Consumers bop to rhythm of online music videos

Viewership of music videos moved from TV to the Web at such a fast pace that few saw it coming.

Yahoo yhoo, the Web's top music destination, streams 240 million music videos monthly. MTV, which defined the young music video medium but now devotes nearly all of its airtime to non-music video fare, attracted 1 million viewers in prime-time viewing in August.

"Online is the single-largest place where consumers are watching music videos," says Rio Caraeff, executive vice president of eLabs, Universal Music Group's digital division. "When we release a video, we still put it on MTV and BET, but in terms of the most impact from audience and revenue, it's online."

Videos used to be given to networks such as MTV to sell CDs. Now, labels charge for video usage. "It was clear that all of our content needed to be paid for," says Thomas Hesse, president of Sony BMG Music Entertainment's global digital business unit. "The times when we could make our content available for free so someone would buy the CD are over. We drive usage to the Internet sites, so we should be paid."

Hesse wouldn't disclose exact figures, but Caraeff says licensing of music videos to sites such as Yahoo, AOL Music and YouTube reaps $20 million yearly for Universal and is growing steadily.

YouTube has been at odds with much of the entertainment industry because some of its users digitize content on their own and put it on the site without compensating the content owner. MTV owner Viacom is suing YouTube owner Google in a copyright-infringement case.

But Universal, Sony BMG, Warner Music and EMI have agreements allowing their music videos to be shown on YouTube. In exchange, they share in ad revenue. YouTube attracts the largest video viewing — including movie trailers, amateur productions and tech podcasts — on the Web, with 44.8 million visitors in August.

With 23.4 million visitors in August, Yahoo is the most-visited music site, followed by ArtistDirect, MySpace's music channel, AOL Music and MTV's music channels, including, and CMT, according to ComScore.

This summer, Yahoo began offering an application to post many of its videos onto pages of the wildly popular social-network site Facebook. It has since expanded this concept, via a test site, to post videos from Universal and Sony BMG onto personal websites or blogs.

Once word gets out and music fans realize that they can take the latest videos by, say, Justin Timberlake or Fergie, and post them to their blog, Yahoo Music general manager Ian Rogers believes the viewing of videos online will grow "from 10 to 100 times over the next one to two years," he says. "There's no question people want to do this."

He says Yahoo fought for several years to shut down sites that offered ways to hack into Yahoo Music and post videos. "We know the demand is there."

Demand and convenience caused music fans to migrate to the Web to watch the majority of their music videos, Rogers says.

"If you want to see a music video, why would you turn on MTV and hope to see the video you want, when you could go online and get it immediately?" he says. "The shift happened as music videos became more available online and less available on TV. This was a natural evolution."

MTV, the channel that defined music videos, isn't sitting out the digital revolution. On-air, the TV channel urges viewers to go to to see the latest videos and video premieres. "We realize that we live in an on-demand culture," MTV Executive Vice President Courtney Holt says.

Holt says on-demand viewing is great, but it's TV exposure that still makes the difference for emerging bands. He cites groups such as OK Go and Paramore, which had major online exposure but took off after MTV started playing their videos.

MTV recently bought a 50% interest in digital music service Rhapsody to expand its online music reach. Both Rhapsody and show music videos on their sites, while some sites — most notably Apple's iTunes — offer them for sale. Caraeff says streaming music videos represent the bulk of the action for music videos and that downloads represent a tiny fraction of sales. Hesse says his best-selling download of all time — a recent Timberlake song — clocked in at just 58,000 sales for $1.99 apiece.

"This is a good, growing business," he says. "As more people get video iPods, we'll start to see more people buying music videos."

Label executives are also looking for streams and downloads to mobile phones — currently a niche business — to explode in the coming years as more wireless customers get multimedia phones.

"The average usage time on a phone for entertainment programming is no more than two or three minutes," Caraeff says. "The short-form nature of music videos makes it a perfect fit."