Apple (AAPL) gave Spotify the go-ahead for its streaming-music iPhone app last month. But the service doesn’t have deals to distribute music in the U.S. yet. RealNetworks’s (RNWK) Rhapsody, however, does have deals, and its app just got Apple’s nod.

So. If you want on-demand access to nearly any song you want, it’s all yours: You’re just going to need to pay Real $14.99 a month for its “Rhapsody-to-Go” subscription service.

What’s that? You like the idea of getting all the music you can eat on your iPhone, without listening to ads, but you don’t want to pay for it? Alas, no dice. Spotify mobile users in Europe are paying, too–about $16 a month–and if and when the service gets distribution in the U.S., you can expect to pay about the same.

So will anyone pay for either app? Good question. Best Buy’s (BBY) Napster says that the pricing level is too high and that it won’t offer a music app until it can get the labels to charge less for their music, adding that it thinks $5 a month is a reasonable charge.

And up until now, Rhapsody hasn’t had a whole lot of luck with its “to go” subscription pricing. But! Up until now, Rhapsody wouldn’t work with Apple’s iPod, which has made it a very, very hard sell. Now it has a very large base to sell against.

Will that make a difference? We’re about to find out.

Here’s a video that previews the app.

Rhapsody on iPhone from Rhapsody on Vimeo.

What about the company’s awesome new iPhone app, the one that will let you stream music directly to your handset? You know, like the one that Apple (AAPL) just approved for Spotify, the superhyped service you can’t even get in the U.S. yet?

Don’t hold your breath says Best Buy (BBY). That Napster app is not coming anytime soon. And neither are apps for Google’s (GOOG) Android platform or Research In Motion’s (RIMM) BlackBerry.  And it’s because of those darn music labels. From a press note the company sent out this morning:

One of the most common questions Napster receives is, “When will you offer an iPhone app?” Well, Napster has created an iPhone application that allows subscribers to stream music on-demand to their iPhone—including personal playlists, albums and radio stations. You can imagine the company is also looking at streaming applications for several other mobile platforms as well (Blackberry, Android). However, due to the high licensing fees for streaming to a mobile phone, Napster has not yet submitted the iPhone app to Apple for approval or attempted to bring the application to market.

Now that’s an interesting approach–something akin to showing off a shiny new sled in a toy store window below a sign that reads “Not coming soon, not our fault.” Or that bank ad where the jerk takes the truck from the chubby kid.

I also don’t know if Napster’s explanation tells the whole story: Best Buy/Napster and the big labels already have an agreement that lets the company stream unlimited music to your PC for $5 a month. Just how much more would the company have to charge to accommodate the fees the labels want for mobile streaming? I’m supposed to talk with Napster folks later today, and if there’s anything I can pass along, I will.

UPDATE:  A little clarification from Napster president Brad Duea. His company’s position is that it doesn’t want to move about its $5 a month price, and that it would have to do so in order to offer streaming.

Why would it have to do that? Duea won’t spell it out. But henotes that RealNetworks’ (RNWK) Rhapsody, which has submitted an streaming music app to Apple, charges $15 a month for “on the go” service it already offers, and assumes it will charge the same for a service that works with the iPhone. Similarly, Spotify charges the equivalent of $16 a month for its premium service in the UK.

Of course, it’s possible that RealNetworks or Spotify will try subsidizing some of the cost for a mobile app in order to grab market share, and offer their iPhone/mobile services for something closer to Napster’s $5 fee.

Now that MySpace has finished its acquisition of iLike, what it’s going to do with it? Don’t think music, MySpace CEO Owen Van Natta stressed in a press conference today, think about “socialization of content.”

What does that mean? Pretty vague, which, I gather, is Van Natta’s intention.

But in short, what Van Natta is saying is that he has bought a 26-person company–for $19.5 million–because it has engineering talent that is good at building stuff that 1) helps users find content and share it with one other, and that 2) works on multiple platforms.

Van Natta did make a point of downplaying iLike’s ability to help MySpace build out its music offering, though. Which makes sense, because MySpace already has a music platform that it owns in a separate joint venture with the big music labels.

And because while iLike is known as a music platform, it really isn’t. It doesn’t have deals with the music labels that let users listen to full songs, and it only recently launched a way for users to buy songs. What it does do is recommend music based on stuff you like, and lets you share your likes and recommendations with friends.

You can see how the people who built the iLike platform–primarily on the back of Facebook, where Van Natta was formerly COO–could be useful for MySpace, which is in the midst of a drastic overhaul.

