Universal Music Group, the world's largest record company, contends the wildly popular Web sites YouTube and MySpace are violating copyright laws by allowing users to post music videos and other content involving Universal artists.
"We believe these new businesses are copyright infringers and owe us tens of millions of dollars," Universal Music CEO Doug Morris told investors Wednesday at a conference in Pasadena. "How we deal with these companies will be revealed shortly."
Universal's talks with YouTube Inc. have deteriorated and the recording giant is set to file a copyright infringement lawsuit against the video-sharing company if no agreement is reached by the end of the month, according to a person familiar with the talks who spoke on condition of anonymity, citing the confidential nature of the negotiations.
Universal's talks with News Corp.'s MySpace have been progressing, the person said.
A call to YouTube seeking comment was not immediately returned. MySpace declined to comment.
The prospect of Universal Music or other record labels suing MySpace or YouTube represents a departure from the way the recording industry has interacted with the sites thus far.
In less than three years, MySpace has emerged as a choice destination for young people and a hub for bands to promote music. Record labels big and small have created Web pages on the social networking site for their bands, typically allowing visitors to listen to the artists' music for free.
Since launching last year, YouTube has grown into one of the most popular video portals on the Web, thriving off user-generated videos that sometimes include people lip-synching to copyright songs or incorporating footage from movies or music videos.
The company has said it promptly complies with notices to remove copyright-infringing material uploaded by users.
But commercial music videos posted with the blessing of the record labels can also be found on the site. YouTube recently added branded channels and videos that enable companies to advertise on the site, a service Warner Bros. Records used to promote Paris Hilton's debut album.
Capitol Records, meanwhile, has released videos on YouTube by The Vines, Cherish and OK Go.
Universal, however, has made it a priority to get compensation for content that was once seen as purely promotional. Last year, the company began charging Web portals such as Yahoo Inc. and Time Warner Inc.'s AOL for playing its artists' music videos online or over video-on-demand services.