• CNet, Tuesday, December 23, 2008 11 AM

CNet's Greg Sandoval claims that it was YouTube that actually began removing Warner Music Group's videos from its site after Warner came to Google with an "11th-hour demand" for better financial terms. Warner over the weekend said that it began asking that YouTube remove its videos after talks to renegotiate its licensing deal broke down, but two sources close to the situation claim that YouTube actually walked away from the deal first.

According to the sources, managers at YouTube considered Warner's demand, only to begin pulling Warner music videos as its answer. YouTube also first notified the public of the split by posting a note on its blog. Warner responded by saying the music labels were building a YouTube competitor, and that YouTube didn't drive much revenue for them, anyway, and that Warner's departure was a bad sign for the Google video site.

"None of that is accurate," says Sandoval, adding that there are no "serious plans" for the big four record labels to build their own music-video site. As for YouTube making them no money, a Universal Music Group exec told Sandoval last week that YouTube made the company "tens of millions" of dollars this year, and that 80% of the nearly $100 million Universal is on track to book in streaming video revenue this year, comes from the Google video site. "By all indications, Warner overplayed its hand," says Sandoval, adding that "YouTube can let Warner walk," because the Warner music channel isn't even in YouTube's top 10.

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