Van Natta was brought in to run the once-hot social network at the behest of corporate owner News Corp. (NWS) earlier this year, and has been busily hiring and firing since then.

The iLike deal is Van Natta’s first major acquisition since he came on, but it is essentially a hiring move, too. The plan is to keep all of the company’s key talent, including CEO Ali Partovi, President Hadi Partovi and CTO Nat Brown. (All three are in the picture at the top of this post, along with Van Natta and MySpace COO Mike Jones. From left to right: Ali Partovi, Jones, Van Natta, Brown and Hadi Partovi.)

Speaking of that talent: Asked about All Things Digital’s report about tax issues slowing the last stages of deal, Van Natta declared that “this was actually one of the smoother sailing deals that I’ve been involved in.”

Which may be true, but it doesn’t mean there weren’t tax problems for the company he was acquiring, as well as a delay.

In one email to the entire iLike board on Monday afternoon, titled “late-breaking tax issues with iLike/MySpace merger,” Co-founder Hadi Partovi wrote, referring to his brother and also Co-founder Ali:

“Ali & I recently learned about a potential tax liability that could be significantly disadvantageous to us as a result of the merger.

“We don’t have definitive info yet, and we’re just as disappointed as anybody to learn this at the 11th hour.”

Then, Hadi Partovi sent yet another email to Gregg Winiarski, GC at IAC (IACI) yesterday, titled “potentially significant tax risks for iLike common shareholder (esp Partovis).”

Before IAC had spun off Ticketmaster Entertainment (TKTM) last year, which was one of iLike’s big investors, Winiarski had apparently been involved in some iLike issues around compensation.

So Hadi asked him: “gregg, do you have any thoughts on this? since the structure of moving into common-stock (to avoid income tax) was your idea, I was hoping you [would weigh in].”

Winiarski–in several exchanges, in which Hadi’s brother and also Co-founder Ali Partovi even asked if IAC and Ticketmaster might indemnify them if problems arose–politely declined to weigh in, presumably since IAC was no longer an investor in iLike.

Ali Partovi intently asked for a call “TODAY,” but Winiarski did not bite on that or the indemnification request.

In the end, Ali Partovi wrote: “We’re moving forward with the deal, mainly because Hadi and I are not the types to hold up a deal over this. But I’d appreciate if you’d be open to a discussion about the risk exposure we’re sustaining here.”

Apparently it did not hold up the deal.

Maybe someone can ask Van Natta about that in the all-company meeting MySpace has scheduled for next week, which he mentions in this internal memo announcing the deal:

Hi everyone,

I’m pleased to announce this morning that MySpace has entered into an agreement to acquire iLike.

iLike is a social music discovery service that in just two years has become the largest, most comprehensive music application across all social networks. With 55 million users and 1.5 billion monthly impressions, their growth speaks directly to the usability of the product, the technology behind it, and the great team that built it.

One of the great things about MySpace is that its openness enables discovery–we’re going to take that strategy one step forward by also allowing users to experience content on the distributed Web.

On MySpace, users connect with the content they love in a centralized and social environment. On iLike, users can access the content they love in a highly distributed environment across their favorite websites. This shared vision around content distribution is a key component to the future of MySpace.

What the iLike team has done with music is applicable to all of the areas that are important to MySpace users today such as entertainment, video, and games. Because we view the opportunities of this acquisition beyond the music category, MySpace Inc. will be making this acquisition separate and apart from the MySpace Music joint venture.

The company’s current management–CEO Ali Partovi, President Hadi Partovi, and CTO Nat Brown–will continue to lead iLike’s future. I’ve known Hadi and Ali for almost 10 years and the two of them, along with Nat are talented entrepreneurs with a strong track record for building world class product.

Just to give you a sense of their history and professional achievements:

· Ali established himself as an entrepreneur by co-founding LinkExchange, which started as the web’s first and largest banner-advertising network and grew to become the web’s largest small-business portal before being acquired by Microsoft in 1998. In 2002, Ali became CEO of Garageband.com and then iLike.

· Hadi co-founded Tellme Networks, a leading provider of voice/telephone technology and services, where he ran product and technology, and later spearheaded the company’s shift from consumer services to enterprise call-center automation for AT&T, FedEx, and E*TRADE. Tellme Networks was acquired by Microsoft in 2007. Both acquisitions (LinkExchange and TellMe) rank as two of Microsoft’s biggest deals to date. Hadi was also an original group program manager for Internet Explorer, a general manager of MSN.com, and he incubated Start.com (now Live.com).

