Warner Music Negotiates More Control In New YouTube Deal. Could This Be Trouble For VEVO? (Updated)

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YouTube has just held a conference call to announce that it has negotiated a deal with Warner Music Group, the major record label that pulled off the world’s most popular video portal after feeling shortchanged by the revenue its videos were driving. Many details of the deal have been rumored for the last few days, and were confirmed accurate: WMG will be putting its full catalog back on YouTube and will have the ability to sell its own advertising against both its premium music videos as well as user generated content that features a WMG song. Revenue will be shared with YouTube but most will be going to WMG. The deal also includes rights to Warner’s Chappell Music publishing arm.

The deal could prove to be a sign of things to come for YouTube’s premium content, especially since the site has left the door open to special branding on Warner’s music pages that would make it clear who the content owner is. YouTube says that it’s working with WMG to define the optimal experience for the user and the artist, and this may well wind up looking significantly different from YouTube’s standard viewing page.

That may be bad news to VEVO, the satellite “Hulu for music videos” site that’s currently being built by Universal Music Group in partnership with YouTube. Sony has signed on to distribute its content through the site, but EMI and Warner are hold-outs. VEVO is supposed to give users a more fleshed out music video experience, while giving the labels a better controlled and more appealing place to sell advertising against their videos. But given the new abilities being granted to Warner with today’s deal — including the right to customize the page layout and sell its own advertising — Warner now seems to have even less of an incentive to join the VEVO initiative than it did before.

That may spell trouble for VEVO, because the site will really only be appealing if it can get all four labels on-board. Even if VEVO turns out to have a great viewing experience, that’s really only half the battle — users are more likely to go to a site that has the music video they want every time than they are to one that’s hit-or-miss. Of course, the site most people will turn to will be YouTube itself, which does feature videos from all four labels (MySpace Music does as well).

Update: A source with knowledge of VEVO negotiations says that Warner is currently in talks with VEVO over partnering with the music portal, so obviously today’s deal hasn’t ruled that out. Warner may have gotten some new perks today, but there are a few advantages it could see on VEVO regardless. For one, it could help attract new advertisers: UMG and Sony collectively have seen over 15 billion views on YouTube, but Warner is only at around 1 billion views overall — if Warner were to join VEVO it could be able to attract advertisers who are holding out for a larger online audience. VEVO’s portal may also be able to engage viewers more than YouTube (which would also be attractive for advertisers) though we won’t know that until the site actually launches.

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