For those who haven’t been following along, here’s what we know about Vevo:

• It will be powered by Google’s (GOOG) YouTube, which will share ad revenue with the joint venture.
• It is being run by Rio Caraeff, Universal’s veteran digital guy.
• In addition to its equity partnership, its distribution strategy is modeled after Hulu: Sony and Universal videos will appear exclusively on the site and/or YouTube, but the site plans on licensing its stream to other outlets, as Hulu does with portals like MySpace and Comcast’s (CMCSA) Fancast. One obvious place to license the stuff: Hulu itself.
• Neither EMI nor Warner Music Group (WMG), which has created its own Vevo-like channel with YouTube, is participating in the venture, but they could.

That’s the obvious question in light of news that both Terra Firma, the private equity group that bought EMI in 2007, and Citigroup, which funded most of the transaction, have written down most of their investments in the music company.

This isn’t a surprise–the move has been a long time coming–but it does open the door for Warner, which restructured its debt with an eye toward making such a deal earlier this year.

Pali Research’s Rich Greenfield thinks that Citi (C) will push to break up EMI and sell Warner (WMG) the record music group, which tends to lose money, and keep the music publishing business, which has been a reliable money maker, even during the industry’s 10-year freefall.

But at this point, I don’t know why Warner couldn’t try to swallow the whole thing. In the past, that deal would have been scuttled due to antitrust issues (and in fact, it was), but the music industry is a different beast right now–a sick beast–and I think regulators would be a lot more forgiving this time around.

[Image credit: beggs]

I’m sure that Apple (AAPL) will indeed sell the Fab Four’s music via its digital music store one day. But it’s not happening at Apple’s keynote presentation tomorrow.

The Beatles estate, Electronic Arts (ERTS) and Viacom’s (VIA) MTV will be releasing a new version of “Rock Band” that features the band’s songs tomorrow. And on the same day, EMI Music Group will release all of the band’s music on remastered compact discs.

But that’s it, a source familiar with the band’s plans tells me. For now.

UPDATE: Want an on the record source? The Financial Times obliges with a follow-up:

“Conversations between Apple and EMI are ongoing and we look forward to the day when we can make the music available digitally. But it’s not tomorrow,” Ernesto Schmitt, EMI’s global catalog  president, told the FT’s Andrew Edgecliffe-Johnson.

Beatles-to-iTunes is a story that never goes away. And some day, it will turn out to be true–there’s no good reason for it not to happen. But predictions that it will happen Wednesday have been tied to wafer-thin logic.

Two years ago, the Web was convinced an announcement was in the offing because of the wording of an Apple keynote invitation. This year, even sober-minded publications are noting the timing of Apple’s keynote event and the Rock Band and CD launches, concluding that an iTunes launch makes sense too.

But I’d argue that it makes less sense: If you’re trying to convince people to spend $16.99 for a remastered copy of the White Album or as much as $250 to play along with the band’s ghostly avatars, why offer a competing product from Apple at the same time?

Nor do I see Steve Jobs expressing much interest in coordinating his marketing announcements with the likes of Viacom.

Anyway, if you really want to get the Beatles on the Web, you don’t have to wait for Apple–a quick Google search will do. Or you can head to Google’s (GOOG) YouTube, which is flooded with great clips like this:

The service took one step toward wider distribution today when Apple (AAPL) approved its iPhone app (for a glimpse of the app, see the video at the bottom of this post). But that won’t help U.S. users until the big music labels–Warner Music Group (WMG), Sony (SNE), EMI and Universal Music Group–agree to American distribution deals.

But before we get to that, let’s back up and explain what Spotify is: A streaming-music service that lets you listen to whatever you want whenever you want, as long as you have a Web connection. A free version comes with ads, and if you want to do away with those, you can pay for a subscription.

Does that sound familiar? It should. There are plenty of models like this available in the U.S. right now, from RealNetworks’s (RNWK) Rhapsody to MySpace Music, a joint venture owned by News Corp.’s (NWS) social network and the big labels. For various reasons, equivalent (and legal) models have been much harder to come by in Europe, which explains part of the appeal there. The other explanation is that Spotify works beautifully.

