Music companies made a share in GooTube deal

October 19, 2006

Interesting article in the New York Times today relating to Google‘s acquisition of YouTube. Apparently, three of the biggest music companies (Universal, Sony BMG and Warner) had quietly negotiated to take small stakes in YouTube as part of the licensing deals they struck prior to the acquisition.

So, obviously that stake will have increased in value considerably after the deal was done, making these companies a nice little slice of the pie. It seems they got a very favourable deal. but for what reason?

Bearing in mind that as big as it is, Google doesn’t want to be sued. Part of the reason behind these licensing deals may well have been a payment in place of legal action (which would have proved costly on all sides). So, now Google are happy (they got YouTube and got missed out of Universals suit of yesterday), YouTubes creators made a bucketload of cash and the record labels got a share as well as a licensing deal.

It may even put other labels off suing as they can see that there may be a better (and just as profitable) way to get involved. Stocks for lawsuits anyone??

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