YouTube has struck a deal with a Japanese publishing company to allow YouTube users to do legal covers of compositions in that catalog. According to Billboard:
Under the new agreement, users can legally post video clips to YouTube in which they play and sing e-License-managed songs. Uploading music data from CDs and artists’ promotion videos remains prohibited. E License, which manages some 17,800 songs, is the second Japanese copyright agency to sign a blanket licensing contract for music use on YouTube after Japan Rights Clearance.
Once Google has achieved broad enough coverage with these deals, musicians will be able to do covers online legally as long as they publish them on YouTube. If the publishers can create enough legal risk related to covers, Google will have a big competitive advantage over other video sharing services and over independents who publish their own media.
Google’s risk is that this pushes YouTube’s operating costs up, and it’s already hella expensive to run. However, user-contributed music where Google only has to pay royalties on the publishing and not the sound recording is still relatively cheap compared to the stuff iMeem is paying for.
This isn’t an academic point. The recent ruling on payments owed by webcasters to publishers gives a yardstick for operating costs associated with publishing, and it is not a trivial amount.