The YouTube Deal

You can’t play by the rules.

Now when it comes to speeding and not paying your taxes, you’re fucked.  You just can’t beat the system.  Questioning the laws will do you no good.  But everybody knows that copyright is the tool of bullies and the present laws are completely outmoded/not in sync with digital reality.  If you played by the rules, you’d never have any progress.  The only hope is to strike out into the land of infringement and take your chances.

First there’s the issue of licenses.  Seems reasonable.  You ask copyright holders to use their work for a payment in return and a deal is struck.  But if you believe this, you’ve never broken bread with an entertainment executive, whose main goal is to keep things exactly the way they are, they HATE surprises.  So, forgo licenses completely.  Build your enterprise, gain traction, and deal with the fallout.  And, if you’re lucky, the copyright holders will realize that you truly are their new best friend and allow you stay in business.

The model for this is Napster.  Not the newfangled high burn rate operation, but the original Shawn Fanning sued by Metallica company.  The best thing that ever happened to the music industry.  That one.

Best thing that ever happened to the music industry?

OF COURSE!  Because it exposed people to new acts, it blew up those already known by the public, it made available music that hadn’t seen a retail store in years, it got people EXCITED about music.  But, the music execs, the first ones to experience this model, shut it down and killed it.  And CD sales went from their highest ever to their now deflated rate.

Despite all the chest-thumping by Edgar Bronfman, Jr. and Eric Nicoli, the failure to license Napster was single-handedly the worst decision ever made in the history of the music business.  And it will haunt the major labels forever.  At best, the iTunes Music Store is a  CD replacement business.  Copy-protected tracks for the same aliquot price as songs on a CD.  Furthermore, with free acquisition opportunities rampant, with new P2P services and IM and hard drive swapping, killing Napster was like killing a fly in a swarm, utterly futile and irrelevant.

Now, a couple of years and a couple of changes behind the music industry, the TV business has been hit.  With YouTube.

No self-respecting, law-abiding Fortune 500 company was going to steal copyrights, which is what YouTube did to build itself.  The landscape was left to this renegade company, willing to bet its ENTIRE company on the edge of legality.

And what happened with YouTube?  The EXACT SAME THING that happened with Napster.  Suddenly, digital exposition, FOR FREE, blew up underlying copyrighted material/shows.  The classic case being "Lazy Sunday" from SNL.  After MILLIONS of viewings on YouTube, ratings for SNL WENT UP!  Sure, it was all based on copyright infringement, but if said law-breaking had not taken place, SNL wouldn’t have made all that extra MONEY!  Because exposure begets revenue.  The more people who know about something, the more people who are interested in buying it.

So what did NBC do?

They told YouTube to take the material down.

But now NBC has woken up.  Rather than build from scratch their own site, a la Pressplay, a place with fewer eyeballs that no one cares about, they’ve thrown in with the company with all the action, where all the people are, YouTube.  They’ve made a deal with YouTube, they realize it’s to their ADVANTAGE!

This is business.  And the music business is run on intimidation.  But hell, we now know that paradigm is over, look at the labels’ failure to have prices raised at the iTunes Music Store.  The labels’ business will implode just as IBM’s did.  Sure, the majors have the catalog, but when it comes to new material everybody doesn’t want to play by the old rules, they don’t want to be kept down, they want to do it themselves and throw in with tech players THEIR AGE WHO UNDERSTAND THE NEW MODEL!

The Wall Street Journal Online

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  1. [...] nse to resist. For an explanation as to why, I point back to my Grateful Dead post and the YouTube/Lazy Sunday experience. Think of all the Star Wars fan sites [...]

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