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Hey there, LonelyGirl

It might not be long before YouTube creations start stealing advertisers away from the networks.

June 01, 2007

THE MUSIC INDUSTRY crossed a symbolic threshold Thursday when EMI, the world's third-largest record company, signed a far-reaching deal with YouTube, the most popular Internet site for user-generated video. All of the major labels have now agreed to ride the YouTube wave, giving up control of their content in exchange for advertising dollars.

The significance of this development is hard to overstate. Launched a little more than two years ago, YouTube quickly became wildly popular in part because of the vast number of unauthorized music-related postings, including slick music videos, bootlegged concert footage and clips of lip-synching amateurs. It was, in short, just the kind of site that the industry would have tried to sue out of existence in the late 1990s and early 2000s. Instead, after a brief period of saber-rattling, each of the major record companies struck a deal to let YouTube users post videos that featured copyrighted content. In return, YouTube agreed to share the advertising revenue generated by those videos.

The labels didn't give up all control; for instance, they can still force YouTube to remove any video they object to. But the deals completely change the game for the labels and YouTube alike. Instead of trying to find and remove all the copyrighted material, the record companies can focus instead on cashing in on the audiences for those clips.

By contrast, much of the TV industry is still trying to play keep-away with YouTube. Several networks have signed deals to pump clips onto special YouTube channels, and CBS President Leslie Moonves has praised the mash-ups of footage from his network's shows that YouTube users have posted. But none has formally agreed to let users post whatever content they wish. Meanwhile, in a case eagerly watched by the entertainment industry, Viacom is suing YouTube for copyright infringement. And Fox and NBC are trying to bypass YouTube by distributing their clips to other popular sites.

Admittedly, partnering with YouTube poses less risk for EMI and company, whose core products don't depend on ad sales, than for the TV networks. But YouTube represents something that the networks avoid at their peril: the technology-fueled shift of control from programmers to viewers. If the networks don't try to capitalize on that, the huge and growing audience for user-selected programming will wind up supporting someone else's clips. And the next thing you know, a YouTube creation such as LonelyGirl15 will be taking away not just viewers but advertisers.

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