The Internet's dominant video site and one of the world's largest music companies had been locked in a dispute over the value of music videos, some of the most popular content on YouTube, whose young viewers are coveted by advertisers.
Licensing talks reached an impasse late last year, resulting in Warner's videos being pulled from the site. The stakes are high for both parties.
Google Inc.'s YouTube, the undisputed leader in online video, has struggled to attract advertisers with its user-created content. It is increasingly striking deals to bring professionally made videos to the site.
The music labels, meanwhile, are eager to explore new sources of revenue to help offset plummeting CD sales, which fell 25% in the last year, according to the Recording Industry Assn. of America.
“These are two parties that really couldn't need each other any more than they already do," said Sonal Gandhi, an analyst with Forrester Research. “YouTube needs music videos because, despite all the user-generated content, [the videos] are responsible for getting a lot of people and keeping them. Warner needs YouTube because that's how young people discover music these days."
Before Warner Music removed its content from YouTube, its videos had logged nearly 1.1 billion views since 2006 -- so many that despite its nine-month absence, Warner still ranks No. 5 among the site's content suppliers, according to researcher TubeMogul Inc.
Indeed, YouTube has proved as powerful a force for music discovery among contemporary music fans as radio was a generation ago. Music videos from the major labels, including Walt Disney Co.'s Hollywood Records, account for 42.8 million views in a typical day, TubeMogul said.
“When you consider only 36.7% of YouTube's top 100 [videos] are monetized, it's difficult to understate the labels' importance to YouTube's bottom line," said David Burch, TubeMogul's marketing director. The agreement announced Tuesday allows Warner Music to control the advertising sold around its music videos and split the proceeds with YouTube, retaining the majority of the revenue.
