YouTube music deals ease piracy fears in $1.6bn buyout

YouTube announced deals to licence content from two major record companies just hours before the wildly popular US video website agreed to be bought by Google for $1.6bn (€1.27bn).

YouTube reached deals with Vivendi’s Universal Music Group and Sony BMG Music Entertainment that will let the website post music videos and content from users that includes copyrighted material in exchange for sharing ad revenue.

“YouTube is committed to balancing the needs of the fan community with those of copyright holders,” said Chad Hurley, chief executive of YouTube in Los Angeles.

Meanwhile, Warner Music Group and Sony BMG announced separate licensing agreements with Google, which now operates its own video-sharing site called Google Video.

Financial details of the deals were not disclosed.

The dealmaking reflects how the growth of online, user-created video has emerged as a potential source of revenue for the sagging recording industry.

“The enormous popularity of these video sites made it clear that a large number of people absolutely love these sites, and so connecting artists with their fans using this viral video platform is incredibly important to us,” said Thomas Hesse, Sony BMG’s president of global digital business.

YouTube had been under pressure to avoid a copyright infringement fight with the entertainment industry while negotiating with Google.

“The cloud that was hanging over YouTube was really the cloud of piracy charges,” said Rob Enderle, an analyst for the Enderle Group. “Having these licensing deals at least lowers substantially the downside risk.”

Last month, Universal Music Group CEO Doug Morris accused YouTube of violating copyright laws and suggested the company owed the record label millions of dollars.

The concerns about YouTube appeared to be resolved by the new deal.

“YouTube is providing a new and exciting opportunity for music lovers around the world to interact with our content, while at the same time recognising the intrinsic value of the content that is so important to the user experience,” Morris said.

Universal artists include U2, The Killers and Black Eyed Peas. Sony BMG is home to artists such as Bruce Springsteen, Justin Timberlake and Jennifer Lopez.

Under the agreements, YouTube also must develop technology to identify copyrighted content in videos so the labels can filter out material they don’t want on the site.

In a separate deal with YouTube, CBS will provide short-form video content for a CBS “brand channel” that includes news, sports and prime-time network programming.

YouTube and CBS will share revenue from advertising sponsorships of the content.

“We’re now able to offer select entertainment, news and sports programming to a new significant audience, get paid for it, and learn a few things along the way,” said Leslie Moonves, president and chief executive of CBS.

The deals involving Google let the Web giant stream music videos on Google Video while providing Warner and Sony BMG with revenue from online advertising. Google can also sell selected Warner music videos for downloading.

Google also must also provide technology for the record labels to identify and remove copyrighted material from the web.

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