But don’t take my word for it. Ask Slate.com columnist Farhad Manjoo (“The best streaming music service in the world”). Or better yet, Facebook CEO Mark Zuckerberg (“Spotify is so good”).

Meanwhile, investors–primarily European ones–have been throwing money at Spotify, and the big music labels’ international arms are enthusiastic partners (and equity shareholders). And the company’s boosters have been pointing to a U.S. launch as early as the fourth quarter of this year.

So let’s assume this happens. What then? The problem with the digital music business, as company after company has found out, is that it’s a miserable business:

• Selling music by the track is a low-margin affair that only works if you have enormous scale–Apple sells some two billion songs a year.
• It’s been nearly impossible to get more than a few hundred thousand people to pay a monthly fee for music–ask Rhapsody or Best Buy’s (BBY) Napster, which have been slogging away at this for years without gaining any traction.
• And it’s been impossible to support a free service with advertising while ponying up big licensing fees to the labels–ask Imeem, et al.

So why will Spotify be any different? Depends on whom you ask. Some figure that it has the best chance of working as a mobile service and that since phone users aren’t used to the idea of getting all the music they can eat on their phones for free, they’ll pay up if given the chance. Others think the big labels have gotten wiser and/or more benevolent about their licensing fees and are willing to wring less out of Spotify at the start in the hope that it will pay off down the road.

Still others just shrug and figure it will work out somehow because…well, one of these days, someone has to figure out how to make this work. “Everybody loves the product,” says an industry executive familiar with the company’s plans. “And there’s a hope that the business model is realistic.”

I have heard rumbling that not all of the big labels are equally enthusiastic about a U.S. licensing deal. It’s unclear whether that’s due to something specific about the U.S. market or to internecine squabbles at particular labels. But Spotify will need at least three of the big four to play along. And then we can see just how realistic the model really is.

Google’s YouTube and Vivendi’s Universal Music Group will be launching a new site, dubbed VEVO, that will highlight UMG’s videos. The site will launch in “coming months” according to a press release (below). And YouTube users will still be able to watch UMG clips from the likes of Lil Wayne via a “new VEVO channel through a special VEVO branded embedded player.”

This is essentially what I’ve been calling “YouTube Music,” and it’s been in the works since last fall. In March, I reported that the two sides had basically hammered out a deal.

I’ll be tracking down whatever details I can throughout the day, but at first glance, this is a pretty big deal for YouTube, the music business, and the rest of the media world.

• YouTube, which dominates the market for Web video but can only sell ads against a small portion of the clips it shows, gets to hang on to valuable, advertiser-friendly inventory.
• Universal gets its best shot at making money from something other than music sales, which it desperately needs to do. I’m also assuming that it gets a large chunk of cash upfront: The press release says the two companies will share ad revenue, but I’d be shocked if UMG CEO Doug Morris wasn’t able to wrangle a significant advance from Google (GOOG). UPDATE: No word on an advance, but I’m told that the two sides have scrapped their earlier arrangement, in which Google paid Universal a fraction of a penny every time someone played on of its videos. That’s a big deal: YouTube has complained that the previous deal was a money-loser, while the labels have complained that they weren’t getting adequately comped for their content.
• Obvious question: Will Universal’s fellow labels–Warner Music Group (WMG), EMI and Sony (SNE)–come on board? Sony has already re-upped its deal with YouTube, and Warner is currently at loggerheads with the video site. I assume that all of them will want access to the dollars and eyeballs that Universal is now getting, but a person familiar with the deal tells me that it’s not a foregone conclusion–in part, because neither YouTube nor the labels understand how VEVO will do. It’s possible, for instance, that both Sony and YouTube will be happy to keep the label’s videos on the larger site. “This is their big toe in the water,” an insider tells me, speaking of YouTube. “I’m not sure they want their whole body in the water.”
• The deal is also an important signal to other content providers YouTube would like to do business with: Give us your best stuff, and we’ll cut you a special deal. Now that YouTube is creating a new site for music videos and directing some its traffic there, who’s to say it couldn’t do the same thing for movies or TV shows? The company would desperately like to sell ads against some of Hollywood’s premium content–whether it’s Sony’s movies, or Disney’s (DIS) shows on ABC. So VEVO may be a template for future deals.

