Universal Music's New Biz Model: Lawsuits and Extortion!

Unversal Music, the mega-major record label that thinks so little of its fans that their CEO, Doug Morris, recently said that iPods were: “just repositories for stolen music,” has evidentally hit upon a new business model: lawsuits and extortion.

Apparently making money by putting good music out there with a price point that might entice people just isn’t good enough. Because, of course, we are all thieves. So instead of that, they’ve decided to go a different route. Instead of using their artists to make money, they’ve decided to fall back upon the lawyers. Hopefully, the lawyers will get a better royalty rate.

Let’s review, shall we?

It started in September, when Mr. Morris — who probably has never danced alone in his apartment to a song that he loved so much that it overtook him — said that YouTube and MySpace “are copyright infringers and owe us tens of millions of dollars.” Ignoring the fact that the widespread distribution of the same videos also potentially turns untold millions of people onto the same music.

Apparently, Universal prefers to expose people to its music the old-fashioned way: payola. Apparently, they’d rather pay for song-length ads in order to game the charts then accept free exposure from their fans.

In any event, YouTube, which was also in the process of sealing its deal with Google, decided that they didn’t need the additional headache and gave into Universal’s blatant threats, signing a distribution deal, just has they had previously done with Warner Music.

However, Universal, obviously sporting a pair of legal blue balls, decided to sue a couple of other video-sharing sites, Grouper Networks and Bolt, Inc. This actions caused a swift reaction across the internet, as millions of web video lovers said in unison, “who?”

Meanwhile, Microsoft, who either felt that they needed Universal’s artists for their music marketplace — or wanted to totally screw Apple — gave into Universal’s demand to extort $1 for each Zune sold. Which was done, of course, “for the artists.” However, as ZD Net pointed out, for any of UMG’s estimated 3,000 artists to get even $5,000 per year, over 30,000,000 Zunes will need to be sold. Each year. My guess is that the lawyers who negotiated the deal, not to mention Mr. Morris, will be getting much more than $5,000 this year from that deal. And in no way are 30 million Zunes going to be sold. Ever.

Which brings us up to now, and Universal’s latest lawsuit: MySpace. Unlike YouTube, MySpace hadn’t given into all of Universal Music’s demands. So Universal sued. Of course. Apparently people on MySpace love U2 and Jay-Z, and they aren’t supposed to share that love without Universal’s seal of approval. Or a cut.

However, MySpace, having been recently purchased by Fox, is having none of this. For now. And so, they’re being sued.

What this adds up to, of course, is Universal fighting a huge war on its customers. In a weird way, it’s also the last war that they are fighting. The War on Napster. But YouTube and MySpace aren’t Napster. Napster was all about anonymously sharing music. And to some people, revenge on a music industry that they felt had been ripping them off for decades.

But MySpace and YouTube are different beasts: for one, it isn’t just music that makes them tick — music is just one aspect of the content that the users of these sites generate — and also, they’ve learned the lessons of Napster, and have pretty much wanted to play ball with content providers from the very beginning. And smart content providers have been able to reap the rewards of these communities — Arctic Monkeys; Dane Cook — from the very beginning.

Universal, as we’ve seen, not so smart. They’d rather fight their customers than switch to the distribution models of the 21st century. And while I’m not the head of a major record label, I’m pretty sure that continually insulting your customers by calling them pirates and thieves while simultaneously trying to squelch their expressions of enthusiasm for your products isn’t good public relations.

I’m also pretty sure that — outside of the Mafia, of course — lawsuits and extortion aren’t the best long-term business strategy.

Who will they sue next? Stay tuned!!

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