By Yinka Adegoke

March 04, Reuters

NEW YORK (Reuters) - Google Inc's YouTube and Universal Music Group are in talks to create a premium online music video service, sources familiar with the situation said on Wednesday.

If they reach a deal, the service could mark a significant step forward in Google's attempt to generate revenue from YouTube, which it acquired for $1.65 billion in 2006.

A deal would also represent a broadening of the sometimes fractious ties between YouTube and the media industry, which has on occasion ordered the popular video-sharing site to pull down clips of TV shows or music videos uploaded by users without the media companies' permission.

Universal, the world's largest music label, and YouTube, the No. 1 U.S. video website, are in talks to create a stand-alone site to showcase music videos by Universal artists, according to three sources who were not authorized to speak publicly about the matter.

The deal would ideally be broadened out to include videos by artists at the other major music labels -- Sony Music, EMI Group and Warner Music Group -- in a concept similar to the TV shows available on NBC Universal and News Corp's

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photo: A man looks at YouTube's web site in a file photo (REUTERS/Peter Jones)