Music videos become hits all over again

Five years ago, the music video appeared to be a dying art form. MTV, the largest player of them, had cut back as it shifted its programming to reality-based dramas.

At the same time, record labels were no longer willing to foot the bill for ever-more extravagant productions at a time when their sales were being eaten away by piracy.

But in the internet era, videos are back. They have been one of the key ingredients behind the success of YouTube, the internet video site acquired by Google for $1.65bn. Last week, music videos accounted for 32 of the 100 most popular videos on its site.

They are also providing a new source of revenues for the major record labels.

In the last two weeks alone, Warner Music, Universal and Sony BMG have all signed deals with YouTube to supply videos from their artists in exchange for a small fee and a share of any associated advertising sales.

“They’re central,” Josh Bernoff, an analyst at Forrester Research, said of music videos’ importance to the internet. “They have two terrific characteristics: One, they appeal to young people. And two, they’re short.”

Music videos have been around in varying forms for decades. But the art form did not take off until MTV started in 1981 and made them a central part of youth culture and an indispensable way for record companies to promote artists such as Madonna and Britney Spears.

“It was all about the video,” one record executive said. The high point may have come with the release of Michael Jackson’s Thriller, a mini-movie whose budget exceeded $1m.

Back then, the record companies made a fateful decision by agreeing to licence their videos to MTV for free, treating them as a purely promotional expense.

But, with the emergence of the internet, they have corrected that mistake. Universal Music, the largest record company, led the way last year by forcing Yahoo, Google and others to pay a fraction of a cent for each video, as well as a share of its advertising.

The company acted after its chief executive, Doug Morris, saw his grandson watch repeated downloads of a 50 Cent video for free.

Those deals could generate upwards of $15m in revenue this year, according to people familiar with the matter, and more in the future with the expected growth of video advertising on the internet.

Rob Campanell, co-founder of Blastro Networks, which operates two youth-oriented websites, argues that the internet is the natural destination for music videos.

“A popular cable channel has a play list of 10 or so songs at anytime,” Mr Campanell said. “On the internet, there are 10,000 available whenever you want.”

Blastro was founded in 2000 on the premise that it could play videos from independent labels eager to attract a buzz around its bands.

Since then, Mr Campanell says that the supply has grown dramatically because digital technology has made it possible for small labels to produce competent videos on the cheap.

Last month, Blastro played 6m videos supported by advertising from the likes of Pfizer, HBO, Yahoo and the US Navy.

“The audience has really learned to go to the internet for music videos,” Mr Campanell said.

Watch the video and read the transcript of the FT’s interview with Google CEO Eric Schmidt