Just received this statement from Photobucket regarding MySpace's assertion that Photobucket was warned. (I have to say: excellent PR to be watching the blogs and getting responses out quickly!)

Photobucket was not contacted by MySpace about this issue. Photobucket is continually identifying new ways for brands to reach, and engage with their audiences. One of the ways we can do this is by allowing our users to combine their own content with that of brands to create personalized slideshows and videos. Some of our users choose to share their slideshows with friends on blogs and social networks, of which MySpace is obviously one. This content is not clickable and does not generate revenue for Photobucket – only the branded content and environments on Photobucket do that. In addition, MySpace is claiming that some of these slideshows contravene its terms of service. However, it has decided to block the posting of user-generated videos from Photobucket, not slideshows.

Brands have a lot of great content available that users want to share with their friends and networks. It’s a trend which is only going to increase, and we think it’s good for the brands, for the users and for
social networks to provide ways to create and share that compelling content. Limiting users’ ability to do so would seem to be contrary to MySpace’s mission and certainly to ours.