Viacom aims to drive up digital revenues

02 July 2010

NEW YORK: Viacom, the media group, is planning to more closely align the online activities of MTV Networks and Warner Music, in a bid to drive up digital advertising revenues.

Under the terms of the deal, MTV will sell ads alongside Warner artists' videos on sites like YouTube, and give preferential promotional treatment to members of Warner's stable on its TV channels.

While Viacom did not disclose how the proceeds are to be divided, the new arrangements hand MTV exclusive control of the ad inventory on all of Warner's internet platforms and mobile services.

This move marks the latest effort to find a viable method of monetising music videos and similar content on the web, as demand for CDs continues to decline.

More specifically, it is hoped that distributing Warner's extensive back catalogue via YouTube and other such offerings could become a profitable way of supplementing MP3 downloads.

Warner's two largest competitors, Universal Music and Sony Music Entertainment, allied with Google and Abu Dhabi-based Media Co last year to try and achieve the same goal.

The four firms jointly constructed a service called Vevo, which aimed to provide companies that create content a greater input into how it is presented on the net.

Vevo currently has the support of the smallest of the four big music labels, EMI, which licenses its videos to this property.

While Vevo has an advertising sales team of around 40 people, Warner has opted to outsource this function to MTV, which already boasts an estimated 150 people undertaking this responsibility.

Lyor Cohen, vice chairman of Warner Music, said this meant the company could leverage the marketing and sales firepower" of MTV, the "world's most widely recognised and highly trafficked music destination."

MTV, which almost single-handedly turned music videos into an advertising medium in the 1980s, has long sought to replicate this success in the new media space.

Its various attempts to date have included two music-streaming programmes developed with Microsoft and RealNetworks respectively.

Known as Urge and Rhapsody America in turn, both were abandoned following disappointing results. 

While the amount of money at stake in the online music video battle is still unclear, even modest revenue streams are likely to welcomed by record labels given the substantial challenges they face.

Data sourced from Wall Street Journal; additional content by Warc staff