YouTube's Licensing Question and the Record Labels

Fred Wilson has an interesting analysis of YouTube's revenue potential. As part of his estimate, he does some musing.
Heather Green

Fred Wilson has an interesting analysis of YouTube's revenue potential. As part of his estimate, he does some musing. "Let's say that 60% of the videos being served on YouTube are unlicensed content that could be licensed with the right business deal," he writes. Another 20%, he posits is high quality user created videos.

Wilson's point is that content companies (and indie producers) could cut a deal and split revenues with YouTube. (He suggests a 10-second ad in front of each video.) This revenue would make the content producers happy and do away with the messy copyright issues dogging the company.

I actually recently spoke with some music labels about this. YouTube and the labels are in talks to hammer out a licensing deal in particular for all the music videos that appear online. One record label exec explained the talks this way: The labels would actually rather take a stake in YouTube than sign a revenue sharing deal.

Why? Because the revenue model is still a work in progress, but the company looks like a good takeover or even IPO candidate. Agreeing to a revenue sharing deal is like selling your car today to someone who doesn't have any money but promises to pay you in 18 months, this exec explained. YouTube has been wary of alienating users by plopping traditional preroll ads in its videos. Instead, it's taking the more untried route of crafting new kinds of ad formats and approaches. So there isn't an easy model to follow.

YouTube won't comment on the negotiations, but I doubt they would want to give up a piece of themselves. Still, the leverage the taht labels have is the threat of a copyright infringement lawsuit if some kind of deal can't be reached.

Update: See the take from Charlie O'Donnell, Dead 2.0, and Calacanis, on why they think prerolls won't work.

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