Over the weekend, Warner Music began pulling their content down from YouTube. The Warner Music channel, and associated videos from artists such as Madonna and the Red Hot Chili Peppers, was one of, if not the, most popular channel on YouTube. YouTube, since being acquired by Google for $1.65 billion, had been experimenting with music labels to develop a program that provided compensation for content played through their site. Discussions beteween YouTube and Warner broke down when the two sides could not agree on how much revenue would be shared with the music company from YouTube’s advertising revenues.
As negotiations fell apart, content started to disappear from YouTube (meaning that content was no longer available on mobile devices such as the iPhone/iPod Touch, which has very tightly integrated YouTube into their device). Ultimately, the breakdown could affect hundreds of thousands of video clips on the site.
The breakdown seems to be due to the fact that generating a significant amount of revenue via advertising is a struggle for YouTube; they are unable to give the music companies the amount of money they’d like in exchange for open use of their content. The fact that content can be made available for free and supported by advertising revenue remains to be seen. Sites such as Hulu have had success with taking high-production value content and successfully monetizing it by attracting big-name brand advertisers, but YouTube’s significant amount of user-generated content has made it difficult to attract large advertisers. Mobile content, where advertising is more low-key and video is less of an option, has favored a for-pay model such as is in place with iTunes.