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Sunday, December 21, 2008

Warner Music Pulls Plug, Drains YouTube Talent Pool

B. Thomas Cooper - Editor

Negotiations between Warner Music Group and YouTube have hit a snag, sinking what once appeared to be a lucrative agreement for both parties.

Warner Music Group has announced it will no longer allow its artists to be featured on the video site, and ordered YouTube to immediately begin pulling videos, a move that will undoubtedly send ripples throughout the industry. Warner (WMG) controls the licensing for many of the music industries most successful acts, including mainstays, Madonna and Metallica, as well as more recent acts like My Chemical Romance. WMG was also the first major label to pursue an agreement with the internet upstart, which in 2006, led to Googles acquisition of YouTube for a staggering $1.65 billion dollars.

Unfortunately, the entire enterprise straddles on the precipice of becoming just another unsuccessful partnership. Although pay per click profits amount to less than a penny per click, it was believed the shear magnitude of hits would generate huge sums of capital for all parties. Apparently, however, such has not been the case, as WMG reports returns have fallen far short of projections.

The failure of this agreement does not bode well for either party. Although both are expected to survive the rough seas ahead, the future remains uncertain. YouTube is the most popular video site on the web, and prospects are good. Warner, however, stands to lose millions in lost revenue and will be facing increasing difficulty as consumer trends change. What seemed like a marriage made in heaven only two years ago, may have been a harbinger of struggles to come, as the entertainment industry adjusts to a rapidly changing market.

B. Thomas Cooper - Editor

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