MTV, Warner Music in Deal

Warner Music Group Corp., the nation’s third-largest music company, is betting that mobile phone users want their MTV.

MTV Networks and Warner Music Group announced a licensing agreement Monday that would allow the cable television giant to include Warner’s music video catalog in programming it sells over mobile phone networks worldwide.

MTV already offers wireless users downloadable video content based on the network’s original shows, but the Warner deal is the first time that MTV has gotten clearance to incorporate music videos into wireless offerings.

“We’re focused on being on every screen our audiences care about, and wireless is in the forefront,” said Judy McGrath, MTV Networks chief executive.

Selling music and videos to mobile phone users is also a priority for Warner Music Group. The company has signed agreements with Verizon Wireless and other mobile carriers to sell the company’s music videos directly to mobile phone customers.

In cutting a deal with MTV, Warner is licensing its content to a direct competitor in the wireless arena. But Warner Chief Executive Edgar Bronfman Jr. predicted that the MTV brand would lure more consumers.

“MTV is in a unique position to add content and attract viewers,” Bronfman said. “More music to more people in more places is a very good opportunity for our audience and our company.”

Financial terms of the multiyear deal were not revealed. An executive at another music company said MTV had recently approached them about a similar deal and offered about $100,000 for a one-year U.S. license of its entire catalog.

MTV representatives say they hope to strike similar deals with other music companies. But executives at some labels are skeptical.

“Why do we want to give MTV mobile rights when we can deal directly with the mobile companies?” said an executive at another music company, who requested anonymity because he does business with the cable network. “The only reason to do a deal with MTV is if you don’t have the manpower or ability to sell mobile videos yourself.”

But others say the MTV agreement is wise. Several major music companies struck deals this year with America Online Inc. and Yahoo Inc. that required the Internet giants to pay to broadcast music videos online. Those contracts and Monday’s Warner agreement are widely seen as an attempt to remedy a costly decision made in the early 1980s, when music companies agreed to provide videos to a fledgling MTV and received nothing in return.

“It is going to take a while for mobile music videos to become big business, so it is safer and more cost-effective to find a partner,” said Mike McGuire, a researcher with Gartner Media Industries. “MTV has established an infrastructure for mobile delivery, and it’s a brand every teenager knows.”

How quickly teenagers and other consumers will begin downloading mobile music videos remains to be seen. Julie Ask, a wireless specialist at Jupiter Research, said fewer than 1% of U.S. mobile phone subscribers had ever watched a mobile video. But Ask estimates that there are more than 17 million phones capable of downloading videos worldwide and that in five years 5% of the nation’s 220 million phone subscribers will have watched a mobile program.

Those statistics are heartening to music executives, but artist representatives worry that musicians won’t benefit from the new markets.

“The record companies have a bad history of sharing music video revenues with artists,” said Gary Stiffelman, a music industry attorney whose clients have included the band Korn and rapper Eminem.

“Artists are going to have to fight for these profits.”

Bronfman said artists would share in the spoils, but he declined to provide specifics.

MTV Networks is owned by New York-based Viacom Inc., which will split into two publicly traded companies next year.

Viacom shares fell 12 cents to $33.24. Warner Music Group shares dropped 6 cents to $18.05.