YouTube has pulled the plug on music videos in Germany as Western Europe starts to look like a hostile environment for Web music services.
A YouTube spokesman confirmed that YouTube is no longer playing music videos belonging to the largest music labels after talks with Germany's biggest royalty collections group, GEMA, broke down.
The conflict is almost identical to YouTube's spat with a royalty group in the United Kingdom, but with one important twist. According to YouTube, GEMA is asking for royalty rates that are 50 times higher than those asked for by PRS, the British organization, and YouTube argues those are even too high.
According to sources close to the negotiations, GEMA is asking for rates far higher than what the group asked for in the original agreement. A GEMA representative could not be reached for comment. But it should be noted that the music industry has often offered favorable financial terms to start-up Web services in initial licensing agreements.
Music executives have told me in recent months that once the companies begin to generate revenue and gain a foothold, they should expect to pay more.
Talks are ongoing but until a deal is worked out, it's unlikely German YouTube fans will be seeing any music clips.
At least in Great Britain, YouTube can make the claim to record labels that the site promotes music sales. The BBC recently reported on a survey that asked more than 1,500 Brits about viewing habits.
About half of the adults who participated said they purchased music after watching a YouTube video by an artist.