YouTube’s deal with Warner is definitely a great first step. Licenses to music videos, and especially allowances for member videos that use Warner music, make YouTube more than just the biggest video site (read: hot air balloon) on the web. Just a month ago we wrote “What would be really cool is if these YouTube-music label talks end up with some kind of allowance for music video mashups and the like.”
So far, the public details of the Warner-YouTube arrangement – how much songs can be altered, how much ad revenue will be shared – are slim to none. But Rafat Ali from paidContent picked up on an interesting detail in a Forbes story on the topic:
“[M]usic industry executives say that YouTube has offered other labels an option for an equity stake in the company as part of proposed deals.”
Forbes writer Peter Kafka notes that if Warner has taken a chunk of YouTube, other labels face an expensive precedent in their potential dealings with the startup. Universal, of course, will drive a hard bargain, with its publicly voiced attitude that YouTube and MySpace “owe us tens of millions of dollars.”
We had gotten worried YouTube was sitting tight in the precarious position of waiting for an acquirer to pay up for its traffic. But lacing in copyright identification and management software, and (possibly) ownership by its biggest would-be enemies, makes it a much stronger prospect.
At the same time, playing nice with music labels doesn’t change YouTube’s financial reality. Their revenue estimates are just that: estimates; and the company, after paying off its label partners, would be left with an even smaller share of whatever it will eventually earn.