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Universal flex content muscles

Universal Music is to charge broadcasters for videos across online and VOD media platforms, and is launching its own channel. What does this augur for music programming, distribution and promotion asks Eamonn Forde...

Universal Music is to charge broadcasters for videos across online and video-on-demand media platforms, and is launching its own 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 music video market very explicitly, pushing forward its own channel and new proposals to charge broadcasters to use its content. The new policy will cover online, satellite and cable companies offering on-demand videos. As the market leader, Universal is in a strong position to set the industry temperate and its pincer movement here could see the other majors follow it, thereby driving a significant reconfiguration of the music video market.

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

EchoStar has, however, refused to carry the proposed Universal channel and this stalemate is currently being addressed in the Manhattan courts. On top of this, Doug Morris, Universal Music’s Chairman, has outlined the company’s new hard-line policy on broadcasters using their video content for free. He told the New York Times: “Too many businesses have been built on the back of the content we produce. So in the future, content we produce won'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 companies offering on-demand videos. Late last year, Universal signed up Microsoft’s MSN service under its new rules, basing payment on a percentage of advertising revenue or a fee based on each video screened (whichever is the highest figure). If broadcasters do not agree to the new terms, Universal will withdraw its content and pull its advertising spend. Now that Universal has stepped into the breach, it is likely that the other majors will slipstream it.

Record companies have been vocal recently about music channels moving away from video programming towards reality formats. A decade ago, the majors attempted to take a stand against the established video channels by setting up their own. The plan was shelved, however, when the Justice Department in the US began an antitrust investigation into the implications of record companies running a music video channel.

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

About the Author:

Eamonn Forde is Editor of Five Eight. A monthly business strategy review that provides music industry executives with a compact overview of the month's news, Five Eight features in-depth articles on key industry news and fresh articles examining new trends. Five Eight cuts through 30 days of information, misinformation and disinformation to give its readers a critical, distilled insight into factors affecting their business. Five Eight is published by Frukt. For more information, see www.fiveeight.net

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