As posted by: Wall Street JournalWarner Music Group Corp. said it began removing its songs and videos from Google Inc.'s YouTube videosharing site this weekend, after the two sides failed to renegotiate a licensing deal.
For now, the decision doesn't appear likely to escalate into a broader battle between YouTube and the music industry, as people close to the other major labels said they didn't anticipate taking down their content in the immediate future. Still, the dispute reflects frustration within media companies over how little ad revenue is generated by their deals with YouTube.
Warner, like two of the three other major-label groups, Vivendi SA's Universal Music Group and Sony Corp.'s Sony BMG Music Entertainment, licensed its recording and music-publishing catalogs to YouTube shortly before the site's acquisition by Google in 2006. EMI Group Ltd. reached its own deal in 2007. In exchange for the use of their music videos and songs, the companies are paid a share of revenue generated by ads displayed alongside their content.
Warner executives have privately expressed frustration with the amount of money they receive from YouTube, saying the site's payment levels are below those of competitors like Time Warner Inc.'s AOL or News Corp.'s MySpace. (News Corp. also owns Dow Jones, publisher of The Wall Street Journal.)
Like Warner, Universal and Sony BMG are both renegotiating their YouTube licenses, which are up for renewal in the next few months.
While Warner says it removed the content on its own, a statement from YouTube implied that the Web site, not the record label, may have made the decision to remove the content from YouTube.
The dispute suggests that YouTube still isn't generating revenue as fast as some media companies would like. YouTube depends on agreements with these media companies to avoid copyright-infringement lawsuits and to draw professionally produced content to the site, which in turn helps attract users and advertisers. YouTube gives the majority of the ad revenue covered by these deals to the companies that own the rights to the content, people familiar with the matter say, although the splits vary.
Analysts estimate YouTube in 2008 will generate revenue of $200 million or less, from selling advertising displayed alongside videos; Google doesn't break out those figures.
Google has made selling more advertising on YouTube one of its priorities this year, and has in recent months launched a number of new ways to advertise on the site. A YouTube spokesman said in an interview Saturday that the new offerings were "starting to show results."
In the wake of Warner's move, people close to the other major labels said they didn't anticipate taking down their content in the immediate future. These people say they are discussing new, more lucrative ways to do business with YouTube. The four music companies don't necessarily have the same terms with YouTube, which could explain the discrepancy in their stances.
It similarly isn't clear whether other media companies will follow in Warner's footsteps. A number of them, including CBS Corp., have recently broadened their partnerships with YouTube, suggesting they are pleased with the results. YouTube has struck a number of similar pacts with a range of companies, including movie studios.
Warner's record labels, including Atlantic Records and Warner Bros., have 21% of the U.S. recorded music market, and distribute current and classic artists including Led Zeppelin, Linkin Park and Aretha Franklin. Its Warner/Chappell division is the third-largest music publisher in the U.S. A Warner spokesman said in a statement: "We are working actively to find a resolution with YouTube that would enable the return of our artists' content to the site." A posting on YouTube's company blog said: "Sometimes, if we can't reach acceptable business terms, we must part ways with successful partners."
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