Universal Labels And Google's YouTube Reach Deal For New Video Service

April 10, 2009 12:44 PM ET

After complaining about the lack of ad revenues they receive from YouTube, Universal Music Group has struck a deal to create a new service to show off their music video library… with YouTube. The new site will be called Vevo and, according to Billboard.biz, the service "is designed as a central repository for all UMG video content initially — including music videos, interviews, concert footage and so on — and eventually to include that of the other major labels and independents." So, essentially, YouTube is helping UMG create a competitor to their own service — a rock & roll 'Tube.

The heart of YouTube's feud with the record companies — and what drove Warner Music to ban their videos from the service — is ad money. As Billboard.biz reports, the record company was only receiving roughly $3-$8 of ad revenues per every 1,000-plus views of their videos, instead of the $25-$40 the labels think they should be getting. As their music video licensing deals with other sites (Yahoo, MTV Music, etc.) expire, UMG will make Vevo and YouTube the sole place to see UMG videos, and UMG and YouTube will split the ad revenue. Essentially, they're doing away with the middle man, says UMG CEO Doug Morris.

Still, the whole idea of another service that both competes against and aids YouTube sounds superfluous, and those kids over at Digg are having a sarcasm-fueled field day with the news: "Is this even possible? I didn't know the Web was capable of streaming videos. Wow! Amazing product idea from an amazing record company! So unique," writes one user. Even Trent Reznor seems to be enjoying his old label's new idea. Vevo is expected to launch by year's end.

Related Stories:

YouTube Hits The Mute Button as Royalty Fight With Warner Bros. Continues
Major Labels Consider Hulu Partnership, New Music Video Site as Alternatives to YouTube
Warner Music Group Pulls Videos From YouTube As Talks Break Down

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