The timing of the agreement is of particular interest. Last week, reports circulated that Universal Music was prepared to drop the legal hammer on the wildly popular service, which allows users to upload and share videos, if a deal wasn't reached by month's end.
WMG marks the first "media company" to do a deal with YouTube. Under the deal, YouTube users will be allowed to incorporate music from WMG's recorded music catalog and into the videos they create and share on the YouTube service.
Financial terms were not disclosed, but YouTube said it will support the agreement by implementing a new content identification and royalty reporting system by year-end.
YouTube said professional content creators, including record labels and TV and movie studios, will be able to use the new reporting platform, which will support copyright identification, and an automated audio identification technique that will enable studios to locate their works within user-generated videos. The system will also aim to help content providers authorize and monetize (i.e. track royalties) copyrighted work on the YouTube site.
By doing a deal sooner rather than later, media companies hope to avoid copyright nightmares marked by the first coming of the Napster service and other peer-to-peer music sharing applications.
"As user-generated content becomes more prevalent, this kind of partnership will allow music fans to celebrate the music of their favorite artists, enable artists to reach consumers in new ways, and ensure that copyright holders and artists are fairly compensated," said WMG Chairman & CEO Edgar Bronfman Jr., in a statement.