With Warner on board, YouTube now has artists from all four major music labels and publishers, as well as hundreds of indie labels and publishers.

Under the new, multi-year global agreement, viewers will be able to discover, watch and share Warner music on YouTube. The partnership covers the full Warner catalog and includes user-generated content containing WMG acts, according to Chris Maxcy, director of YouTube partner development.

"Warner will also be able to sell their own ad inventory and will use our Content ID technology to claim and monetize user-generated videos uploaded to YouTube by Warner Music fans," Maxcy said. "The partnership is based on a revenue share generated from the ads on the videos, and this makes good business sense for everyone involved: Artists and labels can make money from their videos and the YouTube community gets to enjoy them."

The YouTube-Warner Relationship

Warner Music Group was the first record label to ink a deal with YouTube in September 2006. The original agreement was to distribute Warner's artists, as well as behind-the-scenes footage, artist interviews, original programming, and other special content. At the time, it was a first-of-its-kind agreement.

Warner Music had posted thousands of video clips from artists like rapper TI and the Red Hot Chili Peppers on YouTube. But last year, Warner reportedly wanted a larger share of the revenue YouTube generates from its visitor traffic.

Reuters cited a source familiar with Warner Music's talks as saying the amount the music label has been receiving from YouTube is "staggeringly low." YouTube responded with a blog posting about the difficulties of music licensing.

At that time, Warner said, "We simply cannot accept terms that fail to appropriately and fairly compensate recording artists, songwriters, labels and publishers for the value they provide." However, it wasn't clear what terms Warner was demanding.

In the wake of stalled contract negotiations, Warner Music Group demanded that YouTube remove its music videos from the popular video-sharing site last December. Apparently, the negotiations continued away from the media's microscope.

YouTube's 'Jeweled' Position

Warner has a long and supportive history with YouTube. Warner Music, Sony Music, and Universal Music bought small stakes in YouTube before Google acquired the company for $1.65 million in October 2006. The three major labels buying into YouTube gave the then-fledgling site legitimacy.

Brad Shimmin, an analyst at Current Analysis, isn't surprised that YouTube and Warner Music came to a happy medium. Warner was the only record label missing from YouTube's scene, he said, and both sides felt compelled to work out a deal.

"YouTube has shown its ability to drive interest in record-label bands through music videos, which is one of the biggest things traffic-wise YouTube has going right now," Shimmin said. "But they are not all sanctioned videos. A lot of it is their music being used in user-generated videos."

With Warner back on board, even with user-generated content rolling against its copyrighted music, Google has a strong relationship with all four major record labels. Although the majority of the revenue from ads served against copyrighted music goes back to the record labels, Shimmin characterizes YouTube as a "jewel of opportunity" for Google.

"Google is still trying to figure out how to turn that jewel of opportunity into a cash cow over the long-term," Shimmin said. "Google is standing between the consumer and the provider and therefore they have a lot of power. Over time, they should be able to make better revenue from these relationships."