Warner Music Yanks Videos, Songs From YouTube Amidst Licensing Dispute

December 22, 2008 0

New York — Discussions between Warner Music Group ordered YouTube last weekend to pull down all music videos by its artists from the popular online video-sharing site after renegotiations over royalties licensing agreement for the record label’s music videos broke down Saturday.

The stalemate comes at a time when all four major labels, including Universal Music Group, Sony Music, and EMI, are renegotiating their licensing deals with YouTube.

The order could affect hundreds of thousands of videos from artists including Madonna and Metallica, as well as the rights for songs published by its Warner/Chappell unit, which includes many artists not signed to Warner Music record labels.

“We simply cannot agree to terms that fail to appropriately and fairly compensate recording artists, songwriters, labels and publishers for the value they provide,” Warner Music said today in a statement. Warner Spokesman Will Tanous declined to comment further.

Under the pact reached in September 2006, New York based-Warner received revenue from advertisements and other royalty payments from video streaming.

The discussions broke down early on Saturday because Warner seeks a larger share of the gigantic revenue prospects of YouTube’s massive visitor traffic. There were no reports on what Warner was seeking.

YouTube is enormously popular, with more than 100 million viewers in the United States alone in October, according to comScore, a Web audience measurement firm.

“Warner Music, home to artists including Red Hot Chili Peppers and rapper T.I., was the first major media company to negotiate a deal with YouTube in 2006.”

Edgar Bronfman, Warner’s chief executive, made its recordings and its catalogue of songs available to YouTube in September 2006, a month before that deal gave the site legitimacy in the eyes of search giant Google Inc. which bought it soon after for $1.65 billion, and at a time when Universal Music was suing the group.

Chad Hurley, YouTube’s chief executive, described the move at the time as “one of the most significant milestones for our company and our community,” underscoring “the vast financial potential” of YouTube to traditional media partners.

YouTube, since then has expanded into an important income generating stream for at least one of the top labels. This week, Rio Caraeff, Universal Music’s digital chief, said in a statement to CNET News that YouTube has produced “tens of millions” of dollars for the recording company this year, up 80 percent from last year.

However, Warner Group, the once legendary music industry’s most eager digital experimenter — became frustrated with the negligible revenues generated by their deal to share advertising revenues. Months of negotiations since the agreement expired broke down last weekend after failing to agree terms for a new deal.

“Sometimes, if we cannot reach acceptable business terms, we must part ways with successful partners,” YouTube said in a blog posting. “For example, you may notice videos that contain music owned by Warner Music Group being blocked from the site.”

“We are working actively to find a resolution with YouTube that would enable the return of our artists’ content to the site,” Warner said in a statement. “Until then, we simply cannot accept terms that fail to appropriately and fairly compensate recording artists, songwriters, labels and publishers for the value they provide.”

Some of Warner’s most popular artists, who will no longer be available on YouTube, include Led Zeppelin, Madonna, TI, Eric Clapton, REM, Red Hot Chili Peppers, and the Grateful Dead.

Warner Music depends on digital revenue to offset Internet piracy and declining demand for CDs. The growth of digital song sales slowed to 28 percent this year compared with 2007’s 45 percent jump and a 65 percent rise in 2006.

Warner has notified YouTube users that they could find alternative ways of incorporating music in their videos, steering them to Audioswap, a library of music for which rights have been pre-cleared.

Warner has kept its videos available on other online services, including MySpace Music and its own artists’ sites.

YouTube also has agreements with Vivendi’s Universal Music Group, Sony Music Entertainment and EMI Music. The move from Warner Group could see others also making tough demands for higher fees.

And such demands could leave YouTube in a difficult position as it tries to balance the need to pay a reasonable fee to content partners, including TV and movie companies, and also generate enough return on the substantial investment needed to keep streaming millions of videos around the world.