HITS Daily Double
“What doesn’t work for us are companies trying to build businesses using our content without our getting a fair share."


Calls YouTube and MySpace Copyright Infringers, Intimates That a Move Is Imminent
In recent years, the Doug Morris-led Universal Music Group has established a clear-cut, industry-leading pattern of aggressively going after media entities that make use of its content with the aim of opening up new revenue streams, most dramatically in the lucrative video-on-demand deals it hammered out with Yahoo, AOL and other online operations, pulling its videos to force the issue. On Tuesday, during his speech at Jessica Reif Cohen’s Merrill Lynch media summit in Pasadena, Morris strongly hinted that UMG’s next series of targets would be the social networking sites, starting with the massively popular YouTube.

Immediately following an address by Newscorp’s Peter Chernin that focused squarely on MySpace and YouTube, Morris began his speech by enumerating some of ways in which UMG has leveraged its assets to create new avenues of income, including the formation of IMF and Fontana Distribution, and the deal with MTV for mobile content announced earlier this week. He then offered a history lesson for the assembled media mavens.

“What doesn’t work for us,” he said, “are companies trying to build businesses using our content without our getting a fair share. The poster child for this was MTV. Twenty-five years ago, they built a multibillion dollar company on our software. They received the software for virtually nothing. We learned a hard lesson.

“Recently, companies like Yahoo and AOL started video-on-demand, running ads between our videos,” Morris continued. “We asked for payment; they said no. We took down our videos and they said yes. Now we share in their advertising revenue. By the way, Yahoo streams over 350 million videos a month.”

Having completed the setup, Morris got to his point. “Now we have social networking sites and user-generated sites,” he said. “The poster child[ren] for these sites are MySpace and YouTube. We believe these new businesses are copyright infringers and owe us tens of millions of dollars.”

And the punch line, delivered to a suddenly hushed room: “How we deal with these companies will be revealed shortly. We need to get a fair share from all of the new users of our content.”

Morris’ warning shot was strategically timed, coming when many believe YouTube’s ownership is in the early stages of talks with various bankers, the aim being either an IPO or an outright sale. Getting into an extended legal battle with the world’s most powerful music company—one that has shown no hesitation to push hard for what it wants—would make either of those scenarios far more difficult. According to insiders, there’s a very strong likelihood that UMG will file suit against YouTube in the near future.

Morris’ coda was just as ominous. “Fool us once, shame on you,” he said. “Fool us twice, shame on us.”