· Nat has a deep and respected history as an early architect at Microsoft. He rapidly earned a reputation as one of Microsoft’s foremost technical minds by creating and evangelizing the ActiveX/COM object model in the early 90s. He went on to play a seminal role in the creation of XML, DHTML, and as a primary architect of the first XBox. After retiring from Microsoft, he served briefly as CTO at CAC Media and has informally advised numerous startups.

In addition to this great management team, iLike has 26 employees in various technical and business functions including a market leading development team that will join MySpace. iLike will remain headquartered in Seattle but our teams will be working very closely. I’m excited to see the great things that come out of the collaboration between our management teams, employees, and cultures.

We have an all-company meeting next week and I look forward to seeing everyone and answering any questions you might have.

Please join me in welcoming Ali, Hadi, Nat and everyone at iLike to MySpace.

A reminder of the site’s outlaw status is splashed up on the site’s front page right now, in the form of a feature promoting “DJ Joel’s $675,000 Mixtape,” which is supposedly “Approved by the RIAA,” the U.S. lobbying/litigating arm of the big music labels.

It’s not approved by the RIAA, of course. Instead, the feature steers visitors to a page that where they can illegally download 30 songs that just cost grad student Joel Tenenbaum $675,000. That’s the amount a federal jury decided he owed the RIAA after being found guilty of copyright violations for sharing the tunes via a filesharing network.

It’s the kind of cheeky move The Pirate Bay revels in and one of the reasons the Web site has such a large and devoted base of users. The main reason, of course, is that The Pirate Bay is a huge repository for free, illegal copies of movies, music, games.

That’s supposedly going to stop after August 27, when Global Gaming Factory X, a Swedish software/Internet cafe outfit, says it will go through with plans to buy the site, and then try to make it legal.

As I’ve explained before, there’s no chance that will happen.

Even if the deal really goes through, the only way The Pirate Bay’s users will stick around is if they can continue to grab whatever they want, whenever they want. And there’s no way the big music labels and movie studios and videogame companies, et al, are going to go for that.

But it will be interesting to watch!

In the meantime, here’s the track listing for the 30 songs that landed Tenenbaum in trouble. I’m pretty sure most of them are available at Apple’s (AAPL) iTunes store:

01 – Incubus – New Skin
02 – Green Day – Minority
03 – Outkast – Wheelz of Steel
04 – Incubus – Pardon Me
05 – Nirvana – Come As You Are
06 – Green Day – When I Come Around
07 – Green Day – Nice Guys Finish Last
08 – Nirvana – Heart Shaped Box
09 – Nine Inch Nails – The Perfect Drug
10 – Blink 182 – Adam’s Song
11 – Limp Bizkit – Rearranged
12 – Limp Bizkit – Leech
13 – Linkin Park – Crawling Hybrid
14 – Deftones – Be Quiet And Drive
15 – The Fugees – Killing Me Softly
16 – Red Hot Chili Peppers – Californication
17 – Red Hot Chili Peppers – By The Way
18 – Red Hot Chili Peppers – My Friends
19 – Beck – Loser
20 – Eminem – My Name Is
21 – Eminem – Drug Ballad
22 – Eminem – Cleaning Out My Closet
23 – Beastie Boys – (You Gotta) Fight for Your Right (To Party)
24 – The Ramones – The KKK Took My Baby Away
25 – Monster Magnet – Look To Your Orb For The Warning
26 – Aerosmith – Pink
27 – OutKast – Rosa Parks
28 – Rage Against The Machine – Guerrilla Radio
29 – Goo Goo Dolls – Iris
30 – Aerosmith – Water Song/Janie’s Got A Gun

My story about EMI’s lawsuit against Web music start-up Grooveshark elicited this email from Ben Patterson, who runs indie Web music distributor DashGo, about his experience with the service.

I think Patterson’s remarks are useful because they spell out Grooveshark’s business plan, or at least part of it: Charge labels to promote their acts on the service’s search engine. And I think it’s also helpful to hear an obvious but little-voiced argument about the “free Web music = valuable promotion” thesis: It works best when the act or label is playing along. With Ben’s permission, I’m publishing his entire email.

I’ll caveat this by saying they are nice guys and big music fans and I’m always rooting for new music services that work for bands and music fans alike.

Back in 2007 DashGo signed a deal with Grooveshark that basically amounted to a digital download service delivered via P2P. Users who used Grooveshark’s P2P service to search for songs would be presented with a download / buy link and the revenue would be split between fan hosting the file, Grooveshark and the band.

