YouTube, Music Labels: Stop Crying Over Spilt Milk

youtubelogoAmazing! I have been watching the spat between Google’s YouTube and Warner Music Group (s WMG) play out in the media — both online and in its offline variants. The bottom line of this corporate he said she said is that there are no more music videos that feature Warner artists such as Madonna. And a lot of it is two parties crying over spilt milk.

Warner complains it doesn’t make any money from Google (s GOOG), even though music videos are extremely popular on YouTube and are major drivers of traffic to the site. According to The New York Times, Warner made $639 million in digital revenues for fiscal year 2008, of which less than 1 percent (or less than $6.39 million) came from YouTube. Another Fellow music labels might soon follow Warner’s suit and try and renegotiate with YouTube or opt out all together.First of all, this complaining is high-grade manure. All record labels got a piece of YouTube right before the company was sold to Google in October 2006 — a stake that translated into about $50 million each. That’s $25 million a year for 2-year contracts. If the record labels were smart they would have made much more money — Google shares topped $700-a-share vs. $420 a share at the time Google snapped up YouTube.

I can totally understand why Google is asking Warner to take a walk — they feel like being held up by by local mafioso for more baksheesh and don’t want to play ball. At the same time, the record labels, too, have a legitimate gripe. Google has failed to monetize the professionally produced, highly popular music videos — a much easier sell than kitty videos to brand advertisers.

The bottom line is — Google’s YouTube has the traffic (and the eyeballs) and record labels have the content. The two need each other as much as baseball needs the Yankee dollars. So get on with it, guys — and stop crying over spilt milk.