While YouTube had been negotiating with Google for the sale if the web portal, the music industry has been fighting with YouTube about copyright infringement. Just hours before it was announced that Google purchased YouTube for $1.65 billion dollars, YouTube made a huge deal. They agreed to license content from two key record companies. Just last month, one of these two companies accused YouTube of violating copyright laws and suggested the company owed Universal Music Group millions of dollars. The deal will allow YouTube to post music videos from its user base that has copyright protection under the DMCA and US Copyright Act in exchange for a share in the revenue. Interestingly one of those key record companies, Sony/BMG also made a similar deal with Google to populate its video sharing service, Google Video.

The deal allows the record labels to reap some of the revenue from PPC campaigns on Google and its content network. Google will now develop, based on the agreement YouTube made, a technology to identify copyrighted content in videos so the labels can filter out material they don’t want on the site.

“The enormous popularity of these video sites made it clear that a large number of people absolutely love these sites, and so connecting artists with their fans using this viral video platform is incredibly important to us,” said Thomas Hesse, Sony BMG’s president of global digital business.“