In an increasingly high profile spat hearkening back to Apple and NBC's drama-laden contract dispute over TV royalties, YouTube and Warner Music are at each others' throats after talks between the pair over video content royalties fell through.

Late last week talks seemed to be going well between the pair.  A contract had almost been reached, when Warner decided to pull its terms and replace them with more favorable ones.  An angry Google retaliated by dubbing Warner “unforgiven” and announcing that it was pulling Warner's music videos from YouTube.  Madonna and Metallica were among the top viewed items scheduled to be pulled from the video sharing site.

Ever since, the rift has grown increasingly nasty and has descended into the realm of he-said-she-saids.

Some are saying the harsh words on both sides are just ploys to try to get more favorable terms, as many concluded was true with NBC and Apple.  Warner Music's contract with YouTube expired months ago, according to The New York Times, yet its videos remain up on the site.  Even with its threats of action, Google has yet to pull Warner's music videos as it has said it would, perhaps uneager to kill some of its top traffic items.

The spat is significant, though due to the large amounts of money involved and ramifications on YouTube's dealings with other labels.  Sony, Universal and EMI's contracts with YouTube all have soon-to-expire contracts with YouTube and are likely waiting to see how Warner's gambit plays out.

While Warner's income from YouTube is significant, overall it's a drop in the bucket, albeit a growing one.  Warner reported $639M USD in digital revenue for the fiscal year that ended in September, with only roughly 1 percent ($6.39M USD) coming from YouTube deals.  However, the field is growing -- Universal Music Group announced this week that its yearly YouTube haul is in the "tens of millions".

Despite the harsh words, both sides are likely eager to make up, deep down.  Six of YouTube's current top ten videos are music videos and the site's traffic is heavily reliant on music videos.  It has become an MTV of the internet generation; however, in order to maintain this content it must continue to eke out deals with the major record labels. 

Likewise with 25 percent of Google's searches now accounted for by YouTube, that's one growing income source that the cash strapped record labels will find hard to resist for too long.