Legitimate business model
Ending a public dispute over copyright violations, Universal Music Group and Sony BMG will allow access to thousands of archived videos, letting YouTube users incorporate songs from their music catalogs into consumers' creations. The deals mirror an agreement reached in September between YouTube and Warner Music, and give YouTube a more legitimate business model, making it more attractive to any potential suitor.
CBS, meanwhile, plans to offer YouTube users various short-form video programming including news, sports and entertainment. YouTube and CBS will share revenue from advertising sponsorships of CBS videos.
The New York Times reported on its DealBook blog this morning that Google and YouTube are expected to respond later today to the acquisition chatter that began Oct. 5 when a post on TechCrunch stated that Google was in talks to buy YouTube. Reports set the price at $1.6 billion.
Google and CBS have ties going back a year. Last September, the search leader streamed UPN's "Everybody Hates Chris," and earlier this year it began selling current and classic CBS-owned series such as "CSI" and "The Brady Bunch."
Universal Music Group and Sony BMG can now expect an undisclosed share of ad revenue whenever YouTube users stream videos containing the company's intellectual property. To make this possible, YouTube developed a royalty-tracking system that detects when homemade videos are using copyrighted material.
Many companies that once threatened YouTube with lawsuits are now reconsidering their positions due to the video-sharing site's popularity. In August, YouTube drew 34 million unique visitors, up dramatically from 3.5 million at the start of the year, according to ComScore Media Metrix. One example of this trend: NBC's decision in June to promote its fall lineup on its own YouTube channel.
"As a new distribution channel for media companies, YouTube is committed to balancing the needs of the fan community with those of copyright holders," said Chad Hurley, CEO and cofounder of YouTube.
Warner was not the first record label to experiment with YouTube: Capitol Records posted videos by bands The Vines, Cherish and OK Go on the site at the end of July.