Universal Music Group, the world's biggest record company, is stepping up pressure against popular online sites YouTube and MySpace, accusing them of infringing the copyrights of its artists' music videos.
Universal chief executive Doug Morris described video site YouTube and News Corp.'s social networking site MySpace as "copyright infringers" during a Merrill Lynch investors' conference speech on Tuesday that was closed to the press.
"The poster child for (user-generated media) sites are MySpace and YouTube," said Morris, according to a transcript obtained by Reuters. "We believe these new businesses are copyright infringers and owe us tens of millions of dollars."
He added, "How we deal with these companies will be revealed shortly."
"His remarks strongly suggested the company was planning to take legal action in the near-term to either prevent the illegal use of their content on these websites or to ensure the company is compensated for the use of its content," Jessica Reif Cohen, analyst at Merrill Lynch, wrote in a note on Wednesday.
"This could be the first salvo from a content player against business models based on user-generated content, much of which relies on copyrighted material."
Universal, owned by French media group Vivendi, has been in negotiations with both YouTube and MySpace to offer its artists' music legally for a fee.
A spokeswoman for YouTube, a two-year-old start-up company that already boasts more than 100 million viewings of short videos uploaded by users, said, "It is our policy not to comment on our business negotiations."
MySpace declined to comment.
The runaway success of the free-to-view online video sites has raised the question of whether rights holders such as record companies and movie companies should be compensated, even if the clips are uploaded by the users.
To date, YouTube has said it will take down any copyrighted material illegally posted on the site once it has been alerted by the rights holder.
In February, YouTube was ordered by lawyers for General Electric Co.-owned television network NBC to remove illegally posted clips of some of its television shows, though in June the companies agreed to feature some of NBC's shows legally on the site.
Last month, YouTube told Reuters that it is in discussions with record companies to offer its users the ability to watch virtually every music video ever made, but had yet to settle on a business model to allow viewers to see the videos for free.
YouTube also announced later that month it would be testing a new advertising model with Warner Music Group featuring celebrity hotel heiress Paris Hilton.
Record companies are keen to avoid repeating the mistake they believe they made when Viacom Inc.'s MTV was set up 25 years ago -- allowing their artists' music to be aired for free.
Morris in his remarks to investors on Tuesday said MTV "built a multibillion-dollar company on our (music) ... for virtually nothing. We learned a hard lesson."
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