Hope we don't have to start paying to watch music videos:

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From The Sunday Times
December 28, 2008
Companies tune in for a musical rival to YouTube

On song: Google founders Larry Page, left, and Sergey Brin
Dominic Rushe in New York
MUSIC companies are working on plans to launch their own video site, in direct competition with Google’s YouTube. The move comes as Warner Music pulls all its videos from the site after the two firms failed to agree on a new contract.

YouTube has dropped thousands of videos from artists including James Blunt, Madonna and the Red Hot Chili Peppers, and Warner is also insisting that YouTube pull any video featuring songs to which it owns the rights. Warner Chappell, the music firm’s publishing arm, owns classics such as Happy Birthday to You and Winter Wonderland as well as the rights to Cole Porter and music by Eric Clapton, Dr Dre, Led Zeppelin and REM.

Google, founded by Larry Page and Sergey Brin, is in talks with the other three big music firms – EMI, Sony and Universal. Warner executives have said it made negligible amounts from the site. But Universal, the largest music group, has said it makes “tens of millions” from its contract.

Most of the money the labels make is from a “pay-per-play” fee YouTube gives them each time a video is watched. The video firm would now like to cut that fee and offer a greater share of ad revenue.

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YouTube has had difficulty selling ads against its content, homemade “user generated” video that often features music owned by the big labels. The plans being discussed by the music industry are modeled on Hulu, a video website that allows people to watch TV shows including Family Guy, Saturday Night Live and Heroes after they have seen a short ad.

Hulu was launched in March by NBC Universal and News Corporation, parent company of The Sunday Times, and now hosts more than 1,000 TV shows from more than 130 content providers, including Sony Pictures Television, MGM Studios, Lionsgate and Paramount Pictures and PBS.

The blogosphere was sceptical about Hulu. Knockers dubbed the site “Clown Co”. But Hulu, still only available in the US, has been a hit. Comscore, the market-research company, pegged its unique monthly visitors for October at 24m. On average, a visitor watches 10 videos on Hulu in a month. It is now getting about a quarter as many unique viewers as YouTube despite having less content and no presence outside the US.

“Boy, did we have to eat crow,” Michael Arrington of the influential blog Techcrunch.com wrote recently. “I was wrong. Hulu rocks. Despite ridiculous odds, the company was able to pull off a joint venture between two humongous parent media companies and provide users with a compelling, sexy product.”

Talks over a musical Hulu are in the very early stages. Some media executives argue that Hulu is not really a threat to YouTube and they doubt that a music version would seriously harm the Google-owned company, even if it was successful. “Hulu offers premium content only, and for that market it works,” said one.

“YouTube is very different and has a different demographic. It’s a different person who wants to watch clips and amateurish stuff made by fans from the sort of person who will sit back and watch a half-hour show.

“I think it’s a mistake to hold Hulu up as an alternative, it’s not. It’s an additional service.”

He said Universal had done well from its YouTube deal because it had “a lot of content that people want”. “Warner is not a company in great shape. I don’t hear advertisers getting worried about this. Who would you rather be with – Warner or YouTube?” he said.

Music-industry executives believe they can put pressure on YouTube to cut a more favourable deal. YouTube is dominated by musical content and the big companies own the soundtracks to many of the sites’ most watched clips. YouTube dominates online video but the rise of Hulu and MySpace Music (also owned by News Corporation) has increased competition.

“Why should we accept less from YouTube when there are better offers with Yahoo, MySpace, MTV and AOL,” said one executive. He said that the irony was that music lovers would end up using Google to search for their artists anyway.

“They just won’t be watching those videos on YouTube. There have been other hot brands on the internet before. What’s Napster worth now? But these names come and go. Catalogues like Led Zeppelin or Madonna are more enduring.”

http://business.timesonline.co.uk/tol/business/industry_sectors/media/article540...