March 9, 2009 11:29 AM PDT

YouTube unplugs music videos in U.K.

by Caroline McCarthy

Updated at 1:25 p.m. PDT.

Google-owned video-sharing site YouTube is silencing music videos in the U.K. after negotiations with the country's Performing Right Society (PRS for Music), which collects licensing fees for artists and labels, failed.

"Our previous license from PRS for Music has expired, and we've been unable so far to come to an agreement to renew it on terms that are economically sustainable for us," a statement from YouTube read. "There are two obstacles in these negotiations: prohibitive licensing fees and lack of transparency. We value the creativity of musicians and songwriters and have worked hard with rights-holders to generate significant online revenue for them and to respect copyright. But PRS is now asking us to pay many, many times more for our license than before."

The YouTube statement continued: "The costs are simply prohibitive for us--under PRS' proposed terms we would lose significant amounts of money with every playback. In addition, PRS is unwilling to tell us what songs are included in the license they can provide so that we can identify those works on YouTube--that's like asking a consumer to buy a blank CD without knowing what musicians are on it."

But a statement from PRS for Music claimed that Google doesn't want to pay enough for licensing fees.

"PRS for Music is outraged on behalf of consumers and songwriters that Google has chosen to close down access to music videos on YouTube in the U.K.," read a statement from the industry group, which noted that Google rakes in billions of dollars in revenue. "Google has told us they are taking this step because they wish to pay significantly less than at present to the writers of the music on which their service relies, despite the massive increase in YouTube viewing."

A report from the BBC suggests that the change will take effect later on Monday.

YouTube representatives, meanwhile, pointed to the fact that royalty fees in the U.K. caused streaming music service Pandora to pull out of the country (along with other non-U.S. markets) two years ago, and said that smaller players in digital media are currently feeling the pain. PRS for Music has also targeted small businesses in the U.K. for playing radios publicly, which the group says is a form of piracy.

Since it only pertains to music videos, this won't affect, say, Queen Elizabeth's royal YouTube channel. But U.S. digital media companies, particularly when it comes to music, have repeatedly encountered rough seas abroad.

One of the most high-profile has been Apple's iTunes, which several years ago came under scrutiny from one European government after another, typically concerning digital rights management restrictions in its iTunes Store. But music videos have been contentious both in and outside the U.S., with labels apparently unclear as to whether the best strategy would be to ink deals with YouTube--where they have less control--or go at it on their own. Much of the controversy comes from the fact that the music industry says it just doesn't profit much from having its videos on YouTube.

Sources told CNET News earlier this month that YouTube was working with Universal Music Group to create a standalone site "closely linked" to YouTube, a shadowy project that has been described as a Hulu for music videos. And Viacom has created its own hub, MTVMusic.com. It's complicated enough in the U.S.; bringing overseas players and viewers into account opens many new cans of worms.