No one considered music videos to be anything other than telegenic billboards when MTV launched its 24-hour-a-day music channel in 1981. Those were the days when labels spent lavishly on cinematic-quality productions such as Michael Jackson's 14-minute "Thriller" music video, directed by Hollywood filmmaker John Landis, which cost $1 million.
"The irony is, back in the day when the production budgets were more in the seven-figure-plus range, we weren't monetizing them at all," said Jeff Dodes, senior vice president of marketing and digital media for Zomba Label Group, whose artists include such pop acts as Jordan Sparks, Justin Timberlake and Pink. "It was a time when the media landscape wasn't as fractured as it is now."
Those days -- like MTV's dominance as the one place to watch music videos -- are a memory.
The major labels quickly recognized the business potential of the polished, short-form content, which Internet users consumed like digital candy. Music videos allowed sites to build an audience, and Universal Music was among the first to enter into licensing arrangements with America Online, Yahoo Music and Microsoft Corp.'s MSN to request payment for the videos offered free to Internet users.
YouTube's launch, in December 2005, remade the digital video landscape. The site grew quickly in the U.S. and now attracts 100 million monthly visitors, thanks to quirky homemade videos and the mini-celebrities who emerged. Universal Music's own research shows that YouTube is the leading source of music discovery for teens, who increasingly turn to their computer screens, instead of radio and television, to find new tracks.
Universal Music, the world's largest label, expects revenue from online streaming of music videos to approach $100 million this year -- up from zero in 2004. Though that amount doesn't reach the level of consumer spending on song downloads, cellphone ring tones or CD sales, executives nonetheless anticipate that the advertising revenue that flows from the music videos will increase. Revenue for the label from videos is up 80% from last year.
"It's definitely on a significant growth trajectory," said Rio Caraeff, executive vice president of Universal Music's ELaboratory, a division responsible for the label's new technology business initiatives. "As Madison Avenue and advertisers in general learn to start embracing video advertising as a viable medium, there is no content that's more popular on the Internet, more well suited, than music videos as the ultimate snack-size programming."
