THE LATEST AND MOST VIVID SIGN of change in the music industry is the deal that Warner Music Group announced Monday with YouTube, an online video site whose skyrocketing popularity stems in part from bootlegged music videos.
The agreement starts with a seemingly conventional licensing deal for Warner music videos, interview clips and behind-the-scenes footage. Then it goes two steps further: In exchange for a cut of YouTube's advertising revenue, it allows YouTube users to post footage that's copyrighted by Warner, as well as original videos using Warner's music. The latter would include the inexplicably popular category of lip-syncing videos, such as the second-most-viewed YouTube clip of all time: two guys performing to the "Pokemon" theme song.
Although Warner retained the right to block videos it considers inappropriate, it still showed more willingness than other major labels to relinquish control over the distribution and creative use of its products. That shift of control is an essential quality of the digital era, yet entertainment companies in general have struggled to accept it, let alone harness it.
For them, the problem is part economic and part legal. Many online firms, including YouTube, don't charge users for the entertainment they consume. And the labels' artist contracts and copyright law allow for little flexibility.
Whether YouTube can transform itself from the latest dot-com flavor-of-the-month into an enduring business like Viacom's MTV remains to be seen. By accepting a piece of the advertising revenue instead of insisting on a guaranteed fee per view, Warner risks collecting too little for its artists and shareholders. Other major labels, most notably Universal Music Group, have been less eager to strike a deal with YouTube and more willing to take the company to court for allegedly promoting copyright infringement.
Given how quickly dot-coms come and go, however, the greater risk seems to be not collecting anything at all while YouTube still has millions of users. Warner isn't simply lashing out at pirates -- a tactic that's had little effect on rampant online bootlegging -- or resigning itself to them. Instead, it's trying to generate money from what had been unauthorized and unprofitable uses of its copyrighted works.
Computers and the Internet are interactive tools, after all. It's nice to see a major record company recognize the opportunity those tools present.