, but has seen its traffic increase dramatically. Each day, YouTube says, consumers upload more than 50,000 videos to its site, and watch its online videos more than 50 million times. Companies including Google Inc., Yahoo Inc. and CNET Networks Inc., have gotten into the act too.
But with the videos attracting millions of users -- and a rising amount of advertising revenue -- some in the music industry are debating whether to attempt a crackdown. At a May meeting of the Recording Industry Association of America, the industry's main trade group, the world's largest music company, Universal Music Group, pushed for an aggressive stance against amateur videos using commercial songs.
For now, the strongest option on the table appears to be sending legal notices to video-sharing sites advising them to remove copyrighted songs, according to people familiar with the discussions. Lawsuits have not yet been raised as a serious prospect. Some executives say they remain more concerned about issues like pirated professional music-video content and the online sharing of music files that remains rampant.
But concerns about music in amateur videos could come to a head as Internet companies begin generating significant revenue from the ads displayed alongside them. The music industry's considerable legal and commercial firepower, if wielded, could make it harder for those companies to raise financing, attract advertisers or cut business deals. Among other things, record companies also have commercial relationships around the distribution of music videos with many of the Internet players. The music industry could try to leverage those relationships to get the video sites to crack down.
Some predict that the industry will sharpen its focus on the issue as ad revenue grows. "When it gets big enough, they will go after it," says Gerd Leonhard, CEO of Sonific LLC, an Alameda, Calif., digital music licensing startup.
The National Music Publishers' Association said in a written statement that it is "concerned about sites that are deriving profit from unlicensed use of music." The trade group added that it would "monitor the situation."
The video sites say they're on firm legal ground, and very different from the file-sharing companies, such as the original incarnation of Napster, that music labels have targeted previously. YouTube and others remove any infringing content when formally requested to do so, under a recognized procedure that some legal experts say protects them from liability. Some sites also post warnings that uploading videos containing commercial music without permission can violate copyrights, and say they plan to offer libraries of licensed music that consumers can legally use in their videos to discourage infringement.
Generally Protected
Some legal experts say the video sites likely are generally protected as long as they comply with any so-called take-down notices sent by music companies asking them to remove videos containing their songs. That approach, outlined in the Digital Millennium Copyright Act, is how the sites generally handle copyrighted video. "As long as the sites are complying with letters being sent it's going be hard for a court, under existing law, to shut down the services," says Daniel Harris, an attorney and global head of the intellectual property group at Clifford Chance in Menlo Park, Calif.
Still, the tension underscores the sometimes unexpected consequences as the Web blurs the line between private and public content, allowing consumers to post home videos to audiences of millions with a click or two. It also raises questions for the music, TV and film companies, which want to keep tight control on their products while capitalizing on any sales-boosting buzz they can get.
"There are a lot of questions about whether a quality remix of background music with good video imagery is positive publicity" for the music companies, says Jason Zajac, Yahoo general manager of social media. "It definitely has not been nailed down and I think even the music industry's views will evolve over time."
In the battle against file sharing, music companies have taken a strict approach, suing individuals and Web sites linked to copyright infringement. But such legal campaigns are costly and can negatively affect public opinion.
This time around, in a philosophical shift, some in the industry are seeking instead to reach business arrangements before issuing legal threats. Both Warner Music Group Corp. and Universal Music, a division of Vivendi Universal SA, are exploring a variety of possibilities with YouTube and others, including sharing any revenue from ads displayed when their songs are playing.
"They're definitely concerned about their rights. We are too," says Chad Hurley, chief executive of YouTube. "But the discussions are revolving around the opportunities."
Recording-industry executives say they were encouraged to see YouTube and other video sites recently enter negotiations with Broadcast Music Inc. and the American Society of Composers, Authors and Publishers, which collect royalties on behalf of songwriters when their music is played in public or broadcast. Both Ascap and BMI say they are working toward setting rates for use of their members' compositions on video services. Both organizations base royalty rates either on a licensee's revenue or on the number of times listeners hear a licensed piece of music.
But even those looking to forge ties with video sites remain wary as the phenomenon spreads. "I'm not going to embrace these guys and try to figure out a legitimate business model for two years," says Alex Zubillaga, Warner Music's executive vice president for digital strategy.
Others say they want to make video sites prove to be more than flashes in the pan before they invest time and energy in reaching licensing accords. "We draw a distinction between what is a phenomenon versus what is a new business model," says Adam Klein, EMI Music's executive vice president for strategy. EMI Music is part of EMI Group PLC.
