Monday, December 22, 2008

Warner Switch Off the Music

Warner Music Group has demanded that thousands of its videos be removed from YouTube. The battle is once again media companies, which expect to be paid for their online content and Google who have not matched the valuation sought by the likes of Warner and although all the major labels reached agreement some 2 years ago with YouTube on a per view fee and advertising revenue share. The debate is now about whether the labels should be paid in advance or after the videos are viewed and as the old agreement has expired, the renegotiation of a new licence.

Music videos current experience billions of hits on the service and 6 of the 10 most popular videos of all time are music. TubeMogul says musicians and record labels are responsible for over 8 billion views on YouTube. Warner reported $639 million in digital revenue for the last fiscal year but has expressed that YouTube only contribute less than 1% of this. This is obviously a problem that Warner has to solve as physical music sales continue to drop through the floor both in volume and revenues.

Digital content pricing is a difficult one to price today as tomorrow the value and price model is likely to change. The obvious key is to keep to licensing on relatively short term times and remain flexible on the model but as this also has to be acceptable to the licensee that can become a challenge as they don’t want to have to dramatically revisit costs as the service grows.

The one thing that is clearly coming home is that the old adage that the Internet is free is certainly changing at the point of consumption and that it may be free to use but you may be paying via a different business model moving forward. The big issue on advertising models is that aggregation will count and therefore players such as Google will have to upper hand as they will control the money.

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