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Vivendi’s Universal Music Group, Warner Music Group and Sony BMG each received a small stake in YouTube as part of content deals with the video sharing company, according to an NYT report published Wednesday night. The three could receive a total of $50 million from Google’s acquisition of the company — and Google/YouTube could use the deals as a shield of sorts against copyright-infringement claims. It wouldn’t stop suits but it would remove several of the likely major players.
Granted, the deals signed with YouTube should provide some cover even without a stake. Each involved revenue sharing as part of the content licensing deals and each included promises that YouTube would provide content identification technology that would make it easier for them to spot and remove content breaching their respective copyrights.
Warner Music — headed by Edgar Bronfman, Jr, who tried to broker an industry agreement with the original Napster — was the first of the music companies to strike a deal with YouTube. The other two deals closed as Google and YouTube were negotiating. Google and YouTube wanted to be able to announce those deals to underscore the site’s acceptance and legitimacy despite the looming copyright issues, while, the Times reports, Universal and Sony BMG wanted to be included in the likely windfall. (CBS, which also announced a YouTube deal that day, does not have a stake.) If the report is accurate — no reason to doubt it but none of the companies involved would comment for the story — the payoff should come a lot faster than a lawsuit would and it still includes advertising rev share. As the Times reminds, EMI made $40 million by selling part of its Musicmaker.com stake on the first trading day.
One aspect mitigating against it — it would seem that even a small stake would include the music companies in possible liability by other content companies unhappy with continuing infringement.
Update: As Rafat reminds me, the possibility of the labels taking such stakes isn’t new and was raised last month when the WMG deal was cut; music execs told Forbes.com at the time YouTube was offering equity stakes as a part of proposed deals.
Related: Universal Music Sues Grouper and Bolt.com; $15K Per Infringement
— Media Deal Monday: GOOG-YouTube Announce Content Deals While Watchers Wait For Big One