BigShinyThing

We’re not entirely surprised to see that four of the music majors — Universal, Sony BMG and Warner — have each quietly negotiated to take small stakes in YouTube as part of the video-and-music-licensing deals they struck shortly before the site’s sale to Google. According to reports in the New York Times, the music companies collectively stand to receive as much as $50 million from the arrangements. These deals should also help shield Google from the dreaded and much mooted copyright-infringement lawsuits — something that rival Yahoo! has admitted prevented them from swooping on YouTube first.

As the article points out, this pre-emptive and cunning action by the record companies to befriend the ‘enemy’ contrasts with their behaviour a few years’ back:

The decision to take a stake in YouTube is a sharp departure from the tack that the record companies took regarding Napster, the pioneering file-swapping service that transformed the industry in 1999. Back then, after the major companies filed suits against Napster, the two sides discussed various settlements that involved the music companies receiving a big equity stake.

The Napter talks, which were led on the industry side by Edgar Bronfman Jr., then the chief of Universal’s then-parent Seagram — eventually broke down [although Bronfman now helms Warner -- the first record company to join forces with YouTube -- so he eventually gained his chops].

The record companies went on to win a series of legal victories that ultimately forced Napster to shut its site, but the labels have been fighting an uphill battle against free peer-to-peer services ever since.”

As this battle as proved not only extremely expensive but rather ineffectual, the companies have finally decided on a ‘if you can’t beat ‘em join ‘em’ approach. Not only have they found a way to actually make money from YouTube, they’ve also finally cottoned on to the marketing potential in file sharing. Techdirt notes with no little schadenfreude an article in the Wall Street Journal (of all places) titled Record Labels turn Piracy into a Marketing Opportunity. Because file-sharers are first and foremost fans of the music they distribute.Hence Jay-Z has allowed distribution of an eight minute clip of his recent live concert — full of promotional clips for Coke. According to Jay-Z’s attorney:

The concept here is making the peer-to-peer network work for us. While peer-to-peer users are stealing the intellectual property, they are also the active music audience… and this technology allows us to market back to them.

We like to call it crowd surfing — using the P2P network as both media and audience. It’s probably the future of music marketing — or at least one future. Watch and learn.