Warner Music Group (NYSE: WMG) has taken an interesting step in courting the youth market: partnering with Internet video sensation YouTube to distribute its music videos to the site's large audience. It's a particularly interesting development considering the fact that a rival music giant had harsh, threatening sentiments for YouTube just last week.
Warner Music has made a deal with YouTube through which it will post music videos to the site and share any revenues garnered from related advertising. YouTube has been gradually adding ads to its wildly popular site.
Just last week, Vivendi's Universal music arm had some fighting words for YouTube and News Corp.'s (NYSE: NWS) MySpace, implying it plans to strike back at both sites for copyright infringement. Although I had to admit that Universal had a bright idea recently, its attitude toward current community-based trends shows that it just doesn't get where things are headed and continues to ignore what appeals to its very own customers.
Warner Music, on the other hand, is showing that it does indeed get where things are headed, and wants to play ball. A Wall Street Journal article quoted Alex Zubillaga, the company's executive vice president for digital strategy and business development, as saying, "This is a phenomenon which kids have embraced which is only going to continue to grow. We're much better innovating and embracing this than trying to stop it."
Indeed, many companies are trying to find ways to harness user-generated video and make media companies happy -- consider Google (Nasdaq: GOOG) Video. However, like it or not (and some companies haven't liked it -- consider General Electric's (NYSE: GE) and Vivendi's NBC Universal's reaction to one viral success on YouTube last winter, although NBC played nicer recently), YouTube is clearly the player that has caught on with the masses. (I waste an extraordinary amount of time viewing clips on YouTube, myself.)
Apparently YouTube is not only attaching advertising to its site, but it's coming up with an automated system that will troll its site to digitally identify copyrighted material and attempt to pay some advertising revenues to copyright holders that have decided to play nice (if not, such infringing videos will be removed from the site). YouTube is obviously trying not only to operate more profitably (it's well known the start-up has been burning far more cash than it generates), but also reach out to media companies and circumvent the legal problems that could potentially hurt its popular though nascent business. It's a tall order, but it's obviously looking at ways to address all these issues.
Music companies should think outside their traditional boxes and embrace these new trends, as Warner is trying to do, but many still seem to operate under the notion that playing the tough guy won't hurt their images with their customers. Right now, Warner is putting many of its rivals to shame by illustrating that it's willing to work with the will of the crowd, not against it.