Selling Songs for a Song; Record Labels Want a Bigger Cut of Digital Music Profits

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Byline: Johnnie L. Roberts

The music industry is filled with creative types, and many seem to be wearing suits these days. Consider the latest idea from the business suite at Warner Music Group, which is rummaging like the rest of the industry for new sources of revenue: when search engines like Google formally launch their new video-search sites, Warner Music wants a cut of the cash the sites would reap from selling ads next to search results. So if you type in "Madonna"--a Warner act--at the Google Video site (now in its test phase), and the results are accompanied by ads, Warner wants a share of those ad dollars as well as payment for any Madonna videos that are streamed or sold, according to a senior Warner insider who wasn't authorized to speak on the record, adding that the label has approached Google about the idea. Warner Music declined official comment. A Google spokesman wouldn't comment on any talks with record labels, but did say the company believes music companies should profit from their content. Generally, "that's what we are working on," the spokesman said. "We are in the early stages now."

Who can blame music execs for wanting to play offense? The era of digital downloads has upended the industry's business model, and the labels are scrambling as others answer a basic question: what's the value of a song, video or even an artist's name in the age of broadband? It's a matter of heated debate. Last week Microsoft ended talks with music companies, reportedly over what it would pay them in royalties to offer an Internet music subscription service. Universal Music Group has clashed with Yahoo over compensation for videos. A war of words has erupted even between labels and Steve Jobs over whether 99 cents is too cheap for the most popular songs.

The industry doesn't want to repeat a history of undervaluing itself. In the days when its business plan was simply to promote and peddle music, it footed the bill for producing videos, and initially was only too happy to give them to MTV to help build buzz. For the Viacom-owned network, the videos drew huge audiences, building MTV into a multibillion-dollar asset. "We watched people make fortunes and create valuable assets off of our music," says a former top exec who feared risking his role, if he were identified by name, as an industry consultant.

The industry considers Steve Jobs the latest incarnation of this problem. He used songs to sell iPods, and Apple's iTunes site now sells 80 percent of all downloaded songs. …