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YouTube, Universal In Talks Over Music Video Website

March 5, 2009

Sources say Google’s YouTube and Universal Music Group are looking into a partnership over a premium online music video service.

According to a Reuter’s report, such a deal would aid Google’s attempt to generate revenue from YouTube, which it acquired for $1.65 billion in 2006.

The move could also benefit YouTube by easing the often tumultuous relationship between the free video-sharing service and the media industry, which has on occasion ordered the popular site to remove clips of TV shows or music videos uploaded by users without the media companies’ permission.

Reuters reported that three sources who were not authorized to speak publicly about the matter confirmed that Universal, the world’s largest music label, and YouTube, the No. 1 U.S. video website, are in negotiating stages to create a stand-alone site to showcase music videos by Universal artists.

The idea would be similar to the TV shows available on NBC Universal and News Corp’s Hulu.com and would include videos by artists at the other major music labels such as Sony Music, EMI Group and Warner Music Group.

Sources say financial terms and whether the service would be run as a joint venture are still being worked out, along with other details.

One of the sources said UMG CEO Doug Morris wants to create a Hulu for music, but with only premium music content, He also confirmed that other music companies had expressed interest.

“We literally just started negotiations,” the source said.

The site would carry premium music videos and music-related content designed to garner higher advertising rates than those already available through YouTube. So far, the site is being called “Vevo.”

The current YouTube model has music companies being paid a share of any advertising revenue associated with a video on the site, along with a per-play payment for every video viewed.

Market research firm comScore said YouTube is the No. 1 video site in the United States, with more than 100 million viewers in January.

The popularity of the television site Hulu has also grown in recent months, ranking sixth in the United States in January with 24.4 million viewers.

The sources said Vevo could also tap other revenue streams through sales of items like concert tickets and merchandise.

One source even said the talks between YouTube and Universal Music over a service backed by all the major labels have been held up by the video site’s fallout with Warner Music.

In December, Warner forced YouTube to remove all music videos on the site featuring Warner artists, due to busted contract negotiations between the two sides.

A new agreement between Universal’s current licensing deal with YouTube is expected for April, as the current deal expires at the end of March. EMI is also in contract renewal talks with YouTube. Sony Music renewed its contract with YouTube in February.

“We are always working with our partners to find creative ways to connect music, musicians, and fans,” said an official statement from YouTube.

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