More later. For now, here’s a Lil Wayne video, followed by the press release:

UNIVERSAL MUSIC GROUP (UMG) AND YOUTUBE TO LAUNCH REVOLUTIONARY PREMIUM MUSIC & VIDEO SERVICE

VEVO – UMG’s Premium Music Service Powered By YouTube
To Launch In Coming Months

NEW YORK, NY and SAN BRUNO, CA, Thursday, April 9, 2009 – Doug Morris, Chairman & Chief Executive Officer of Universal Music Group (UMG), the world’s leading music company and Eric Schmidt, Chairman of the Board & Chief Executive Officer of Google Inc., today announced that UMG and YouTube, a Google subsidiary, are working together to launch VEVO, a music and video entertainment service that will feature UMG’s premium video content.

In addition to VEVO, YouTube has renewed and extended its successful partnership with UMG that allows users to continue creating and watching user-generated videos containing UMG sound recordings and Universal Music Publishing Group’s compositions on YouTube through various territories around the world. The two companies will also share advertising revenue on YouTube and VEVO.

Launching later this year, VEVO will be a premium online music video hub built for consumers, advertisers and content owners that will blend UMG’s broad catalog of top artists and content with YouTube’s leading edge video technology and user community. YouTube will provide the technology infrastructure that will power VEVO and host UMG’s extensive library of professionally-created music videos on the new site.  On YouTube, this content will be exclusively available through VEVO.com and a new VEVO channel through a special VEVO branded embedded player.

“VEVO will bring the most compelling premium music video content and services to the world’s single largest online video audience,” stated Mr. Morris. “We believe that at launch, VEVO will already have more traffic than any other music video site in the United States and in the world. And this traffic represents the most sought after demographic for advertisers, especially as advertising dollars continue their shift from old media to new. VEVO will be uniquely positioned to monetize this opportunity and a host of others as we grow it to become “the” destination for premium music video content online. For music lovers who want the best in music videos, the VEVO experience will be second to none.  At the same time, VEVO will expand the premium video marketplace, generate new revenue streams for content creators, and provide brand advertisers an unprecedented opportunity to get in front of a highly engaged audience. We couldn’t be more excited about the huge potential we see in the VEVO service.”

“Technology has allowed fans to discover music in endless ways while creating new business opportunities for artists and labels alike,” said Mr. Schmidt.  ”At Google, we are committed to promoting greater innovation and choice and are thrilled to be working with UMG in what will surely be an exciting new service for consumers, advertisers, content creators and the music industry at large.”

At launch, people will be able to access UMG’s entire catalog of premium music video content, including professionally-created and full-length videos on VEVO, as well as artist-generated content and user-generated content hosted on YouTube.  VEVO will also serve as a syndication platform, expanding the reach of the VEVO brand. This innovative platform is aimed at providing consumers the very best in digital music content while further extending UMG’s lead in the direct-to-consumer market.

Presently, UMG’s YouTube video channel has more than 3.5 billion views, making the UMG channel the most watched on YouTube.

And then these two sentences: “Discussions regarding the digital distribution of the catalogue will continue. There is no further information available at this time.”

So, to sum up: The Beatles are still not available on Apple’s iTunes (AAPL) or any other legal online venue.

If you want to read about the CDs, which will be released in September and will feature “new packaging,” go right ahead. But if you’re pressed for time, here’s what said packaging will look like. Start saving now:

In theory, the new pricing scheme Apple (AAPL) struck with the big music labels swaps out the old deal–99 cents a song–with three new tiers: 69 cents, 99 cents and $1.29 a song. But based on the (admittedly) cursory check I just conducted, finding a song priced below 99 cents will be very, very rare. In fact, I have yet to find one.

