Warner Music coming to YouTube

Like the original Napster, YouTube is a hit service in search of a business model. Unlike Napster, YouTube looks to be stumbling slowly toward both profitability and legality. The most recent bit of good news for the site is today’s announcement that Warner Music Group has inked an unprecedented deal with the Internet upstart. In return for a slice of advertising revenues, Warner will allow YouTube to host its entire music video back catalogue and—even more unusual—user-created videos can use Warner songs in their soundtracks.

Warner has done more than just “seen the light”; the music behemoth has had a full-blown, Damascus Road-style conversion when it comes to the Internet. Giving music videos away? Allowing consumers to use Wilco songs? Has the world gone mad?

Whether Warner will backslide into the apostacy of the RIAA and Universal (both of whom have been rumbling about suing YouTube into the Stone Age) remains to be seen, but this is a positive first step. Warner, like St. Paul, will embrace those it once persecuted. Unlike St. Paul, however, Warner’s motivations are decidedly unspiritual. The music group will get a cut of the advertising revenue for ads displayed during videos that use its music. This is simple enough to determine when it comes to music videos, but much harder when a 15-year-old from Skokie throws a track into the school project she has just uploaded. To make sure that Warner gets its cut, YouTube is also rolling out a proprietary system for identifying clips of copyrighted music in its videos. This “content identification and royalty reporting system” will be rolled out by the end of the year in conjunction with the release of Warner’s material.

For artists who request it, Warner does reserve the ability to pull certain songs and videos from YouTube, but it expects this to be the exception rather than the rule. Not only is this excellent free publicity for artists (which has always been true for songs and videos on the site), but those artists and their labels now get paid as well. While it hopes to make money from the music videos, Warner and YouTube actually have a much more interesting revenue plan—enlist unpaid users to create content.

Alex Zubillaga, the Executive Vice President for Digital Strategy and Business Development at Warner, said, “This agreement establishes a model by which content companies can transform consumers’ creativity into a legitimate commercial enterprise that will benefit fans, artists and copyright holders.” The idea is that users around the world will create fascinating videos which feature Warner music. When these videos are watched millions of times, Warner will watch the checks roll in. Judging by the quality of much user content on YouTube, this is an optimistic vision.

Still, it’s intriguing. Will users, if given the resources they want, use their time and energy to create content that will benefit someone else? The massive amount of material uploaded to sites like YouTube suggests that they will. If even a few of these projects become a viral hits, they could do great things for the bands in question (much like car commercial appearances and spots on The OC do now). Warner gets marketing for its artists, it gets paid, and it doesn’t antagonize its fans. The Magic 8-ball says, “Savvy deal-making.”