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YouTube Negotiating To Become a Digital MTV
YouTube Negotiating To Become a Digital MTV

By Jennifer LeClaire
March 5, 2009 12:50PM

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Google-owned YouTube is rumored to be negotiating a deal with Universal that could make YouTube the digital successor to MTV. An analyst said MTV has been abandoning its original mission of showing music videos. This time around the record labels want want to get paid for their content to appear on YouTube, with YouTube handling advertising.

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Could YouTube be the next MTV? If it inks a deal with Universal that's being widely rumored, it would be a strong first step. Negotiations are reportedly under way between the music giant and the video-sharing site to launch a premium online music destination.

It's not difficult to see why YouTube would make an attractive platform for Universal. According to comScore Video Metrix, U.S. Internet users viewed 14.8 billion online videos in January, a four percent increase over December. YouTube led the growth charge, accounting for 91 percent of the incremental gain. YouTube also surpassed 100 million viewers for the first time in January.

According to news reports, Universal approached the Google-owned site about the concept of an MTV-like digital forum late last year. The site would include videos from all the major music labels. YouTube would reportedly provide the infrastructure to sell advertising with the videos.

MTV's Digital Successor

According to Phil Leigh, a senior analyst at Inside Digital Media, the reports are credible. If Universal inks a deal with YouTube, it indicates that Google's popular video-sharing site is the likely digital-media successor to MTV, he said.

"MTV has been gradually moving away from simply showing music videos and showing more reality shows and other programming," Leigh said. "In doing so, MTV has sort of abandoned its original mission. That creates a vacuum, and YouTube can fill that vacuum. Of course, it all boils down to money."

From the perspective of the record labels, Leigh said, Universal, Warner Bros. and Sony, among others, feel they made a mistake with the MTV relationship by not demanding payment for broadcasting videos on the once-fledgling cable music station. The videos aired on MTV were instead a promotional tool to boost awareness of artists and albums.

"For decades, the MTV model worked well for the record labels, but it made MTV a huge success," Leigh said. "This time around, the record labels are insisting they get paid. This deal needs to be structured in such a way that both sides make money. That's why they are looking to set up a separate type of Web site within YouTube where these videos will be available. There will be more intensive advertising."

YouTube's Revenue Challenge

If the deal comes through, it might finally mark a way for Google to generate significant revenue from YouTube. YouTube has tried various approaches to advertising but hasn't found the sweet spot. Analysts said showing videos on demand from the major record labels could be the key. It could also address the concerns of the music copyright holders whose content has been displayed on YouTube without permission.

"It's all very logical. As is almost always the case in situations like this, the problem is money and dividing it up. YouTube is not going to permit themselves to lose money doing it. The labels are drawing a line in the sand and saying , 'We are not going to turn you into another MTV unless we get paid'," Leigh said. "I think both sides are trying to figure out a way for all parties to make money."

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