I did find plenty of music priced at $1.29, though. Six of Apple’s Top 10 songs are now at the new tier, which means that if you want buy “Boom Boom Pow” by the Black Eyed Peas (really?), you’re going to have pay up.

That’s pretty much as expected. The labels–that’s Warner Music Group (WMG), EMI Music Group, Sony (SNE) and Vivendi’s Universal Music Group–have always argued that hot new singles should cost more than not-hot new singles, because…. well, actually the logic there that gets a little fuzzy.

But whatever: If the labels can get away with charging more per song, more power to them.

But I don’t understand why they wouldn’t make a point of aggressively discounting some of their older catalog stuff at the same time. Online music sellers have found, via repeated experiments, that consumers are price-sensitive and that if you charge less, they’ll buy more. And last time I checked–and every time I’ve checked for the last decade or so–the labels needed to sell a lot more music, not less. Right?

Merrill’s hire in April 2008 was supposed to represent EMI’s willingness to break free from its old CD-based businesses, and a breath of fresh air. Merrill, who had formerly been Google’s (GOOG) CIO, cheerfully admitted that he had no background in the music business.

But it’s not clear what, if anything, Merrill was able to accomplish since he moved to EMI. On the other hand, it’d be hard to imagine any single executive being able to make much impact at EMI or any other label, given the industry’s accelerating decline.

Meanwhile, Guy Hands, the private equity executive whose Terra Firma shop bought EMI in 2007, has had to write off half the value of his investment, and that’s probably an optimistic valuation. And earlier this month Hands himself stepped down from his position as Terra Firma’s CEO.

Here’s the internal announcement from EMI CEO Elio Leoni-Sceti:

From: Internal Communication
Sent: Mon Mar 23 19:31:21 2009
Subject: ORGANISATION ANNOUNCEMENT – from Elio Leoni-Sceti

Dear all

With digital now comprising over 20 per cent of our revenues and growing fast, and with the progress we have made in integrating all of our digital operations fully into the business, we will no longer operate a standalone digital function.

Douglas Merrill has today stepped down from his roles as President of Digital and COO of EMI New Music and will be leaving the company.

I would like to thank Douglas for his contribution and to wish him well for the future.

Digital Marketing

I am delighted to announce that Cory Ondrejka is appointed to the newly-created position of Executive Vice President, Digital Marketing, reporting initially to me and then to our new President of Marketing whose appointment we expect to announce shortly. We have been planning this promotion for Cory for some time now. In his new role he will help us deliver our goal of leveraging the power of digital across our business, particularly in the key areas of consumer understanding and analytics, content creation and digital marketing, in order to strengthen the relationship and interaction between our artists and their fans.

Cory is a highly talented executive with a passion for music and a complementary, technology-based skillset. Since he joined us from Second Life last year he has helped us create a new approach to digital that will be unique to the music industry including establishing a world-class engineering team on the West coast and instituting modern, agile software development practices and tools that are the foundations to help us transform our approach to analytics and marketing.

He will be making further announcements about his Digital Marketing team in due course.

New Music

Nick Gatfield and Billy Mann, our Presidents of A&R Labels for North America/the UK and International respectively, will join the EMI Music Executive Committee and, as members of the New Music Operating Board, will continue to support me directly in my role as President of EMI New Music.

Under their leadership, EMI is building very strong creative momentum. In the last four weeks alone their A&R Labels teams around the world have signed 14 new artists, three in the US, four in the UK and seven in the rest of the world.

Digital Supply Chain/IT

Peter Baker, VP, Digital Software Engineering, and Dan Levine, VP, Digital Product Development, who have been leading the work on our Digital Supply Chain, now report to Ronn Werre, President, EMI Music Services. Ronn will be making the Digital Supply Chain a top priority so that we can best serve our artists and our customers.

