Wired on Friday: If there was evidence of any degree of co-ordination, it might look like the music industry was using the Good Cop, Bad Cop routine with the latest batch of internet start-ups. As it is, the old media barons have been showing, as ever, more schizophrenia than co-ordinated strategy, writes Danny O'Brien

Warner Music, with a dukedom of about 15 per cent of the global music market, this week announced a deal with YouTube, the popular video-sharing website.

Almost simultaneously, the chief executive of Universal Music Group, whose fiefdom occupies 32 per cent of the same market, said he believed companies like YouTube were "copyright infringers and owe us tens of millions of dollars", adding: "how we deal with [ them] will be revealed shortly".

Is it Napster all over again? Back in 2000, the enormously successful music file-sharing company struggled to convince music labels to work with it to obtain revenue from its 20 million users.

At the time, Napster was looking for a business model that could derive revenue from its own success, and was willing to share it with musicians and labels whose works were being traded between its users.

Instead, Napster was taken down in a series of lawsuits that ended with its ignominious bankruptcy (the name was bought at auction by US company Roxio and used to relabel its existing music download service, which still runs today).

Musicians failed to retrieve any monies from Napster's fans; those fans quickly sidled off to file-sharing networks that weren't so dependent on centralised, litigable corporations. The opportunity vanished.

At the time, not every entertainment company was equally unfriendly towards Napster. One part of European media empire Bertelsmann invested in the file-sharing start-up and began to work with them to revenue-share - even as another part of the same goliath, BMG, was suing Napster in the US courts.

Such experimentation was punished by Bertelsmann's fellow music industry competitors. In 2003, a group of music publishers began legal action against Bertelsmann, accusing its Napster funding of "facilitating infringement by Napster users". The case trundles on to the present day, with Bertelsmann currently offering to settle the case with Universal for $60 million (€47.3 million) - in return for Universal's purchase of BMG.

Meanwhile, sharing home videos is the new craze online.

YouTube is the top service for hosting video clips on the internet. Its most popular hits are mostly homemade schticks recorded by teenagers, as well as clips containing material copyrighted by the music industry. From muffled CDs playing in the background of videoed wedding receptions to 1980s music videos uploaded by nostalgic fans, a paranoid music executive could spend a lifetime browsing his company's music, offered without charge on YouTube.

That said, no one but a paranoid music executive would use YouTube for the music.

The quality of audio and video on the site is about as good as a flaky VHS tape. This is suitable for the quick three-minute video downloads the site excels at, but it's no threat to any music label's business.

But it's not the existing business Universal and Warner care about. The existing business is collapsing anyway and, since the birth and death of Napster, the companies have found no way of replacing it.

To the revenue-attuned noses of the music industry, opportunity is so close they can smell it. All those teenagers lipsyncing to Justin Timberlake should be making them some cash; the problem is how to extract it. The deal Warner appears to have accepted from YouTube is similar to the one Napster was offering. YouTube will work on technology to spot material for which Warner owns the rights; when a clip contains such content, Warner will get a cut of YouTube's advertising revenue.

Universal clearly feels, as the music industry did in 2000, that this cedes too much control. It appears it would rather scare investors away from YouTube until it dies of its own accord.

If Universal does take the legal route, it will have a far tougher case on its hands than with Napster. YouTube hosts user content in a way that translates more clearly to US copyright statutes than Napster ever did. That law (crafted by internet service providers like AOL to protect themselves from the peccadilloes of their own users) makes it clear that hosting intermediaries bear no liability for their users' infringing ways, as long as the hosts agree to take down copyrighted material when notified.

One company appears to be fighting its last war; the other appears to have learnt its lesson. While the music industry may think it won the battle against Napster, not everyone is of the same opinion. Like Bertelsmann before it, Warner may be punished by the rest of the industry for seeking alliances before it serves lawsuits.

But the market's patience for executives who kill golden goose after golden goose in the search for the perfect internet money machine must be wearing thin. True, there's not as much money in YouTube advertising revenues as there is in selling CDs or ringtones; but there's more potential than there is in another set of internecine battles over scraps in the courts.

Danny O'Brien is activist co-ordinator of the Electronic Frontier Foundation