updated 12/10/2007 10:21:29 AM ET 2007-12-10T15:21:29

Social networking Web site operator imeem Inc. has signed a licensing deal with Universal Music Group to offer free streaming of music and videos by the record company's artists in exchange for a share of online advertising revenues, the companies said Sunday.

Financial terms of the deal were not disclosed.

The pact is the latest example of record labels betting on online advertising as a source of revenue amid sinking CD sales.

The Web operator already has similar licensing deals with the other three major record labels. Collectively, the four biggest recording companies account for more than 85 percent of music sales so far this year.

Under the agreement, imeem can carry full-length music and videos by Universal Music's acts, which include Snow Patrol, Kanye West and Amy Winehouse.

San Francisco-based imeem launched in 2004, offering instant messaging and file-sharing software. It has since morphed into a social networking Web site that also streams free audio and video next to advertisements.

Like Google Inc.'s YouTube and similar sites, imeem allows computer users to post their own videos. The imeem site claims to have more than 19 million active users.

Imeem said it counts Apple Inc., Microsoft Corp., Nike Inc., and AT&T Inc. among the companies advertising on its Web site.

Getting access to music from the four major record labels should help imeem drive more traffic, even taking some from established online music sites such as Apple's iTunes Store, said James McQuivey, an analyst with Forrester Research.

ITunes allows users to listen only to samples of songs before they purchase them for download. Imeem allows full playback of songs and videos; it hosts links to iTunes for visitors interested in buying tracks.

"It creates a new kind of music distribution model," McQuivey said. "As a result, it takes away the need that you might otherwise have to go get your music from iTunes or from a CD, because your music is now available for you on imeem."

SpiralFrog, another Web site offering ad-supported music, lets users download tracks and videos for free. So far, the site does not offer content from all the major labels.

Imeem could see some competition from News Corp.'s MySpace, which has been beefing up its online music profile, McQuivey said.

The popular social networking site recently launched a music program that provides exclusive audio and video content from recording artists, among other music initiatives.

Universal Music Group is a unit of Paris-based media and communications company Vivendi SA.

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