YouTube=MTV 2.0. Time to Turn That Into a Business

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.