Universal flex content muscles

Universal Music is to charge broadcasters for videos acrossonline and video-on-demand media platforms, and is launching itsown channel. What does this augur for music programming,distribution and promotion asks Eamonn Forde…

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Late last month, Universal Music set out its stall in the musicvideo market very explicitly, pushing forward its own channeland new proposals to charge broadcasters to use its content. Thenew policy will cover online, satellite and cable companiesoffering on-demand videos. As the market leader, Universal is ina strong position to set the industry temperate and its pincermovement here could see the other majors follow it, therebydriving a significant reconfiguration of the music videomarket.

The launch of its own dedicated video channel has, however, hitits first obstacle in the shape of EchoStar. Back in 2001,Vivendi SA invested $1.5B (£0.8B/€1.2B) in EchoStar. One of theconditions of the investment was that EchoStar would have tocarry Universal’s music channels should it choose to launch any.Vivendi, however, sold its stake in EchoStar a year latealthough it retained the clause covering the channel launch.Late last year we reported (see Issue Thirty Seven) thatUniversal had appointed Andy Schuon – former head of programmingat VH1 and MTV – to head up the new channel.

EchoStar has, however, refused to carry the proposed Universalchannel and this stalemate is currently being addressed in theManhattan courts. On top of this, Doug Morris, Universal Music’sChairman, has outlined the company’s new hard-line policy onbroadcasters using their video content for free. He told the NewYork Times: “Too many businesses have been built on the back ofthe content we produce. So in the future, content we producewon't just be provided for free for promotional purposes.People will have to pay if they're going to use it.”

The new policy will cover online, satellite and cable companiesoffering on-demand videos. Late last year, Universal signed upMicrosoft’s MSN service under its new rules, basing payment on apercentage of advertising revenue or a fee based on each videoscreened (whichever is the highest figure). If broadcasters donot agree to the new terms, Universal will withdraw its contentand pull its advertising spend. Now that Universal has steppedinto the breach, it is likely that the other majors willslipstream it.

Record companies have been vocal recently about music channelsmoving away from video programming towards reality formats. Adecade ago, the majors attempted to take a stand against theestablished video channels by setting up their own. The plan wasshelved, however, when the Justice Department in the US began anantitrust investigation into the implications of recordcompanies running a music video channel.

In the UK, unlike in the US, labels are paid for use of theirvideo content via VPL. Last year, over £9M (€13M) (note: this isthe unaudited figure) was distributed by VPL to its membercompanies. US music video channels and radio stations have longargued that they serve a promotional role for the music industryand so should not be expected to pay to play this music.Universal’s move could see a groundswell in music industrysupport for a revision of this broadcast royalties issue.

About the Author:

Eamonn Forde is Editor of Five Eight. A monthly businessstrategy review that provides music industry executives with acompact overview of the month's news, Five Eight featuresin-depth articles on key industry news and fresh articlesexamining new trends. Five Eight cuts through 30 days ofinformation, misinformation and disinformation to give itsreaders a critical, distilled insight into factors affectingtheir business. Five Eight is published by Frukt. For moreinformation, see http://www.fiveeight.net

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