Music Labels Score Big From YouTube Sale To Google

Posted on Oct 20, 2006

Vivendi’s Universal Music Group, Sony and Bertelsmann’s jointly owned Sony BMG Music Entertainment and the Warner Music Group are set to cash in from Google’s $1.65 Billion dollar buyout of YouTube. Each adroitly negotiated to take small stakes in YouTube as part of video and music licensing deals they struck shortly before the sale. The music companies collectively stand to receive as much as $50 million from these arrangements.

Because a significant portion of the videos posted to YouTube contain copyrighted songs or video material, the Web site had been considered a litigation land mine. Last month, Doug Morris, the chief executive of the Universal Music, called YouTube and MySpace “copyright infringers” and said the sites “owe us tens of millions of dollars.”

The deals that the music companies struck for stakes in YouTube should help to shield Google from copyright-infringement lawsuits, an issue that concerned some Google investors when the YouTube deal was first announced. Still, other copyright holders, including the Hollywood and television studios, could pursue legal action if their content appears on YouTube.