A couple months later we got a nice packet–a t-shirt, letter and wax-sealed, yes, wax-sealed, envelope with a check for $0.59 in royalties. (Coconut Records “West Coast” I think)

Then I didn’t hear much for 6 months. No checks, no real action. At the end of 2008, they reached out and told me about their new music search engine at listen.grooveshark.com–basically Seeqpod / Songza / all other stream song aggregators…not what we licensed for, but not egregious enough to get huffy.

Of course, that was before they offered to sell me advertising for my bands as the default search keyword. For $0.05 per search, I could make the default phrase “DashGo Band Name” instead of “Search here.” I had to ask–am I getting paid per play? No of course not. Because “[they] are not profitable and can’t afford to share that advertising revenue.” So I’m paying, not even for a play, but for a search term on a service where they have users and can sell ads ONLY because people can listen to music, and because it’s free, what incentive is there EVER to buy the song?

So we don’t deliver there anymore.

I’ll tell you why all these free streaming music services are broken–because they rely on music advertising to pay the rent but give away the advertisers product. If I got free McDonald’s and Budweiser by watching the Super Bowl, why would I buy the food? As an advertiser, why would I pay a CPC to advertise streaming music and promote listens when the per stream rate a existing subscription services is AT BEST $0.02 per play?

It sucks to get sued. I’m sorry Grooveshark, but really..what did you expect? You’re soliciting labels and bands to pay your bandwidth, rent and operating costs and giving away the product.

While I’ve got this soapbox out, let me preach one more gospel; offering free music accessible via a search engine is NOT promotional if the band hasn’t opted in.

If a user SEARCHES for the music and listens to it for free in an environment where someone ELSE has posted the music and the band doesn’t have the option to ask for an email address or even pitch a tour or merch or actual album; then the service is just ripping off the band by giving free content to someone who asked for it–not promoting it to a new fan or adding a filter that helps expose and distinguish music.

[Image credit: Mrs. Logic]

But the lawsuits have yet to be resolved.

Confusing? Of course.

Here’s Project Playlist’s description of the deal, which references layoffs at the company to eliminate redundancies with the new acquisition, but doesn’t specify how many folks are being let go. Given that Total Music only employed about 30 folks at its peak and was essentially shut down last winter, it’s hard to see how many Total Music employees are coming aboard–I’m guessing fewer than a dozen, and am trying to confirm.

We recently acquired assets and employees from TotalMusic LLC, a digital catalog management and reporting system. This acquisition is an important platform that will allow us to host a streaming music service, help us with e-commerce solutions and provide a set of application programming interfaces that will be invaluable to us as we offer next generation digital music services to our users.

Today we are integrating the assets of TotalMusic into our Playlist operation. As a result we have to address some overlap in certain areas and let some employees go both from Playlist and Total Music. This is no reflection on the talent of the people we had to release, rather a responsibility we have to run a lean organization with no redundancies and clear lines of reporting.  This often happens when two companies merge, but it is never easy.

On a positive note, we are very excited about the progress we are making. With the Total Music acquisition and our recent licensing agreements with Sony ATV and EMI Publishing, we are developing new features and services everyday that will form an even deeper bond with our 45 million loyal users and create new revenue opportunities for our company as well as our music content partners. More to come, watch this Space!!

Total Music, which Universal started in the fall of 2007 and shut down this February after joining up with Sony along the way, was supposed to be a subscription music service that got bundled in with devices or with ISPs/cable guys/telcos, etc. Given that it never, to my understanding, streamed a single song or collected a penny in revenue, it’s interesting to see that Project Playlist thinks there’s something there worth buying.

The bigger picture: It’s hard to see how this company can move forward until new CEO John Sykes, who replaced Owen Van Natta when he decamped to run MySpace for News Corp. (NWS), can clear up lawsuits with Universal and Warner and then get Facebook and MySpace to let it back onto their respective sites. The social services were crucial to Playlist since they generated the majority of its visitors, but they cut them off last fall, presumably under pressure from the labels.

Given that Van Natta is now running MySpace and that Playlist was at least able to negotiate an asset purchase from Universal, perhaps there’s a shot at getting all of that accomplished. Then the service could concentrate on the even tougher task of trying to make money in digital music.

Not because the notion is necessarily a terrible idea, mind you. But because musicians and music labels seemed unlikely to be beneficiaries of Washington aid.

