Among the problems that have led 3/4 of the majors to block embeds in third party sites of their videos on YouTube is the strategic need to maintain strength in negotiations. In a comment on the first post in this series, Jay Fienberg articulated the issue this way:
Adding to your leverage item: the labels are likely concerned that any very successful site or combination of sites becomes a primary interface between fans and recording artists, i.e., that takes the record labels out of the equation, or at least makes them only a small factor in the transactions between artists and fans.
The success of sites like YouTube potentially give these sites and/or artists and/or fans leverage over the record labels. For example, an artist can get a video seen on YouTube without a big label-type marketing budget, and so that fact could potentially weaken a labels’ negotiation in a record deal. Or, YouTube could become like a radio station and seek payola from labels to promote certain artists, etc.
The labels must want to curtail especially singular successes, like iTunes music store-type successes. These sites could become so big as to become more or less like monopsonies (buyer’s monopolies), where they have more power over the labels than vice versa.