Richard Piercy, Acting Chief Information Officer, now reports to Chris Kennedy, our Chief Financial Officer. Richard will continue to oversee our global IT system which is an important strategic enabler and one that is strongly linked to our management and financial reporting requirements. Chris will ensure that IT supports the company’s strategic ambitions effectively and efficiently.

Meanwhile Mark Piibe, in his role as SVP of Digital Business Development, will report to Ronn Werre whose Music Services team now leads all deals and relationships with our digital and physical retail partners.

Building our new music repertoire and embedding digital into everything we do are key to our future success. With our growing creative momentum under strong A&R leadership and the final integration of all remaining digital functions into the business, we have a solid platform for enhanced performance in this coming year.

Thank you for your continued efforts.

All the best
Elio

Google’s YouTube has cut a deal with Sony (SNE) to keep the label’s videos on the world’s biggest video site. But it is still haggling with the other big music companies: Warner Music Group (WMG), Universal and EMI.

Here’s one way that Google (GOOG) execs could speed up the process–wave the results of this survey of U.K. youngsters in front of the labels’ faces. And make sure to underline this part:

You Tube has soared into pole position as the default website that this age group turn to for checking out new artists (38%). Myspace (and a band’s own website) come a distant joint second, each scoring 15%.”

A couple decades after the fact, the labels are still smarting because Viacom (VIA) built MTV into a giant business on the backs of their labor. Now YouTube is becoming this generation’s MTV. But this time around, the labels are in a position to benefit–if they can think big.

Right now, the labels and the video site are hung up on the fraction of a penny the labels get when YouTube shows one of their videos. The labels want a bigger fraction; YouTube wants to pay less. But that’s a silly debate: The bigger challenge is figuring out how to turn the intense interest YouTube users already have in music into a real business.

Again, my not-so-modest proposal: The best way to to pull this off is to copy MySpace and create a YouTube Music. As I wrote last month:

What would YouTube Music look like? It’s not that important. Maybe in addition to videos, it would offer downloads via Amazon’s (AMZN) digital media store, as MySpace does. Maybe it would have detailed biographies and a spartan design, like that MTV video site that MTV pretends doesn’t really exist yet. Doesn’t matter.

What is important: Like its MySpace predecessor, YouTube Music would take the large audience that already consumes music content throughout the site and assemble it one place. That might have some benefits for the site’s users. But it’s undeniably useful for the site’s ad sales team: Advertisers like clean, well-lit spaces with lots and lots of bodies, and partitioning off music creates just that.

That’s why MySpace Music was able to launch with an array of blue-chip advertisers last fall. And there’s no reason why they wouldn’t pony up for YouTube music too.”

So. Labels? YouTube? Get to it. You’ve got a huge audience there that’s already consuming your product. Time to turn those eyeballs into dollars.

UPDATE: Several readers have pointed out this data from Big Champagne, which shows that MySpace Music generates many more “music impressions” than YouTube does. That’s interesting, but I’m not quite sure what the point is. For one thing, there’s no reason why MySpace Music and (my proposed) YouTube Music can’t co-exist. Less important point, I think that a YouTube music impression, delivered via a video clip, is worth much much more to an advertiser than a MySpace Music impression delivered via audio.

UPDATE2: Can’t recall what MTV used to be like when it played videos? Here’s an hour-and-a-half-long trip in the way back machine. Thanks to BusinessWeek’s Roben Farzad for digging this one up.

Better late than never: Apple (AAPL) has deals in place with three of the big music labels–Warner Music Group (WMG), Sony (SNE) and Universal Music Group–to sell DRM-free songs. In exchange, Jobs will give the labels some ability to introduce “flexible pricing”–a key demand for the industry. CNET’s Greg Sandoval reported the news yesterday, citing sources; I’ve confirmed with my own industry sources this morning. Expect an announcement this week; the logical timing would be during today’s MacWorld keynote. [UPDATE: Here's the press release]

You’ll be hearing a lot of hubbub in the Techmemeworld about the move: DRM has been one of the tech world’s biggest bugaboos. If you believe the people who write blogs and leave blog comments (please do!), the fact that the labels have sold their music with DRM has been a drag on iTunes sales.

