Duo in talks to partner for new venture

Universal Music Group, the world’s largest music recording company, is in talks with Google’s YouTube division to create a musicvid venture.

Instead of just receiving licensing fees or a share of ad revenue from the online video site, UMG is seeking an equity relationship on an ad-supported site focused on high-quality musicvideos unlike the grainy, user-generated fare common to YouTube’s main site.

Other record labels such as Warner Music Group, Sony Music Entertainment and EMI have also been contacted about the plan, although they are not part of the talks. UMG is a division of France’s Vivendi.

The discussions began about a month ago but are still in the preliminary stages, said people who spoke on condition of anonymity because the discussions are supposed to be confidential.

News of the talks was first reported in the Wall Street Journal.

The discussions began at the behest of Universal Music Group chief exec Doug Morris, who has pushed to earn more revenue from musicvids on its artists, from U2 to Lil Wayne. UMG’s licensing arrangement with YouTube, which began in 2006, was set to expire at the end of March, which provided another reason to revisit their agreement.

UMG’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 destination site under the working title Vevo.

Record labels, faced with declining sales of CDs, have been experimenting with a number of different ways of distributing their 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 also sued YouTube for $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 directly 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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