Big music companies seen owning small YouTube stake
Report: Universal Music, Warner Music, Sony BMG could get $50 million from Google sale for their YouTube stakes.
NEW YORK (CNNMoney.com) -- Some traditional recording companies have taken a small stake in video-sharing site YouTube that could net them millions from the Web site's recent $1.65 billion sale to Google, according to a published report.
The New York Times reports that the companies, including the Vivendi (Charts) unit Universal Music Group, Warner Music Group (Charts) and Sony BMG Music Entertainment, a joint venture of Sony (Charts) and Bertelsmann, could see $50 million between them due to the sale to Google (Charts).
The paper reports each quietly negotiated to take small stakes in YouTube as part of video- and music-licensing deals they struck shortly before the sale earlier this month. The companies involved would not comment to the paper on their stakes in YouTube.
The stakes in YouTube are somewhat of a surprise, given that a significant portion of the videos posted to YouTube contain copyrighted songs or video material. Many had therefore seen YouTube as a likely of target of litigation from the record companies, rather than partnership.
In fact, Universal Music Group said Tuesday it filed lawsuits against two other online video sharing sites - Grouper and Bolt.com - for allowing users to swap pirated versions of its musicians' videos.
The Times reports that in September Universal Music CEO Doug Morris called YouTube and social networking firm MySpace, which is owned by media conglomerate News Corp. (Charts) "copyright infringers" and said the sites "owe us tens of millions of dollars."
The Times reports the deals between YouTube and the record companies should help to shield Google from copyright-infringement lawsuits. That litigation threat was a concern for some Google analysts and investors.
But the site still faces the threat of other copyright holders, including the Hollywood and television studios, could pursue legal action due to their content appearing on YouTube.
The paper reports that the music companies have begun trying to wring more revenue from their music videos, instead of offering them at a nominal fee as a way to promote music sales. The companies struck deals with services like Yahoo (Charts) to share in revenue from advertisements that run in front of the music clips.