Today, however, the music business got one step closer to getting the bill passed: The House Judiciary Committee approved the legislation in a 21-9 vote. There’s a long way to go: If I remember my Schoolhouse Rock correctly, the bill has to get through a Senate committee, then the full House, the full Senate and then President Barack Obama’s desk before it becomes law.

The National Association of Broadcasters, which hits my inbox almost daily with a press release decrying the act and promising its ultimate failure, assures me that “nearly half the House of Representatives already opposes RIAA efforts to feather the nest of foreign record labels.” And that kind of invective may help them quash this thing.

But let me reiterate: I still think the best way to kill this, if you were so inclined, would be to start calling it the “Britney Bailout.”

Per my previous story, here’s the campaign I would run if I was the NAB: “Slap up an ad that shows Britney Spears driving with her kid on her lap or staggering around an MTV stage or cavorting with K-Fed, and run a simple tag line: “Britney wants more money. Tell Congress not to give her any.” But again, what do I know?

Oooh. Here’s that Schoolhouse Rock classic:

Google’s YouTube and Vivendi’s Universal Music Group will be launching a new site, dubbed VEVO, that will highlight UMG’s videos. The site will launch in “coming months” according to a press release (below). And YouTube users will still be able to watch UMG clips from the likes of Lil Wayne via a “new VEVO channel through a special VEVO branded embedded player.”

This is essentially what I’ve been calling “YouTube Music,” and it’s been in the works since last fall. In March, I reported that the two sides had basically hammered out a deal.

I’ll be tracking down whatever details I can throughout the day, but at first glance, this is a pretty big deal for YouTube, the music business, and the rest of the media world.

• YouTube, which dominates the market for Web video but can only sell ads against a small portion of the clips it shows, gets to hang on to valuable, advertiser-friendly inventory.
• Universal gets its best shot at making money from something other than music sales, which it desperately needs to do. I’m also assuming that it gets a large chunk of cash upfront: The press release says the two companies will share ad revenue, but I’d be shocked if UMG CEO Doug Morris wasn’t able to wrangle a significant advance from Google (GOOG). UPDATE: No word on an advance, but I’m told that the two sides have scrapped their earlier arrangement, in which Google paid Universal a fraction of a penny every time someone played on of its videos. That’s a big deal: YouTube has complained that the previous deal was a money-loser, while the labels have complained that they weren’t getting adequately comped for their content.
• Obvious question: Will Universal’s fellow labels–Warner Music Group (WMG), EMI and Sony (SNE)–come on board? Sony has already re-upped its deal with YouTube, and Warner is currently at loggerheads with the video site. I assume that all of them will want access to the dollars and eyeballs that Universal is now getting, but a person familiar with the deal tells me that it’s not a foregone conclusion–in part, because neither YouTube nor the labels understand how VEVO will do. It’s possible, for instance, that both Sony and YouTube will be happy to keep the label’s videos on the larger site. “This is their big toe in the water,” an insider tells me, speaking of YouTube. “I’m not sure they want their whole body in the water.”
• The deal is also an important signal to other content providers YouTube would like to do business with: Give us your best stuff, and we’ll cut you a special deal. Now that YouTube is creating a new site for music videos and directing some its traffic there, who’s to say it couldn’t do the same thing for movies or TV shows? The company would desperately like to sell ads against some of Hollywood’s premium content–whether it’s Sony’s movies, or Disney’s (DIS) shows on ABC. So VEVO may be a template for future deals.

More later. For now, here’s a Lil Wayne video, followed by the press release:

UNIVERSAL MUSIC GROUP (UMG) AND YOUTUBE TO LAUNCH REVOLUTIONARY PREMIUM MUSIC & VIDEO SERVICE

VEVO – UMG’s Premium Music Service Powered By YouTube
To Launch In Coming Months

NEW YORK, NY and SAN BRUNO, CA, Thursday, April 9, 2009 – Doug Morris, Chairman & Chief Executive Officer of Universal Music Group (UMG), the world’s leading music company and Eric Schmidt, Chairman of the Board & Chief Executive Officer of Google Inc., today announced that UMG and YouTube, a Google subsidiary, are working together to launch VEVO, a music and video entertainment service that will feature UMG’s premium video content.

In addition to VEVO, YouTube has renewed and extended its successful partnership with UMG that allows users to continue creating and watching user-generated videos containing UMG sound recordings and Universal Music Publishing Group’s compositions on YouTube through various territories around the world. The two companies will also share advertising revenue on YouTube and VEVO.