Meanwhile, some companies are pushing ahead. The CEO of video site Grouper Networks Inc., Josh Felser, says his company is in discussions with music companies about promotional relationships that will allow Grouper users to legally use tunes as soundtracks in their videos. Grouper's software includes a video-editing application that will provide one way for users to access cleared music. Mr. Felser expects the first songs to be available by next month. Pump Audio LLC, which licenses independent artists' music for uses such as TV shows and commercials, says it is in talks with Internet companies to let users tap most of its catalog of 65,000 tracks for their videos.
Technological Solutions
There also are some technological solutions being examined. YouTube is one of several companies that says it is exploring technology that can automatically spot commercial tunes in order to remove them or share related ad revenue. Gracenote Inc. has created digital fingerprints of roughly nine million songs, and says it can identify tracks from excerpts as short as four seconds. The Emeryville, Calif., company says its technology could be used to pinpoint specific commercial songs in the video sites' databases, but declines to say whether it's discussing that with any of the sites.
Still, many of the most popular songs likely won't be cleared for inclusion in amateur videos. And for now it remains easy for consumers to slap commercial music tracks into their videos without permission, using home-editing software such as Apple's iMovie, and upload the result to the Web. It also is tough for video sites to sift through the tens of millions of videos available online in search of music excerpts.
One day this past week, the most-watched video on YouTube showed a young woman lip-synching to "United States of Whatever," a novelty song by a singer named Liam Lynch.
Other popular clips in recent months have included no fewer than two juggling routines choreographed to the Beatles' "Golden Slumbers," "Carry That Weight" and "The End," and at least two others that show comedians offering a "history of dance" set to medleys of songs by Elvis Presley, the Bee Gees, Michael Jackson and others. And more than one million viewers have viewed a clip of two Chinese students cartoonishly grimacing as they lip synch to the Backstreet Boys' hit "I Want It That Way."
by Kevin J. Delaney and Ethan Smith, June 10, 2006
The music industry is grappling again with how to protect its copyrights on the Internet, as amateur videos featuring commercial songs flood the Web.
Some of the most popular videos on sites such as YouTube and Google Video show amateurs lip synching to music by the Backstreet Boys, *Nsync and other pop artists. Many home-videos posted on such sites include songs as soundtracks, as well as snippets of concerts captured by music fans with their cellphone cameras. Virtually all this material is put online without securing permission from the owner of the rights.
The concerns have taken root as the popularity of video sites -- which allow users to post their own and view others' videos -- has exploded, thanks in part to the spread of high-speed Internet connections and the rapidly expanding amount of amateur and commercial content online.
One of the most popular video sites, YouTube Inc. of San Mateo, Calif., was founded only in February 2005, but has seen its traffic increase dramatically. Each day, YouTube says, consumers upload more than 50,000 videos to its site, and watch its online videos more than 50 million times. Companies including Google Inc., Yahoo Inc. and CNET Networks Inc., have gotten into the act too.
But with the videos attracting millions of users -- and a rising amount of advertising revenue -- some in the music industry are debating whether to attempt a crackdown. At a May meeting of the Recording Industry Association of America, the industry's main trade group, the world's largest music company, Universal Music Group, pushed for an aggressive stance against amateur videos using commercial songs.
For now, the strongest option on the table appears to be sending legal notices to video-sharing sites advising them to remove copyrighted songs, according to people familiar with the discussions. Lawsuits have not yet been raised as a serious prospect. Some executives say they remain more concerned about issues like pirated professional music-video content and the online sharing of music files that remains rampant.
But concerns about music in amateur videos could come to a head as Internet companies begin generating significant revenue from the ads displayed alongside them. The music industry's considerable legal and commercial firepower, if wielded, could make it harder for those companies to raise financing, attract advertisers or cut business deals. Among other things, record companies also have commercial relationships around the distribution of music videos with many of the Internet players. The music industry could try to leverage those relationships to get the video sites to crack down.
Some predict that the industry will sharpen its focus on the issue as ad revenue grows. "When it gets big enough, they will go after it," says Gerd Leonhard, CEO of Sonific LLC, an Alameda, Calif., digital music licensing startup.
The National Music Publishers' Association said in a written statement that it is "concerned about sites that are deriving profit from unlicensed use of music." The trade group added that it would "monitor the situation."
The video sites say they're on firm legal ground, and very different from the file-sharing companies, such as the original incarnation of Napster, that music labels have targeted previously. YouTube and others remove any infringing content when formally requested to do so, under a recognized procedure that some legal experts say protects them from liability. Some sites also post warnings that uploading videos containing commercial music without permission can violate copyrights, and say they plan to offer libraries of licensed music that consumers can legally use in their videos to discourage infringement.
