User generated Machinima videos - a trend to be embraced or a trend to be discouraged?

Machinima videos are great examples of user generated content. Gamers mashup / re-edit footage from popular games like Halo, the Sims and World of Warcraft to create their own short films and videos. Video sharing sites like YouTube are being used as Machinima distribution networks and are allowing videos to be shared with both peer groups and a wider audience.

Machinima music videos are popular and a selection based on Halo and World Of Warcraft are below:


Dance All Night Machinima music video


McDonald's Rap Machinima music video


Its All Coming Back To Me Now Machinima music video
Established publishers are working out how to address this trend, though the standard response has been that Machinima music videos breach artist copyright. WindUp records' response to UGC machinima videos is documented in the book 'Wikinomics'. Fans of WindUp records artists created over 3000 hours of Machinima music videos and spent over a quarter of a million hours creating them. This level of engagement offered a fantastic opportunity for WindUp records, however instead of embracing these Machinima creators, WindUp records served 'cease and desist' notices and asked for these videos to be removed as they breached copyright.

Despite this Machinima videos and user created remixes and mashups persist. Some mashup artists like Danger Mouse have since been officially signed to labels and some in the music industry seem to be changing their approach - seeing these areas as vibrant pools of creative talent rather than just viewing them as copyright infringers.

Should machinima and mashup user generated creativity be encouraged or should it just been seen as another form of copyright infringement?