Warner Music Group has reportedly already signed on to the service, while Universal Music Group, Sony Music Entertainment and independent label digital rights agency Merlin are now in talks.
The new service, internally referred to as Remix, would include Spotify-like on-demand streaming and would incorporate elements from YouTube, such as video clips, the people said.
YouTube has always been seen as one of the biggest obstacles for musical artists and labels, seeing as it's a go-to site for streaming free music. Not only has YouTube been trying to negotiate new deals with Universal and Sony for more than a year, but it also has a negotiation with Vevo looming early next year.
What do you think of the idea of a YouTube music streaming service?
Vevo is majority owned by Universal and Sony. Namely, they have been disappointed in how YouTube Red is not music-centric enough and instead focussed on producing original video content.