By NICK WINGFIELD and ETHAN SMITH, Staff Reporters, The Wall Street Journal

(July 18) - Apple helped ignite the digital music craze. The next possibility: video.

The Cupertino, Calif., computer and electronics company has recently held discussions with major recording companies, seeking to license music videos to sell through Apple Computer Inc.`s iTunes Music Store, according to several people in the media industry briefed on the discussions. The negotiations are a possible prelude to a version of Apple`s hit iPod that would play video, a widely expected gadget that Apple has told some entertainment-industry executives that it could announce by September. Any foray into video would represent a major gamble by Apple that it could translate its smash success in digital music into a broader entertainment franchise. If successful, such efforts could help create a significant new source of income for media companies that are stepping up efforts to distribute video content on the Internet, in part to counteract the growing volumes of pirated movies, television shows and other programs being traded online.

So far, commercial movie-download services haven`t widely caught on, nor have devices from Creative Technology Ltd., Samsung Electronics Co. and others that have hard disk drives onto which users can transfer video files from their PCs. Apple Chief Executive Steve Jobs, in fact, has derided the consumer appeal of watching feature-length movies on portable devices with small screens.

Yet Mr. Jobs has made a practice of criticizing product categories that Apple later adopts; he dismissed music players that use a form of storage hardware called flash memory rather than hard drives, for example, until Apple began offering the iPod Shuffle based on the technology. What`s more, some analysts consider it telling that Mr. Jobs hasn`t spoken out against all forms of video on portable devices, such as television programs, clips from personal camcorders and other short-form content.

Music videos, too, make sense because of the iPod`s ready-made audience of music lovers. Apple in recent months has started bundling a limited number of music videos when iTunes customers purchase an entire album on the site. Users who pay $9.99 for the latest album by the White Stripes, for example, get a video for a song by the rock duo called Blue Orchid that can be downloaded to a computer.

Building on that effort, Apple has approached the four major music companies, Warner Music Group Corp., EMI Group PLC, Vivendi Universal SA`s Universal Music Group and Sony BMG, a joint venture between Sony Corp. and Bertelsmann AG, to license music videos for sale through iTunes, according to people in the media industry. The videos, which could go on sale as early as September, would likely be sold for $1.99 each, with the possibility of a discount if consumers buy a music video and a song at the same time, these people say.

For music companies, a deal with Apple would represent another attempt to generate income for the music videos they sometimes spend hundreds of thousands of dollars creating. Music companies are still smarting from their two-decade-old strategic blunder of letting cable network MTV air video content for next to nothing, a decision that gave them little participation in the creation of what has become a hugely successful business for Viacom Inc.

Global music companies recently reached arrangements to charge online services like Yahoo Inc. and Time Warner Inc.`s AOL to broadcast music videos over the Internet.

Apple has also approached some media companies with television-production arms about licensing shows, one media executive said, though securing rights to sell television shows over the Internet is highly complex and is likely to take longer than other forms of video.

If Apple succeeds in creating a video-distribution service, analysts expect the company to follow up with a portable hardware device capable of playing the content, just as it has used iTunes Music Store -- which makes little money as a separate business -- to help promote sales of the highly profitable iPods. The three-year-old iPod line has led a renaissance at Apple, accounting for about a third, or $1.1 billion, of the company`s $3.52 billion in total revenue last quarter.

Speculation about Apple`s product moves is rampant, and frequently wide of the mark. Yet many analysts consider a video iPod a virtual certainty, in part because of Apple`s strength in video software, including the Quicktime movie format and Macintosh video-editing software such as Final Cut Pro and iMovie.

In one potential clue about the company`s plans, Apple recently licensed a chip from a subsidiary of Broadcom Corp. that could be used to display video on portable devices, though it can also be used to power more sophisticated graphics, a person familiar with the matter said.

``I believe it`s inevitable,`` Richard Doherty, an analyst with Envisioneering Group, a research and consulting firm in Seaford, N.Y., says of a video iPod.

By adding video to iPods, Apple could help maintain the popularity of the devices, which have nabbed more than 90% of the market for hard-disk based music players. One threat may come from cellular phones as handset makers add increasingly sophisticated entertainment functions to the devices, including the ability to download music and video. Verizon Communications Inc., for instance, recently added a limited number of music clips to its mobile video service, which users access for a fee; other carriers are expected to follow soon.

Mr. Jobs has also fielded questions about the prospect of video iPods as head of Pixar Animation Studios, the Emeryville, Calif., movie studio responsible for ``Finding Nemo`` and ``The Incredibles.`` In a conference call in May with Pixar investors and analysts, Mr. Jobs declined to say whether Pixar plans to make its library of movies available for portable video players, though he said Pixar had discussed the subject with Walt Disney Co., its movie-distribution partner.

``So far there really hasn`t been a successful portable video device other than those that play industry standard DVDs, and that we participate in just because we sell DVDs,`` Mr. Jobs said in the call. ``So who knows what`s down the road?``