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YouTube, Warner Deal Begins Site's Maturity

  • Forbes, Wednesday, September 20, 2006 11:15 AM
"Finally, an old-media dinosaur gets it!" writes Peter Kafka of Forbes.com about YouTube's expanded deal with Warner Music Group. Kafka calls the deal a "coup for Warner," which he says is "taking great pains to convince investors that the Internet is an opportunity for the company, not a revenue destroyer." It's interesting, though, that Warner Music Group--one of the recording industry's big four--has chosen YouTube as its distribution partner for songs and music videos. Meanwhile, Warner's big competitors, EMI and Universal Music Group, have entered into distribution agreements with an ad-supported music start-up named SpiralFrog. UMG is also in talks with Bertelsmann to acquire its record label, BMG, which would effectively give SpiralFrog access to three of the big four's music catalogs. Far from being willing to work with YouTube, which allows its users to upload clips of whatever they want, then uses a self-policing system to flag copyrighted or inappropriate content, UMG is threatening to sue the viral video site for "tens of millions of dollars." The Warner deal, Kafka said, is a great first step both for Warner and YouTube. Its next task will be to "convince other copyright holders to play along." Less than two years old, with more than 100 million videos on its Web site (most of them illegal), YouTube still hasn't made a dime, and still has to convince potential investors that it's not the next Napster. In effect, the deal will mean little to either company if other copyright holders don't jump on board with similar agreements. YouTube and Warner are to share any ad revenue the site earns when Warner's copyrights are used by artists or YouTube's users. Warner can also request to have its copyrights pulled for whatever reason.

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