YouTube’s traffic growth and costs continue to explode. YouTube’s revenue, not so much.
As we noted a few weeks back, most of the most popular videos of the year were music videos. Unlike much online video, music videos can be monetized. But YouTube can only monetise them if the labels allow YouTube to host them. And Warner and YouTube, apparently, have hit an impasse while renegotiating their licensing deal, which expires in March, 2009:
Wall Street Journal: Warner Music Group Corp.’s videos and songs began disappearing from the YouTube videosharing Web site early Saturday after talks to renegotiate a licensing deal stalled.
It isn’t clear whether the decision to remove the content was made by Warner Music or YouTube. But regardless, the dispute may indicate the start of a broader dispute between YouTube and the music industry over the value of music content on the site.
Warner, like the three other major-label groups, licensed its recording and music-publishing catalogues to YouTube shortly before the site’s acquisition by Google Inc. in 2006. In exchange for the use of their music videos and songs, the music companies are paid a share of revenue generated by ads displayed alongside both their content and user-generated content that contains their music.
People in the music industry generally say that music videos don’t command significant advertising fees online, and Warner executives have privately expressed frustration with the amount of money they receive from YouTube.
Whichever side initiated the takedown, the move is probably a negotiating ploy. Warner may be “frustrated” with how much revenue it is generating, but anything is better than nothing (the videos are a sunk cost at this point). Google, meanwhile, probably stands a better chance of making money on music videos than most of the content on the site, so it’s in its interest to get a deal done, too.
UMG said the other day it is making nearly $100 million a year on online streaming, and it’s likely very high margin revenue. So there’s a bit of money in this business–for the labels, if not for YouTube.