Generally Protected
Some legal experts say the video sites likely are generally protected as long as they comply with any so-called take-down notices sent by music companies asking them to remove videos containing their songs. That approach, outlined in the Digital Millennium Copyright Act, is how the sites generally handle copyrighted video. "As long as the sites are complying with letters being sent it's going be hard for a court, under existing law, to shut down the services," says Daniel Harris, an attorney and global head of the intellectual property group at Clifford Chance in Menlo Park, Calif.
Still, the tension underscores the sometimes unexpected consequences as the Web blurs the line between private and public content, allowing consumers to post home videos to audiences of millions with a click or two. It also raises questions for the music, TV and film companies, which want to keep tight control on their products while capitalizing on any sales-boosting buzz they can get.
"There are a lot of questions about whether a quality remix of background music with good video imagery is positive publicity" for the music companies, says Jason Zajac, Yahoo general manager of social media. "It definitely has not been nailed down and I think even the music industry's views will evolve over time."
In the battle against file sharing, music companies have taken a strict approach, suing individuals and Web sites linked to copyright infringement. But such legal campaigns are costly and can negatively affect public opinion.
This time around, in a philosophical shift, some in the industry are seeking instead to reach business arrangements before issuing legal threats. Both Warner Music Group Corp. and Universal Music, a division of Vivendi Universal SA, are exploring a variety of possibilities with YouTube and others, including sharing any revenue from ads displayed when their songs are playing.
"They're definitely concerned about their rights. We are too," says Chad Hurley, chief executive of YouTube. "But the discussions are revolving around the opportunities."
Recording-industry executives say they were encouraged to see YouTube and other video sites recently enter negotiations with Broadcast Music Inc. and the American Society of Composers, Authors and Publishers, which collect royalties on behalf of songwriters when their music is played in public or broadcast. Both Ascap and BMI say they are working toward setting rates for use of their members' compositions on video services. Both organizations base royalty rates either on a licensee's revenue or on the number of times listeners hear a licensed piece of music.
But even those looking to forge ties with video sites remain wary as the phenomenon spreads. "I'm not going to embrace these guys and try to figure out a legitimate business model for two years," says Alex Zubillaga, Warner Music's executive vice president for digital strategy.
Others say they want to make video sites prove to be more than flashes in the pan before they invest time and energy in reaching licensing accords. "We draw a distinction between what is a phenomenon versus what is a new business model," says Adam Klein, EMI Music's executive vice president for strategy. EMI Music is part of EMI Group PLC.
Meanwhile, some companies are pushing ahead. The CEO of video site Grouper Networks Inc., Josh Felser, says his company is in discussions with music companies about promotional relationships that will allow Grouper users to legally use tunes as soundtracks in their videos. Grouper's software includes a video-editing application that will provide one way for users to access cleared music. Mr. Felser expects the first songs to be available by next month. Pump Audio LLC, which licenses independent artists' music for uses such as TV shows and commercials, says it is in talks with Internet companies to let users tap most of its catalog of 65,000 tracks for their videos.
Technological Solutions
There also are some technological solutions being examined. YouTube is one of several companies that says it is exploring technology that can automatically spot commercial tunes in order to remove them or share related ad revenue. Gracenote Inc. has created digital fingerprints of roughly nine million songs, and says it can identify tracks from excerpts as short as four seconds. The Emeryville, Calif., company says its technology could be used to pinpoint specific commercial songs in the video sites' databases, but declines to say whether it's discussing that with any of the sites.
Still, many of the most popular songs likely won't be cleared for inclusion in amateur videos. And for now it remains easy for consumers to slap commercial music tracks into their videos without permission, using home-editing software such as Apple's iMovie, and upload the result to the Web. It also is tough for video sites to sift through the tens of millions of videos available online in search of music excerpts.
One day this past week, the most-watched video on YouTube showed a young woman lip-synching to "United States of Whatever," a novelty song by a singer named Liam Lynch.
Other popular clips in recent months have included no fewer than two juggling routines choreographed to the Beatles' "Golden Slumbers," "Carry That Weight" and "The End," and at least two others that show comedians offering a "history of dance" set to medleys of songs by Elvis Presley, the Bee Gees, Michael Jackson and others. And more than one million viewers have viewed a clip of two Chinese students cartoonishly grimacing as they lip synch to the Backstreet Boys' hit "I Want It That Way."
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