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Universal, Google Mull Music Video Venture

LOS ANGELES (AP) — 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, according to people familiar with the matter.

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 France's Vivendi SA.

The discussions began about a month ago but are still in the preliminary stages, said the 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 Chief Executive 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 March, 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 destination site under the working title "Vevo."

Record labels, faced with declining sales of compact discs, 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. Even Neil Young jumped into the fray, arguing on his Web site this week that YouTube had underpaid Warner compared with other labels, resulting in a shutdown that "penalized" artists like himself.

Viacom Inc. 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" cartoon.

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."