Warner became the first major label to partner with YouTube in 2006. But last December, its music videos began disappearing from the site, a sign the label was unhappy with the amount of revenue it was collecting from the partnership. YouTube's vast library of unpredictable and sometimes objectionable user content has made it difficult for Google to place ads next to more than 9% of videos, according to eMarketer's estimate.

Google says the new deal allows Warner to sell ads against its own music videos, as well as user-generated videos that contain clips of its songs. "This sets us up for a sustainable partnership going forward," said Chris Maxcy, head of music partnerships at YouTube, during a call with reporters. Maxcy credited Warner Music CEO Edgar Bronfman with taking a personal role in the latest deal.

The arrangement leaves Warner out of Vevo, a separate music video site which YouTube first announced with Universal Music in March and which Sony signed on to in June. Presumably, Warner couldn't come to a financial agreement with Vevo, or else didn't want to lump its videos together with those of other labels in a kind of online portal for music videos. No new details on the planned launch of Vevo were announced.

The deal sees Google continuing to take steps to wring profits from the video site, which Credit Suisse analysts earlier this year estimated loses nearly half a billion dollars annually due to the high cost of technology needed to run it. In April, YouTube introduced new sections of its site for professional TV shows and movies, and earlier this month the company was said to be in talks with Hollywood to charge for rented movies on its site.

The talks between YouTube and Warner Bros., Lions Gate Entertainment, and Sony, with which YouTube already has relationships, first reported on the Wall Street Journal's Web site, are in very early stages, and details could change, according to at least two sources. Sources indicated any agreement could be several months away, and could involve other studios as well.

Reports indicate that YouTube was open to charging for videos, rather than simply depend on advertising to fund them, if it could get movies at the same time they become available on DVD. The rentals could cost about $3.99, the same rate Apple's iTunes Store charges for new movie rentals and similar to video-on-demand prices. To date, the movies available on YouTube under agreement from studios have been older or less popular titles.

If reached, the deal would put YouTube in direct competition with online movie rental services from Netflix, Amazon.com, and Apple. YouTube is by far the most popular video site, though much of the material is either clips or snippets provided by studios and other companies for marketing purposes or videos contributed by amateurs. YouTube's traffic, however--Google sites, chiefly YouTube, drew nearly 121 million viewers in July, according to comScore--represents a huge audience ready for movies and other professionally produced video.

For the past year or so, Google has pressed to come up with ways to make money on YouTube, which is believed to be losing money, though how much remains a matter of great debate. It has come out with a series of new ad formats. But so far, even Google CEO Eric Schmidt has conceded that the site hasn't lived up to its revenue hopes.

The talks follow a gradual thawing of relations between YouTube and at least some studios. On Aug. 19, Time Warner said it would distribute movie clips and shows on YouTube, sharing ad revenue with the video site. At the time, Jeff Bewkes, Time Warner chairman and chief executive, said in a statement: "Working with YouTube, we expect to improve our ability to monetize this short-form content through new and creative advertising initiatives."

A copyright infringement lawsuit by Viacom, however, is still pending. That lawsuit, and the difficulty in keeping unlicensed material off YouTube, no doubt will figure in any negotiations.

The move will open up YouTube monetization to tens of thousands of potential partners, up from thousands today, according to Tom Pickett, YouTube's director of online sales and operations. It's one more way Google hopes to make some money off its $1.6 billion purchase of YouTube, which hasn't produced significant revenue as quickly as Google and its investors have hoped. "This really opens up the door for more people to participate in the program," Pickett said today in a conference call with reporters.

Whether it pulls in the advertising will be another story. The ads will have to match the content pretty well, or they won't be effective. Both publishers and advertisers have often complained that contextual ads on AdSense sites don't always, well, fit the context. Two ads I just saw on Battle at Kruger were for a video game and a computer projector. UPDATE: I now see an African photo safari ad overlaid on the video itself, which I missed before. So I have to give YouTube props on that one. The display ad on the right is still the video game. But Google tells me not all the ads are contextual; some are demographically targeted.

Pickett didn't provide many specifics, such as how much revenue such videos might bring in. Some details from a post on the official Google blog: