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Source: Universal Music Group plans 'Hulu-like' site

The largest recording company wants to create a video portal that would feature the label's many artists and offer high-quality video. Isn't YouTube enough?

UPDATE 10:10 a.m. Friday: to include YouTube's response

Universal Music Group, the largest of the major recording companies, plans to launch a "Hulu-like" video portal, a source close to the company told CNET News.

The new venture would offer professionally produced music videos as well as other original programming that features the label's artists. The Killers, Mariah Carey, Kanye West, and Amy Winehouse are just a few of the company's acts. A Universal spokesman declined to comment.

Doug Morris, Universal's chairman and CEO, wants to squeeze more revenue out of music videos and offer artists a new and more polished platform to display their talents than what's available online now, the music industry source said.

What is paramount to Morris is drawing larger numbers of premium advertisers to music videos. Right now, YouTube has become the most prominent online venue for music videos, and all four of the major labels have licensed music to the video-sharing site. YouTube's troubles at attracting top-tier advertisers are well chronicled.

It's been reported that while Hulu, the long-form video destination site created by NBC Universal (NBCU has no affiliation with UMG) and Rupert Murdoch's News Corp., is selling ads against 100 percent of its videos, YouTube is estimated to see ad revenue from only 3 percent.

The reason for that is simple. NBC Universal offers full-length TV shows and movies that are professionally made. Advertisers feel far more comfortable attaching their brands next to that than they do user-generated content, which is what YouTube mostly offers. The user experience between the sites is also an issue. The video quality at YouTube is grainy while Hulu's images are offered in much higher quality.

A YouTube representative said via e-mail late Thursday evening: "We have great partnerships with major music labels all over world that understand the benefit of using YouTube as another way to communicate with their fans."

It's important to note that Universal will soon be in talks about renewing its licensing agreement with YouTube. Their deal ends at the end of the year. According to my music industry source, Universal and the other three major labels are happy with the promotional benefits that YouTube provides.

But Morris wants to change how music videos are perceived, the source said. They cost too much to produce and generate too much interest to be used exclusively as a promotional tool, the source told me. Morris wants to extend his initiative to monetize music videos and create more revenue from them.

This may not be easy. MTV once built an empire on top of music videos but since then they have become a commodity online. Before YouTube reached agreements with the top labels, music videos were easily pirated and distributed via YouTube and other user-generated sites.

In a digital world, concert performances are videotaped with the use of cell phones and posted to YouTube even while the performance is occurring. But what the labels have in their favor is that people are still interested in watching music videos.

Of the top 20 most-viewed clips of all time on the site, more than half are music videos. Singer Avril Lavigne's "Girlfriend" is the top viewed video ever with more than 102 million hits.

Universal's channel on YouTube has generated over 2.6 billion views over the past year, making it the most watched channel on YouTube.