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Amazing! I have been watching the spat between Google’s YouTube and Warner Music Group play out in the media — both online and in its offline variants. The bottom line of this corporate he said she said is that there are no more music videos that […]

youtubelogoAmazing! I have been watching the spat between Google’s YouTube and Warner Music Group play out in the media — both online and in its offline variants. The bottom line of this corporate he said she said is that there are no more music videos that feature Warner artists such as Madonna. And a lot of it is two parties crying over spilt milk.

Warner complains it doesn’t make any money from Google, even though music videos are extremely popular on YouTube and are major drivers of traffic to the site. According to The New York Times, Warner made $639 million in digital revenues for fiscal year 2008, of which less than 1 percent (or less than $6.39 million) came from YouTube. Another Fellow music labels might soon follow Warner’s suit and try and renegotiate with YouTube or opt out all together.First of all, this complaining is high-grade manure. All record labels got a piece of YouTube right before the company was sold to Google in October 2006 — a stake that translated into about $50 million each. That’s $25 million a year for 2-year contracts. If the record labels were smart they would have made much more money — Google shares topped $700-a-share vs. $420 a share at the time Google snapped up YouTube.

I can totally understand why Google is asking Warner to take a walk — they feel like being held up by by local mafioso for more baksheesh and don’t want to play ball. At the same time, the record labels, too, have a legitimate gripe. Google has failed to monetize the professionally produced, highly popular music videos — a much easier sell than kitty videos to brand advertisers.

The bottom line is — Google’s YouTube has the traffic (and the eyeballs) and record labels have the content. The two need each other as much as baseball needs the Yankee dollars. So get on with it, guys — and stop crying over spilt milk.

  1. Om, did you bother proofreading?

    “Warner complains it doesn’t any money from Google” should be “Warner complains it doesn’t [make] any money from Google”

    “even though videos are extremely popular” should be “even though [its] videos are extremely popular”

    “which less than 1 percent (or less than $6.39 million) came from YouTube $6.39 million” should be “which less than 1 percent (or less than $6.39 million) came from YouTube”

    “Another music labels might soon follow Warner’s suit and try and renegotiate with YouTube or opt out all together.” should be “[Other] music labels might soon follow Warner’s suit and try and renegotiate with YouTube or opt out all together.”

    “First of all this complaining is high grade manure” should be “First of all, [all] this complaining is high grade manure”

    “they feel like being held up by by” should be “they feel like being held up by”

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    1. Hey Trex

      Thanks for the catches. I admit, a very poor job on proof reading. Sorry about that…. just hit send without re-reading the post. Not likely to repeat that mistake next time!

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  2. Baksheesh is a term used to describe tipping, charitable giving, and certain forms of political corruption and bribery in the Middle East and South Asia.

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  3. Youre absolutely right. Google and Warner are both being childish. It’s silly how bad they need each other but for some reason, they can’t seem to work it out.

    Nice site.

    Josh

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  4. [...] soon follow Warner’s suit and try and renegotiate with YouTube or opt out all together. – from GigaOm Filed Under: TechTags: YouTube Digg, Facebook, Email: Share This Buzz! Related Posts:Warner Music [...]

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  5. “”a stake that translated to about $50 million each.” – this an unconfirmed NYT story via Liz Gannes at GigaOM (not exactly the equivalent of an SEC filing brother OM!) – more aptly referred to as speculation. There is no factual information on an equity stake (unless of course you show your audience something from WMG filings ). They did get a few greenbacks packaged as upfronts, etc (the obligatory baksheesh!). – but NOT an equity stake.

    OM – the real story on this WMG-YouTube matter is yet to be written – only way to look at this one is “in the rear view mirror”. So while most will speculate – the real story will not be heard for some time….

    Cheers -

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    1. @G

      While you are right on the assertion that it is not a SEC filing, this was widely reported story and since then I have talked to many music industry insiders who have said that the labels did get a piece of the action. Other small start-ups have always had to pay the labels, the latest being imeem, a story that was widely reported in the WSJ.

      However, you speak with some insider knowledge on the issue of “money they got” and if you want to share some details, drop me a line.

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  6. OM – Yes Imeem and Lala gave up equity stakes for WMG investment ($15 MM and $20MM respectively) – and did show up in WMG filings. But this GooTube one is a whole different story. And please don’t confuse my “domain knowledge” for insider knowledge :-)

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    1. @G

      It is common knowledge that domain knowledge has roots in insider knowledge. :-) so what is indeed the gootube story?

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  7. OM – here is one among many “domain knowledge” driven hints – wait for the Viacom-GooTube proceedings to get underway. You will see this one in the rear view mirror soon.

    Remember BMG doling out hundreds of millions because they took a stake in the old Napster…. Use that frame of reference – and you will understand why an equity stake in YouTube ends up on the liability side of the balance sheet as opposed to the asset side.

    Imeem went from sacrilegious to alter boy overnight – and Lela was always the parochial school type (selling CDs to start off). But YouTube has been a heretic – that’s the difference.

    Ok Brother OM – no more baiting me – that’s about as much as I should be rambling. Give me your next post will ya.

    As I used to say while managing money on Wall Street – the clarity of hindsight is magnificent!

    Cheers.

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  8. Google doesn’t need Warner’s or any of the labels’ content to sustain traffic on YouTube. The labels should wake up and realize this is one of the very last opportunities to monetize music on the web, so they’d better take what they can get.

    Honestly I can’t wait for the ultimate demise of the labels. They’ll never wake up and realize their old model of music distribution died years ago, and that their power is gone. They’ll flail about, suffocating themselves with their own ignorance and greed. I used to work in music distribution, so I’ve been watching this pathetic charade for about ten years now and nothing ever changes.

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  9. See this interesting view about the Music Industry in 10 years:

    http://disruptionmatters.com/2008/12/23/music-2019/

    Labels want to make the same kind of money they made selling expensive CDs. No way!

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  10. YouTube’s ContentID technology backfired. Dont-ask-Dont-tell is the way to go. Particularly since YouTube is now making over $20M/month via ads on their search pages. they can afford to boot Warner and not lose any sleep.

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