Record Companies Taking a Spin at the Video Business

With retail sales of movie videocassettes growing and siphoning shelf space from albums at record and video store chains, some record labels have begun moving beyond their primary business of tapes and compact discs and are expanding their video programming.

In recent weeks, Atlantic Records and Polygram Records have set up independent video operations in the United States to produce theatrical-length music videos as well as non-music programs for children and other audiences.

Earlier this month, Stuart Hersch--former chief operating officer of King World Productions, a leading syndicator of television shows such as “Jeopardy” and “The Oprah Winfrey Show”--was made president of Atlantic’s video unit, A Vision Entertainment. Polygram has named Joe Shults president of Polygram Music Video, which plans to reorganize under a new name and expand into making children’s and special-interest videos.

Meanwhile, other record companies ranging from Warner Bros. to CBS say they are releasing more videos for sale than ever before, prompting retailers such as Tower Records and Music Plus to devote more shelf space to the product. Sacramento-based Tower, which used to display music videos among other tapes, now has an entire section of its stores devoted to them, said President Russ Solomon.

Since the advent of music videos in the late 1970s, many record companies have set up video production units. But the efforts have been mostly aimed at making short promotional film clips for programs such as cable’s 24-hour music channel, MTV. Sales and rentals of music videos were usually handled through the same channels as movies--by the studios themselves or by independent distributors.

Singer Michael Jackson’s 14-minute video from his “Thriller” album, for example, was considered a breakthrough when it was released in 1983 because of its high $1-million cost and because it was directed by well-known Hollywood filmmaker John Landis. But it was only shown on MTV and other music shows. A longer version called “The Making of Michael Jackson’s Thiller” sold more than 500,000 copies. But most of the money went not to Jackson’s record label but to Vestron Inc., the Stamford, Conn.-based distributor that brought the rights to the video.

Today, however, most record companies have taken greater control. What’s more, they have revamped the music video itself--adding interviews, concert footage and a history of the musicians--and transformed it from a promotional tool into a profit center.

“It’s become a very profitable business,” said Debbie Newman, vice president of programming and marketing for CBS Music Video. With the proliferation of audio and video formats, music fans have become avid collectors of music in all its forms. “They want to own everything made by the artist,” Newman said. The interest is not only in pop videos, but also operas, jazz and special interest videos.

Historically, video sales were dominated by exercise tapes such as “Jane Fonda’s New Workout” or hit movies such as “Raiders of the Lost Ark,” which has spent 166 weeks on Billboard’s top 40 video chart.

But today, four music videos are among the nation’s top 20 best-selling videocassettes, Billboard says. They include a Barry Manilow concert film from Arista Records, a Rolling Stones video and the nation’s best-selling music video: “New Kids on the Block: Hangin’ Tough Live,” which has sold nearly 1.3 million copies since it was released by CBS Music Video Enterprises last year.

Warner Reprise Home Video, a unit of Warner Bros. Records, said it will release 20 videos this year, compared to only six in 1989. The releases, said Yvonne Troxclair, coordinator of Warner’s video division, include a 90-minute video from singer Laurie Anderson and an unusual project called “Industrial Symphony No. 1” that is being developed by maverick filmmaker David Lynch, who is one of the executive producers of the ABC television drama “Twin Peaks.”

Atlantic’s A Vision unit said that, for the first time this summer, the record company will promote and release three $14.98 music videos simultaneously with new albums from Winger, Ratt and Debbie Gibson.

Polygram, which has sold more than 400,000 copies of Def Leppard’s video “Hystoria,” also plans more video releases.

Although it can cost as much as $100,000 for an elaborate short video, “record companies can make a lot of profit” from music videos packaged in longer form, said Antony Payne, president of A&R; Group Inc., a production company with offices in Los Angeles. That’s because “the cost of the videos have already been paid for and the interviews with the group can be done for next to nothing,” he said.

Full-length music videos still are mostly limited to superstars. But as videos become more lucrative for the labels, some video producers are starting to ask for a piece of the future action when they make videos even for fledgling artists, said Karolyn Ali, a vice president at Renge Films, which has produced more than 100 videos, including clips for Stevie Wonder and Dionne Warwick.

Besides money, another motivation for the record industry’s new interest in video sales is that MTV and other cable networks such as Video Hits One (VH-1) are devoting less time to airing promotional music videos, said Wendy Griffiths, manager of video promotion at Warner Bros. Records.

MTV this year switched from a nonstop rock ‘n’ roll network to a segmented broadcast that features a game show, a dance show and a pop-culture news program, for example.

Yet the cable music shows have left a whole generation of viewers accustomed to enjoying the visual aspect of artists’ musical performances. What’s more, consumer electronics companies in recent years have begun to focus on integrating home video and audio components in the wake of stereo TV broadcasts and better performing video and audio products such as big-screen television sets, laser discs and compact discs.

“A lot of record companies are starting to understand that there’s a whole generation of people out there who grew up on MTV and are visually oriented,” said Emiel N. Petrone, a former Polygram Records executive who is a senior vice president at American Interactive Media of Los Angeles, which is developing an audio-visual device based on the compact disc. “I don’t think, in the future, record companies will be limited just to marketing rock ‘n’ roll.”

“We look at music videos as just another configuration: CD, cassette, home video,” said Hersch. “Research is showing that as the video marketplace matures, VCR owners tend to rent less and buy more.” Therefore, he added, because “music lends itself to being played over and over again, we want to more fully utilize the artists and present them in other ways than just on albums and compact discs.”

Yet record companies may face tough going as they expand into the so-called sell-through market, where movie studios and other programmers compete to sell videos directly to consumers rather than to video stores for daily rental to consumers.

The market has grown in recent years, but experts say only certain kinds of video titles--mostly movies with big box-office sales and strong youth appeal--are able to generate heavy sales.

“Consumers are not used to buying music videos,” said Robert C. Alexander, president of Alexander & Associates, a New York consulting firm which estimates that music videos make up less than 1% of all retail video sales. Currently, he said, the largest-selling non-theatrical video releases are exercise videos, followed by special interest and instructional videos.

But Alexander, noting that record companies haven’t strongly marketed music videos in the past, observed that although he does not think music videos will challenge sales of compact discs in the near future, they “could grow to be an important market.”