An RIAA board member and executive from the world’s biggest record company has said the old way of doing business has gone forever now.

Larry Kenswil, president of Universal Music Group’s eLabs, might not speak for all of Universal Music, but he does speak for an important part of it. Kenswil today said labels could no longer “count units” but had to license rights.

The eLabs chief’s comments caused a few jaws to drop here in Cannes, but it’s part of a sea change in strategy at UMG. The DRM gurus have departed – Barney Wragg left Universal last summer – and Universal is striking deals with anyryone who can hold a pen and scrawl an X. Towards the end of 2006, MySpace, YouTube and Microsoft all agreed to pay Universal for rights to their catalog – material crucial to the success of their products or services.

“We can’t think of it as counting unit sales anymore,” said Kenswil. “We have to license … and think like the publishers.”

After initially threatening to sue, Universal granted YouTube a license to its catalog, which permits users to repurpose it to create new content. Asked by a panel moderator at MidemNet how much users were paying for the privilege, Kenswil joked,

“Users are creating free content for YouTube. Maybe the question should be, ‘How much is YouTube paying its users’”, said Kenswil.

That’s a subtle dig at the Web 2.0 idea whereby users produce stuff for nothing for the benefit of hugely profitable multinationals (MySpace is owned by News International, and YouTube by Google) , under the guise of “sharing” or “user generated content”. This approach to business has been dignified with some fairly bogus pseudo-economics, but is better described by the label “digital sharecropping”.

YouTube was granted a blanket master license, but Kenswil said that if artists objected they would request the licensee withdrew the material.

“It’s a whole new revenue stream for our record company,” he said. Kenswil wouldn’t elaborate on how it worked, but said getting the new deals in place was an involved process, and hinted that he’d much prefer not to have to do it company by company.

“The box is getting smaller, so if you don’t think outside of the box your company is going to get smaller.” Kenswil said.

Asked about the “Long Tail”, Kenswil called it “an interesting catchphrase” that wasn’t in itself much help to doing business.

He agreed that “larger virtual shelfspace” meant more products would sell more.

“Universal’s catalog is 300,000, alot smaller than [last.fm’s database] 65m. But most of those 65m will be listened to once. That doesn’t make up for the decline in the head.”

Kenswil urged record labels to partner with independents:

“Indies have always been the lifeblood of the industry,” said Kenswil. “It will fall on indies even more than before to find talent”.

The executive’s comments made a discussion that took place just moments earlier seem like it belonged to a different era.

Kicking off proceedings at MidemNet, the Recording Industry Ass. of America’s maximum leader Mitch Bainwol, and the Motion Picture Ass. of America’s executive VP Fritz Attaway took lumps out of Gary Shapiro of the Consumer Electronics Association.

Shapiro said “it’s become a profit center for the RIAA to devastate families.” Bainwol said DRM ” served a legitimate pro-consumer role”, in creating new models. Attaway said DRM wasn’t perfect, but it “was the only tool we had to prevent indiscriminate copying,” and Bainwol accused Shapiro of wanting the destroy the “only way” of doing business the record industry had. Did he just say “the only way”?

Sadly, Shapiro couldn’t counter this absurd accusation.

Happily, within an hour, one of Bainwol’s own board members had.