Digital Music Group announced a distribution and revenue sharing agreement with YouTube today.

At the World Economic Forum in Davos, YouTube founder Chad Hurley annouced that YouTube would begin showing three-second pre-roll advertising on select videos and sharing the revenue with the video publishers.

Digital Music Group has acquired a large catalog of older video content lately. The video, which ranges from Hopalong Cassidy to Mr. Bill, isn’t something you can sell on a mass scale, but there’s certainly a niche audience who’s interested.

The Business Journal is reporting that Sacramento’s Digital Music Group’s IPO provided the second-worst return on investment of any IPO in 2006. The results are based on a Motley Fool tally of gains and losses by the year’s IPOs.