9.20.2006


Will the You Tube/Warner Deal Be Good For You?

As I said some time ago - capital knows no boundary and,
if you stand around in the web world, you can just watch new revenue streams form around you. It's like a high water level pushing at the levy - at some point something has got to give.

If we look at the recent YouTube deal with Warner Music Group, what gave? Well . . . you have 19-month-old YouTube started by two guys with some $11.5M in venture capital. Today, that little venture serves up more than 100 million videos today and has become the zeitgeist of web and pop culture. YouTube's movement to the starring role of today's Web also brought some troubles . . . particularly in the area of copyright infringement with the user generated content hosted on YouTube. In recent weeks, music companies like Universal have threatened to sue YouTube.

As reported in the New York Times: "Under the revenue-sharing accord, YouTube.com will use special software to identify recordings used in videos posted by users and then offer the owner of the copyrighted music a percentage of the fee for advertising that would run alongside the clip."

YouTube sidesteps the copyright issue by giving Warner a piece of the ad revenue action. As far as I've been able to find - no details on the exact financial arrangement have been published which, of course, makes sense since Warner isn't likely the only music/entertainment company YouTube will want to strike deals with. Warner wins because it (er, I mean its artists) get paid for their work and they don't have to litigate.

The deal is good for YouTube and it's good for Warner Music Group, but is it good for YouTubers? I think only time will tell. The ad revenue streams are starting to multiply - I blogged a while ago on astroturfing and used the Paris Hilton promotion as an example. Not long after that posting (and I don't suggest because of it!) YouTube unveiled a new revenue model - brand channels: separating out "real" content from astroturfing and making money while doing it. NBC saw the value and signed on too, back in June.

One more point on this issue - I think it's definitely worth noting that Edgar Bronfman Jr., chair of Warner Music Group, was quoted as saying : "Consumer-empowering destinations like YouTube have created a two-way dialogue that will transform entertainment and media forever."

Two-way communication, you say? And they say PR is dead! I couldn't possibly disagree more!

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