Warner, YouTube Dance to New Music Deal

Warner Music Group and Google have come to terms on a revenue-sharing agreement that will allow content from Warner’s full music catalog to be used in YouTube videos, according to a blog post by Chris Maxcy, director of YouTube partner development.

Warner will be able to sell its own ad inventory and use YouTube’s Content ID technology to monetize videos incorporating its content.

Warner backed out of a previous license agreement with Google, saying that copyright holders were not adequately compensated under its terms.

Under the new deal, which is set to go into effect soon, the companies will share revenue generated by ads placed alongside the videos. “Warner’s videos will begin appearing on YouTube in the near future,” said Maxcy.

Ends With a Murmur

The deal is a quiet end to a legal dispute that began last year when Warner and YouTube could not come to terms over the renewal of the licensing agreement the two had inked earlier. The dispute led to YouTube recalibrating its Content ID — a tool that has sinced morphed to include ways for users to track viewing trends and possibly monetize their own videos.

It also reopened a debate on fair use on the Internet. The Electronic Frontier Foundation, for instance, claimed at the time that “snippets of shared mass media culture” from iconic TV shows or movies would be off limits to everyday users.

The new deal is a fitting end to a disagreement that stems from an archaic — and soon to be extinct — industry structure, Lee Maicon, vice president and head of strategy at Wing, told the E-Commerce Times.

“In a lot of ways, this is a 20th Century fight, similar to the old East Coast/West Coast hip hop rivalry,” he said. “For the time being, the big labels, such as Warner, are remnants of a 20th Century paradigm where centralization and brokers had a reason for being. They’re representative of barriers to access and creativity.”

At one time there was a reason for such brokers, he said — such as economies of scale and limited distribution channels — but that time has passed.

“As advertisers and people who think up creative ideas for brands, we want as few barriers as possible between people and the content they love,” remarked Maicon. “So in that sense, Warner and YouTube coming to an agreement is good for us. The barriers are crumbling, and the more that this helps us have more direct connection to everyday people, the more we can do.”

Good for Warner

The deal also gives Warner more avenues to pursue other online strategies — namely participation in Vevo, a music video Web site being launched by YouTube and Universal Music Group. It’s expected that the companies will share in the revenues under this venture as well.

Despite the increase in venues, it’s important to remember that the online music video space is emerging, and its rules — both spoken and upspoken — are still being defined, Maicon added. YouTube and Warner need to be careful that the financial circumstances of the deal do not put too much pressure on them to force brands into uncomfortable or negative situations, he warned.

“I encourage them to use their power for good, for creating better and more user-centric experiences that happen to include brands, rather than force fitting old models of advertising into new models of sharing content.”

That may be harder to establish than the licensing agreement, at least as long as economic trends continue the way that they have, Peter Cohan of Peter Cohan & Associates, told the E-Commerce Times.

“The business models between Warner and YouTube are completely different,” he said.

For instance, the music industry has declined to the point where the only sure revenue boosts it can receive are from blow-out concert tours.

“One of the reasons why Warner must have come back to the negotiating table is that it feels the benefits of participating are greater than the costs,” noted Cohan.

As for the rest of the industry, the deal’s ramifications are meaningless, Yves Darbouze, CEO of Plot Multimedia, told the E-Commerce Times.

“It is not going to change the way new media deals will work because YouTube is the only player who can structure a deal like this with little to no consequence,” he said.

“The music industry is so desperate to create 1980s-type revenue that they look at any relationship and see how they can squeeze any dollar from any place they can,” Darbouze continued.

“Old media is always their own worst enemies and instead of creating a relationship with YouTube that would have spurred more music sales they have to create this complicated ad sales scheme that does not change the fact that their tangible music assets — the CD — has no value in the digital age where you can download the file,” he concluded.