But I don’t think that’s the case: Apple moves some two billion songs a year via iTunes, and unless you’re in a small minority of people who want to do something with your iTunes song other than listen to it on your computer, iPhone, or iPod, you’ll find it hard to butt heads with a DRM restriction.

In the real world, few people have even heard of DRM. That’s one reason why the fact that Amazon’s (AMZN) Jeff Bezos has sold DRM-free music for all of 2008 doesn’t seem to have helped the company even dent Apple’s commanding market share. And think about it this way: Who’s more eager to sell digital music–Steve Jobs or the struggling music labels? If DRM-free tunes were a cure-all, you would have seen the big guys moving to drop it a long time ago.

The bigger news here is the move to add flexible pricing to the iTunes store. The labels have long pushed for the ability to mark up certain songs above the 99-cent mark, and Jobs hasn’t given in (he initally sold EMI’s DRM-free songs for a premium, but ended that after a few months). Neither CNET nor I have details about the pricing, but expect three tiers: One for in-demand songs, one for “long tail” back catalog and one for midrange stuff.

If Apple and the labels play this right, the tiered pricing could move the needle. But it won’t be at the high end: While there’s some opportunity to squeeze a few more cents out of the buyers who absolutely have to have the new Beyoncé song, the real opportunity will be selling lots and lots of music at a steep discount.

That’s if the labels go ahead and offer music at a significant discount, which I think they will be reluctant to do, for various reasons (more on that later). But let’s hold off and see what the pricing actually looks like first.

UPDATE: Expect the following tiers: $0.79, $0.99 and $1.29 per track, I’m told. [Update: Make that $0.69, $0.99 and $1.29] Disappointing but understandable: I’d like the labels to sell most of their music for 50 cents or less; they think their best music is worth much more than $1.29.

UPDATE 2: Also coming to iTunes: Over-the-air downloads for iPhone 3G users.

The Recording Industry Association of America (RIAA) initially contacted Facebook last summer requesting the removal of the Project Playlist application for copyright violation, and recently reopened those communications. We have forwarded the RIAA’s letters to Project Playlist so it can work directly with that organization and music labels on a resolution. In the meantime, the application must be removed to comply with the Facebook Platform Terms of Service. Our hope and expectation is that the parties can resolve their disagreements in a manner that satisfies the developer and copyright holder, that continues to offer a great experience to music fans, and that doesn’t discourage other developers from using Platform to share their creativity and test new ideas.”

The only surprise here is that it took Facebook this long to face up to reality: There was next to no upside for Mark Zuckerberg and company in fighting the big music labels, three of whom are suing Project Playlist. But there was plenty of downside: At best, the social network would end up squaring off against potential partners; at worst, it’s conceivable that it could end up being sued by the labels as well.

Facebook’s move is also less important than the one that MySpace made last week. That’s because Project Playlist is first and foremost a music service geared toward users of News Corp.’s (NWS) social network.

It’s also not surprising that MySpace was the first to bail on Project Playlist at the labels’ request: Not only does the network have its own competing music service–MySpace Music–but its partners in that service are the four major labels– Sony (SNE), Warner Music Group (WMG), Universal Music Group and EMI.

Most important is what the big labels who are suing Project Playlist– Warner, UMG and EMI–hope to accomplish by forcing the social networks to cut it off at the knees. The boilerplate answer from the labels is that Project Playlist violates copyright, and that they’d complained to MySpace and Facebook before, etc, etc.

But that’s a silly argument: The labels have also been trying to negotiate a deal with Project Playlist for some time, which is why investor Bob Pittman sank up to $20 million into the company earlier this year and former Facebook executive Owen Van Natta came aboard as CEO last month. I’m told that those talks had reached advanced stages this month.

So that leaves us with two possible conclusions:

1. This is just another negotiating move by the labels, which have previously sued Web services before partnering with them (see: Warner/Imeem, Universal/MySpace). But since they’ve already sued Project Playlist, cutting off their oxygen is more effective.
2. The labels have decided that ad-supported, free music services like MySpace Music, Imeem and Project Playlist just aren’t going to work, period, and that’s there’s no point in even trying to let new ones thrive.

