This came to me today by email from Bob Lefsetz, and I found it important to pass along. The majors focus on short term vision and making ALL the money. because of this, they are getting left behind. In a minute they will be as irrelevant as dinosaurs. Maybe the rest of us can learn from their stupidity. Here's Bob's email:

The paradigm here isn't MTV, but Napster.

MTV wasn't pirating the labels' wares, building a business without compensation. Hell, at first the labels were eager to give MTV videos. Only after record companies experienced the juggernaut did they demand payment, and they ultimately received it, albeit minimally. By then they'd lost their leverage, not that they really cared, because they were selling boatloads of records.

But now the labels are hurting. They're turning over every rock looking for found money.

The only problem is twentysomethings and thirtysomethings are turning over the rocks first, and using copyrighted wares to build businesses.

This flummoxes major labels. They used to be in control. They've got the law on their side. How did things go so horribly wrong?

Call it the Napster effect. You've got to steal the labels' wares, because you're never gonna get a license.

Oh, Ted Cohen did some innovative deals at EMI, before he got frustrated and left the company. But his bosses weren't open to new ideas until years after Napster, after the die had been cast.

Have a good idea for a business employing music? Try to be reasonable and ask for permission? You won't get it. You'll spin your wheels, wasting time and money, and eventually be forced to go out of business, or launch on such a limited, hamstrung basis, that you'll end up with a site/service that no one wants to use.

So act brazenly, steal with impunity. Maybe, like the principals of Hummer Winblad, you'll be sued personally for your efforts, but you'll go down in the history books as bringing the future to the people, as pushing the envelope, as doing a good thing.

Without Napster, there's no iTunes Music Store.

Without the Rio, there's no iPod.

Don't ask! Hell, record execs are too busy in marketing meetings figuring out how to get their wares placed in the few existing slots on radio so they don't get fired to pay attention to your wacky idea until it gets traction.

YouTube got traction. Airing videos that the labels didn't even know existed, oftentimes of acts so old no nobody was working at the company when their records were released. The Internet brings catalogues alive. This is a good thing. And the labels didn't care, since everybody in charge is working on new stuff, even though the guy in the basement selling the old stuff is making all the money.

But then YouTube started playing new stuff. Well, that's good, since exposure sells records, that's Marketing 101. But suddenly YouTube is a media darling, and might sell for as much money as MySpace.

Yes, Murdoch seemingly overpays for MySpace, yet has his chip covered by an advertising deal with Google. And despite all the hoopla about indie acts breaking on the service, the real story is it's a haven of rampant copyright infringement, since seemingly every one of its tens of millions of users is utilizing copyrighted music on his space/page.

Funny how it took so long for the majors to react. Especially to MySpace. Everybody knows you log on to someone's page and you hear their favorite music. Was no one at a label using the site? Is everybody really that out of touch, with his head up his ass, focusing on radio and even MTV to the exclusion of what's really happening? Or is it that when they found out about the MySpace action they believed the site could be utilized to break their acts, not realizing unlike radio or TV there were endless channels and it was almost impossible to get traction.

Major labels/rights holders should be paid for the utilization of music on these sites. Anybody who believes otherwise not only has no understanding of copyright law, they lack a moral compass. But how should this be done?

Employing the Napster model above, it appears that labels want sites eviscerated, or they desire the lion's share of the money. The labels are so worried about control, and so unworried about the check!

Imagine a legal/authorized Napster. There's no KaZaA. And certainly no legal expense fighting KaZaA and its brethren. There's only income.

But it's tainted income. Because the idea wasn't fostered within the halls of the label. Outsiders, not members of the club, are profiting. Doug Morris is a king, he can't be a pawn in their game.

But he is. Music is an element of these services. Not their raison d'etre. Eliminate the music from YouTube and MySpace and they still exist. So, you must license them.

But there's no statutory rate. It's all subject to agreement.

Sure, Yahoo and AOL made deals for video on demand, but they're run by old wave players afraid of the copyright police. YouTube? Come sue me! Even Murdoch. He knows there's rampant piracy on MySpace and doesn't seem to give a shit.

So the labels want too much. Or a guaranteed figure, even though the real money's in percentages. If you believe in YouTube and MySpace, you negotiate a royalty against their revenues. With a guaranteed floor. You go into business with them. Yet, the labels are always interested in the short term money.

But rather than figure out a way to work together, Doug Morris and his ilk want to play sheriff in the wild west. Well, if you watched "Deadwood", you know that the law didn't always win. The key is to get in bed with the enemy, to play along and invest in them, rather than shut them down, because you can't shut them down.

Doug Morris was antagonistic. What does this buy him? Can't he employ the dealmaker persona he utilizes when he wants to sign an act? What performer would sign with Universal if Doug were confrontational? You've got to be a friend. A press story should talk about negotiation, it shouldn't be about lobbing bombs.

Artists should be paid. But the way they'll make money is to embrace the future, not try to eliminate it, which one can't do anyway. He who surfs the new world will win in the end. No one can stop the wave. Just get on your board and ride!

http://today.reuters.com/news/articlenews.aspx?type=industryNews&storyID=2006-09-14T012222Z_01_N13130884_RTRIDST_0_INDUSTRY-MEDIA-UNIVERSALMUSIC-YOUTUBE-DC.XML