Launching later this year, VEVO will be a premium online music video hub built for consumers, advertisers and content owners that will blend UMG’s broad catalog of top artists and content with YouTube’s leading edge video technology and user community. YouTube will provide the technology infrastructure that will power VEVO and host UMG’s extensive library of professionally-created music videos on the new site.  On YouTube, this content will be exclusively available through VEVO.com and a new VEVO channel through a special VEVO branded embedded player.

“VEVO will bring the most compelling premium music video content and services to the world’s single largest online video audience,” stated Mr. Morris. “We believe that at launch, VEVO will already have more traffic than any other music video site in the United States and in the world. And this traffic represents the most sought after demographic for advertisers, especially as advertising dollars continue their shift from old media to new. VEVO will be uniquely positioned to monetize this opportunity and a host of others as we grow it to become “the” destination for premium music video content online. For music lovers who want the best in music videos, the VEVO experience will be second to none.  At the same time, VEVO will expand the premium video marketplace, generate new revenue streams for content creators, and provide brand advertisers an unprecedented opportunity to get in front of a highly engaged audience. We couldn’t be more excited about the huge potential we see in the VEVO service.”

“Technology has allowed fans to discover music in endless ways while creating new business opportunities for artists and labels alike,” said Mr. Schmidt.  ”At Google, we are committed to promoting greater innovation and choice and are thrilled to be working with UMG in what will surely be an exciting new service for consumers, advertisers, content creators and the music industry at large.”

At launch, people will be able to access UMG’s entire catalog of premium music video content, including professionally-created and full-length videos on VEVO, as well as artist-generated content and user-generated content hosted on YouTube.  VEVO will also serve as a syndication platform, expanding the reach of the VEVO brand. This innovative platform is aimed at providing consumers the very best in digital music content while further extending UMG’s lead in the direct-to-consumer market.

Presently, UMG’s YouTube video channel has more than 3.5 billion views, making the UMG channel the most watched on YouTube.

In theory, the new pricing scheme Apple (AAPL) struck with the big music labels swaps out the old deal–99 cents a song–with three new tiers: 69 cents, 99 cents and $1.29 a song. But based on the (admittedly) cursory check I just conducted, finding a song priced below 99 cents will be very, very rare. In fact, I have yet to find one.

I did find plenty of music priced at $1.29, though. Six of Apple’s Top 10 songs are now at the new tier, which means that if you want buy “Boom Boom Pow” by the Black Eyed Peas (really?), you’re going to have pay up.

That’s pretty much as expected. The labels–that’s Warner Music Group (WMG), EMI Music Group, Sony (SNE) and Vivendi’s Universal Music Group–have always argued that hot new singles should cost more than not-hot new singles, because…. well, actually the logic there that gets a little fuzzy.

But whatever: If the labels can get away with charging more per song, more power to them.

But I don’t understand why they wouldn’t make a point of aggressively discounting some of their older catalog stuff at the same time. Online music sellers have found, via repeated experiments, that consumers are price-sensitive and that if you charge less, they’ll buy more. And last time I checked–and every time I’ve checked for the last decade or so–the labels needed to sell a lot more music, not less. Right?

Who actually made the move to drop the label’s content from the world’s biggest video site is a matter of dispute, though. Both sides are taking credit for the decision.

Here’s Warner Music (WMG)’s statement:

We are working actively to find a resolution with YouTube that would enable the return of our artists’ content to the site. Until then, we simply cannot accept terms that fail to appropriately and fairly compensate recording artists, songwriters, labels and publishers for the value they provide.”

But a person familiar with the situation tells me that the two companies were close to an agreement until recently, when Warner changed its terms. In response, Google (GOOG) made the move to yank the label’s content.

Google’s blog post about the matter is more oblique. But note that it doesn’t say it is taking the music down at Warner’s request:

Sometimes, if we can’t reach acceptable business terms, we must part ways with successful partners. For example, you may notice videos that contain music owned by Warner Music Group being blocked from the site.”

As I explained yesterday, music videos are some of the most popular content on YouTube. But the videos are also money losers for the video site because it has to pay the labels each time someone views a clip, regardless of whether it’s generating any revenue. YouTube’s contracts with all of the the big labels–in addition to Warner, it has pacts with Sony (SNE), Universal Music Group and EMI–are set to expire in the near future, so there are multiple games of chicken to watch here.

Meanwhile, taking down an entire music company’s catalog can take quite a while, which means that if you head to YouTube right now, you can still find plenty of Warner stuff  there–like the Madonna channel, which has golden oldies like this one: