YouTube said to be in talks with Universal about site

YouTube, the video-sharing Web site owned by Google Inc., is in discussions with Vivendi SA's Universal Music Group to create an online music Web site, two people familiar with the situation said.

The talks are still at an early stage, said the people, who declined to be named because the discussions are private. Universal approached YouTube about the idea at the end of last year and proposed a site that would include videos from all the major music labels, one of the people said.

Record labels are seeking to boost revenue from online video sources as a way to make up for declining compact-disc sales. Media companies have fought with YouTube, which has more than 100 million viewers in the U.S., over the use of their content and how they are compensated. In December, Warner Music Group Corp. said it would remove videos and songs from YouTube after royalty negotiations failed.

Under the partnership being discussed, YouTube would provide the technology to sell advertising accompanying music videos, one of the people said. The discussions are unlikely to result in a joint venture between YouTube and Universal, another person said.

Universal Music's artists include U2, Beck, Maroon 5 and the Rolling Stones.

"We are always working with our partners to find creative ways to connect musicians, music and fans," YouTube said in a statement. Universal Music spokesman Grant Pavolka declined to comment.

Google Chief Executive Officer Eric Schmidt said this week at an investor conference that YouTube is slowly working out ways to make money from online video. Google, owner of the most- used Internet search engine, bought YouTube in 2006 for $1.65 billion. Schmidt said last year that YouTube hadn't yet found the "perfect" business model.

YouTube has the advertising technology and the audience that make it attractive to the music labels, said Allen Weiner, a Scottsdale, Arizona-based analyst for Gartner Inc.

U.S. Internet users watched 14.8 billion online videos in January, a gain of 4 percent from the previous month, according to researcher ComScore Inc. in Reston, Virginia. YouTube accounted for 91 percent of that increase as it surpassed 100 million users.

YouTube renewed a licensing agreement with Sony Corp.'s music unit, a person familiar with the matter said last month. That allows the site to host videos from Bruce Springsteen, AC/DC, Beyonce and Alicia Keys.

Google, based in Mountain View, California, fell $6.56 to $318.92 today in Nasdaq Stock Market trading. Vivendi, based in Paris, rose 3.5 percent to 19.78 euros in Paris trading.

The Wall Street Journal reported the Universal Music partnership earlier today