YouTube's Warner Music Group Deal: The Technology Made the Difference

| About: Warner Music (WMG)

Looks like YouTube cracked a big nut. I'm not talking about Warner Music Group (NYSE:WMG), but rather the technology YouTube appears to have built.

That is a content identification and royalty reporting system. Until that type of system was available and developed, it would have been difficult for YouTube to be fully embraced by the big music labels or movie or television studios.

Apparently, the system is ready for prime time. YouTube just inked a deal with Warner Music Group to share advertising revenue for ads that appear next to Warner's music videos uploaded on the popular video-sharing site. YouTube has created technology to identify copyrighted content. If the owners of the content have a deal with YouTube, the video-sharing site will split the ad fees on that video. By the end of this year, YouTube says all professional creators of content will have the opportunity to authorize the use of their content on YouTube.

It's a good compromise for both sides. Clearly, Warner Music Group would be foolish to ignore YouTube's audience and demand that copyrighted material be taken down. It's hard to justify that decision when YouTube draws a massive audience, with 100 million video downloads a day.

Now, let's see how smoothly this technology works.