Universal Music Group, the world’s largest music recording company, is in talks with Google Inc’s YouTube division to create a music video venture, people familiar with the matter said.
Instead of just receiving licensing fees or a share of ad revenue from the online video site, Universal is seeking an equity relationship on an ad-supported site focused on high-quality music videos, separate from the grainy user-generated fare common to YouTube’s main site.
Other record labels, such as Warner Music Group Corp, Sony Music Entertainment and EMI Group Ltd, have also been contacted about the plan, although they are not part of the talks.
Universal is a division of Vivendi SA.
The discussions began about a month ago but are still in the preliminary stages, said the sources, who spoke on condition of anonymity because the discussions are confidential.
News of the talks was first reported in the Wall Street Journal.
The discussions began at the behest of Universal CEO Doug Morris, who has pushed to earn more revenue from music videos on its artists, from U2 to Lil Wayne, one person said.
Universal’s licensing arrangement with YouTube, which began in 2006, was set to expire at the end of this month, which provided another reason to revisit their agreement.
Universal’s channel on YouTube is by far the site’s most popular, generating some 3.6 billion views. The sides are considering forming a separate site under the working title “Vevo.”
Faced with declining CD sales, record labels have been experimenting with a number of ways of distributing music online, such as getting paid for streams on News Corp’s MySpace Music site.
But YouTube has run into a number of problems from content providers.
In December, Warner Music pulled all of its music from YouTube, saying the payments it received did not fairly compensate the label or its artists and songwriters.
Viacom Inc sued YouTube for US$1 billion, saying the site infringes on copyrights of its shows, including Comedy Central’s The Daily Show with Jon Stewart and Nickelodeon’s SpongeBob SquarePants.
YouTube declined to comment on the talks, but issued a statement saying: “We are always working with our partners to find creative ways to connect music, musicians, and fans.”
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