For now, I’m going with No. 1, just because it’s the most obvious answer. But I’m willing to hear other arguments: Sound off in comments below or drop me a line at peter@allthingsd.com.

Who actually made the move to drop the label’s content from the world’s biggest video site is a matter of dispute, though. Both sides are taking credit for the decision.

Here’s Warner Music (WMG)’s statement:

We are working actively to find a resolution with YouTube that would enable the return of our artists’ content to the site. Until then, we simply cannot accept terms that fail to appropriately and fairly compensate recording artists, songwriters, labels and publishers for the value they provide.”

But a person familiar with the situation tells me that the two companies were close to an agreement until recently, when Warner changed its terms. In response, Google (GOOG) made the move to yank the label’s content.

Google’s blog post about the matter is more oblique. But note that it doesn’t say it is taking the music down at Warner’s request:

Sometimes, if we can’t reach acceptable business terms, we must part ways with successful partners. For example, you may notice videos that contain music owned by Warner Music Group being blocked from the site.”

As I explained yesterday, music videos are some of the most popular content on YouTube. But the videos are also money losers for the video site because it has to pay the labels each time someone views a clip, regardless of whether it’s generating any revenue. YouTube’s contracts with all of the the big labels–in addition to Warner, it has pacts with Sony (SNE), Universal Music Group and EMI–are set to expire in the near future, so there are multiple games of chicken to watch here.

Meanwhile, taking down an entire music company’s catalog can take quite a while, which means that if you head to YouTube right now, you can still find plenty of Warner stuff  there–like the Madonna channel, which has golden oldies like this one:

[UPDATE: Negotiations between YouTube and music labels are already getting unpleasant: Warner Music's clips are disappearing from the site, and both sides are taking credit for the move.]

Universal Music Group officials told CNET this week that they’re going to make close to $100 million from Internet videos this year–an 80 percent increase–and that most of that will come from Google’s (GOOG) YouTube.

I believe that may be possible–in part because people close to Universal Music Group told me the same thing earlier this year. But I think that those YouTube dollars may not continue to increase at the same rate, whether it’s for Universal or any music label.

That’s because YouTube’s current arrangement with the labels is a money-losing one, people familiar with the company tell me. And that’s unlikely to continue as the company renegotiates its deals with the four major labels–UMG, EMI, Sony (SNE) and Warner Music Group (WMG)–which expire throughout next year.

Here’s how the current deals work: Whenever someone clicks on an official video that’s been sanctioned by the labels, YouTube has to pay the labels either a per-stream fee or a share of ad revenue associated with the clip, whichever is greater. Since YouTube is just beginning to get serious about selling ads next to its content, it’s usually paying the per-stream fee, which industry executives peg at about half a penny per clip.

That kind of deal might have been OK during Google’s go-go days, but it’s unlikely to fly now. And as Google execs start sitting down with the labels, it’s reasonable to think they’ve got much more leverage. While music videos are some of the site’s most popular programming–look at how many label-sponsored clips like Avril Lavigne’s “Girlfriend” are among the site’s most popular offerings of all time–Google doesn’t need their blessing in the way that YouTube did when it was still transitioning from rogue copyright violator to upstanding citizen.

Meanwhile the labels are under great pressure to dig up dollars wherever they can find them because their core CD business evaporates day by day. Universal Music recorded some $4.4 billion in revenue during the first nine months of this year, so $100 million in high-margin video revenue would be a meaningful contribution to the bottom line. But it may be harder to get in 2009 than it was this year.

I can’t show you most of YouTube’s most popular clips here–the site disables embeds for those. But here’s a less-viewed one I do like.

The company says the site is emphatically not supposed to be another MusicNet or PressPlay, the two unenthusiastic yet very expensive attempts the big labels made at creating their own portals in the wake of the original Napster.

