Google's YouTube and Universal Music Group, the world's largest recording company, are to launch a stand-alone music video website.

The companies are aiming to turn Vevo.com into the premier music video website. Discussions are under way to bring in the other major music publishing groups.

Vevo will be the only place web users can watch high quality video from Universal's roster of big names including U2, 50 Cent and The Killers. The site will be accessed via a new Vevo channel on YouTube or directly at Vevo.com

YouTube will supply the online infrastructure and sales support to showcase Universal's content. The two companies will share advertising revenue from the new site. Vevo, due to launch later this year, will also tap other revenue streams by offering concert tickets and merchandise in due course.

The deal marks a significant step in Google's attempt to generate cash from YouTube, which it acquired for $1.65 billion in 2006. It could also help to ease the music industry's search for greater profits from online music and video by attracting premium advertisers who have been put off in the past by YouTube's high proportion of low quality user-generated videos.

Universal, owned by Vivendi, is by far the most popular channel on YouTube. Its music videos have been viewed more than 3.5 billion times.

Doug Morris, Chairman & Chief Executive Officer of Universal Music Group, said: "Vevo will bring the most compelling premium music video content and services to the world's single largest online video audience."

He added: "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."

Universal and YouTube also announced a new contract to allow its content to continue to be licensed on YouTube. The double deal represents a change of direction for the sometimes fractious ties between YouTube and the media industry over copyright issues and licensing terms. Warner Music Group in December ordered YouTube to pull down all music videos on the site featuring Warner artists, after contract negotiations between the two sides broke down.

YouTube is still in dispute with PRS for music, representing composers and songwriters in the UK, over licensing terms and has blocked premium music videos in the UK.

Eric Schmidt, Google CEO, welcomed the deal. He said: "Technology has allowed fans to discover music in endless ways while creating new business opportunities for artists and labels alike."

YouTube, the world's most popular online video site, has been under pressure to create more revenue and has introduced a range of advertising features. YouTube has also introduced technology to help media companies identify their music, videos or TV programs uploaded by the public so that they can choose to have the content taken down or place adverts on it.

Music companies are paid a share of the advertising revenue associated with their content on YouTube as well as a small sum for every time the video is viewed.

The deal comes as other companies try out new ways to make money from online music. The four major music companies have done a deal with MySpace, the social networking site owned by News Corp, parent company of The Times, to create music streaming service MySpace Music from which ad revenue is shared.

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