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From MTV to YouTube: When the Net Pays Everyone But the Musician

01/06/2009 02:05 pm ET | Updated May 25, 2011

In 1996, taped to the wall of my now defunct record label spinART Records' 800 square-foot, four-Ikea-desk-loaded-with-unsold-CD-and-vinyl office was a $1 check from MTV. I fought hard for that stupid check. MTV wanted to use a song called "Supermerica" by a band called Poole that I released. Usually TV shows pay good money for the use of a song, but not MTV — they required labels to allow them to use the music for free in their TV shows when you submitted a music video to be considered for programming on their network. I still don't know why they even bothered saying they would pay a dollar. It really pissed me off. I had fronted money and worked my heart out along with the band to promote, market, manufacture and release their album and along comes a multi-national billion dollar media corporation and demands to be able to use the music for a stinking dollar. I refused to do it. The music had value to me, it was the thing we sold and the thing the band made the majority of their money off of. I could not just give it up for free. But, Harry (lead singer of Poole) convinced me to let MTV have it in anticipation of the promotional value they might get out of it. The show aired, the song appeared in the background for about 30 seconds, the show ended, MTV made money from the advertisers and the song was not mentioned anywhere. This was the way it worked. The labels fed MTV free music and videos and in return hoped to get their videos aired which in turn would drive huge music sales. And MTV made a fortune off the advertising.

And this is more or less why Warner Music recently demanded that all its videos and music be removed from YouTube. Warner previously granted YouTube the legal rights to use its content and YouTube generated a lot of money from it via advertising. Now Warner wants to be paid more by YouTube. If the Google-owned YouTube does not comply, it opens itself up to potentially tens of millions of dollars in copyright infringement fines. Universal did this same thing successfully some time ago.

When media giants fight over music, you know it has to be valuable. Looking, listening and occasionally buying a "good" song drives revenue, tremendous web traffic and generates big advertising dollars. I can kind of understand Warner's point, but as music sales drop and the multi-national, billion dollar media giants wrestle, lobby congress and sue each other for new income streams the musician seems to be getting lost in the shuffle, and that's a huge mistake. Creating a new revenue sharing model that focuses on allowing artists to generate enough money to continue creating music would be a win for everyone. After all, it is the music that is fueling the entire machine.

The union of music and advertising goes back decades, but it seemed to reach a new level with the launch of MTV. MTV broadcast free "TV shows" from the labels in the form of music videos. These videos brought viewers allowing MTV to charge money to advertise on its network. In return for the free videos, the labels and artists received promotion. Artists became more famous which in turn allowed labels to make more money from music sales (there were other income streams as well like money from gigs, but the labels only participated in revenue that came from the sale or license of the music). This symbiotic relationship worked very well as long as all involved made their fair share of money.

However, after over two decades of a steady annual increase in music sales generating enough revenue to feed the record industry, music sales plummeted. At about the same time, advertising revenue from music went through the roof. Internet companies made money off music via venture capital investments, going public and getting acquired for a billion dollars. And this is the crux of the problem, music is being used for profit but not everyone is getting a piece of the pie.

Music sales plummeted with broadband proliferation and the mass adoption of the Internet, MP3s, compression technology, peer to peer file sharing, instant messaging of files, email attachments, torrents and other on-line distribution vehicles. The labels found themselves wondering why they should continue to provide their music and videos for free if the channels/sites they gave them to were reaping a disproportionate financial benefit. Labels would not have given MTV free music videos in the 80's if MTV made money off the videos but the labels did not. (Imagine ABC getting the TV show "Lost" for free, then broadcasting it and keeping all the advertising revenue.)

Move ahead in time to the launch of the original peer-to-peer music file sharing software Napster allowing anyone to get any song at any time for free. Tens of millions of users provided Napster a huge "viewing audience" that it could reach via its "channel." Unlike MTV, most labels and artists did not give Napster permission to use their music. The one area where value could have been created - music sales from discovery - was made irrelevant by allowing users to get the songs for free. To add insult to injury, despite Napster raising almost 100 million dollars and then being bought for 8 million the artists and labels were not paid anything (some would even suggest they lost money due to pirating).

The money that labels did make came from suing Napster and getting paid settlements for copyright infringement; the artists got nothing.

Over time social networking sites began to pop up and MTV moved on to showing its own TV shows (why not, they now had their own built in audience). Bands began to use these sites to get heard, discovered and to collect fans. Music lovers flocked to the sites, web traffic went up and the social networking sites began to charge advertisers for banner ads based on the "eyeballs" they were getting (for a website, any friend of the band is a friend of theirs). Once again it was the bands' and labels' content driving the audience, and once again someone else was making money off the music without an equitable inclusion of the labels and bands in the equation.

Which brings us back to Warner demanding that YouTube take down its content until it receives what it perceives to be its fair share of revenue. Following Google's one billion dollar acquisition, YouTube is not yet profitable and suggests it cannot give up even more of its advertising revenue. Labels contend that this is really not their problem and need to be paid more for the use of their "products." Unfortunately, advertisers are not paying the same sort of rates for online exposure as for TV and radio airtime, and there is not enough money to go around. And the artists, the ones who create and make the music that fuels it all, have yet to be directly included in the conversation.

As the "golden era" of MTV morphs into the world of MySpace and YouTube, a new model of advertising around music - ads appearing on artist's WebPages or popping up on a streaming internet radio player- is not creating enough money to share. And no one is seriously discussing sharing it with the artists anyway. How then in this shifting landscape can they survive?

One possible piece of the puzzle may be the democratization of corporate sponsorship; instead of companies deciding which bands they choose to endorse or random ads appearing when music is played, let bands decide which corporations they want to work with. Bands can then tells their fans to click a link to land at a sponsor's webpage where the fan gets a "free" song. The advertiser gets the web traffic and the artist gets their proportionate share of the advertising money for each free download. Going a step further, the artist has the ability to collect information about the fan (i.e. email address, age, zip code) thereby providing the opportunity for a targeted ad buy , i.e. 18 - 25 year old woman in the 02134 zip code. Or, taken another step further, as opposed to a random ad appearing on a streaming Internet radio player as a Pixies' song is played, assume an ad appears for a product that the Pixies selected, i.e. The Pixies use Gibson Guitars or they love the movie Fight Club. Targeted demographic marketing allows advertising fees to go way up.

TuneCore is launching this model in January 2009 (full disclosure, I am CEO). This connection allowing artists and corporations to work with one another directly may prove to be one of the better ways to generate revenue in the new model. New companies such as TuneCore can then become facilitators providing the tools and information to the artists to collect fans, create music and provide access to opportunities such as corporate sponsorships. I by no means believe this is the magic bullet to the problem, but I do think it has the potential to be part of the solution. In 1981, video killed the radio star, here's to hoping the Internet does not inadvertently kill the musician.