So what is it? The site wasn’t scheduled to go live until 4 a.m. New York time, but it popped up earlier this evening and I gave it a quick spin. (Click to enlarge images.)

Based on that very cursory look, I think it’s meant to be a cleaner, in-house version of sites like MySpace Music and iMeem. Those sites offer streaming music, music videos and the opportunity to buy songs via affiliate deals with Apple (AAPL) or Amazon (AMZN).

Once it’s really up, that is. EMI says the site is in beta, but that’s generous. U.S. users can only listen to 30-second clips. U.K. users can listen to entire songs. But only ones from EMI’s catalog–which are the only songs that appear to be on the site, anyway.

There’s also a rudimentary discovery engine, and it appears as if the site will eventually direct would-be buyers to 7Digital, a U.K.-based iTunes and Amazon competitor.

The press release, which I’ve reprinted below, describes the site as a “learning lab.” I guess there’s nothing wrong with that–and the company has more pressing issues than a Web site launch. But I don’t understand the point of putting up something this raw.

LONDON, 17 DECEMBER 2008 — EMI Music today announced the launch of its new website, EMI.com. The site provides options for fans to discover new music and rediscover their favorite musicians. It also gives artists another platform to showcase their music and videos. EMI.com is one of many ways EMI Music will experiment with new digital platforms in order to develop a deeper understanding of how consumers interact with and experience music online.

“EMI.com is designed to be a learning lab. It will help us gain even more knowledge about consumers’ preferences and choices. Those insights will be invaluable to our artists, helping them respond to fans in a more relevant way,” said Alex Haar, Vice President of Digital Special Projects at EMI Music. “This is the beginning of a longer term experiment. In the coming months, we will continue to add content and features to the site.”

This launch of EMI.com is the first step in a process to better test and learn from the consumer experience. As of today, EMI.com will house a range of information about EMI artists, such as music, videos, photos, biographies and discographies. Fans in the U.K. and U.S. can listen to their favorite songs (in full or in 30 second segments, respectively), watch videos and create playlists. The discover feature of the site helps fans search for tailored music recommendations, by entering artists’ names, including those of non-EMI artists.

Future features, such as the ability to create widgets or to purchase music, will be added to the site in ways that will enable the company to test different values of increasing consumers’ music experience. The site will also be home to free special and unique content from EMI artists, such as interviews, concerts and back-stage visits.

Shamsa Rana, Managing Director of Imdad Capital Ltd., was responsible for designing and implementing EMI.com. Rana also brought in a digital media company, Perform, which built the site.

“With EMI.com, we wanted to build a site that provides a simple, user-friendly experience,” said Rana. “A focus on the fan and passion for the user experience is critical in today’s digital landscape, and that’s exactly what we worked to achieve with EMI.com.”

PR reps at both Sony, Warner and Real declined comment. iLike offered this statement:

From day one, iLike has offered only music that is fully licensed from copyright holders, via a combination of direct licenses as well as third-party relationships such as Muze and Rhapsody. From time to time these arrangements are renewed and re-negotiated, and sometimes it’s hard to avoid temporary outages in the middle of discussions.”

This isn’t a huge problem for iLike, as the “outages” only affect the offerings at iLike.com itself, and not iLike’s popular Facebook app, which is the core of its business. That’s because the Facebook app has never offered users the chance to listen to full songs from the big labels. And iLike has other pressing issues to deal with: The company is actively looking for buyers.

But it does point out one of the challenges that iLike and anyone else who wants to build a music service, or extend an existing one, face: They can’t automatically assume that someone who has deals with the music labels, as RealNetworks does, can take those deals and transfer them to a new service.

This has particular implications for Facebook, which is still exploring the possibility of launching its own music service. If Facebook wants RealNetworks (RNWK) or any other existing music service–like, say, MySpace Music–to operate a music offering on its behalf, it’s going to have to get the labels themselves to sign off on the deal. That’s not an impossible hurdle–note that RealNetworks has been able to offer free music at Yahoo (YHOO) since this fall–but it will slow things down.