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Making Money With Streaming Music Videos

Music videos may have put MTV on the map as a beacon for youth-oriented entertainment, but they also serve an important marketing function for record labels. And while the largest audience is still reached through television, many record labels are taking advantage of the viral marketing atmosphere of the Web to distribute some of their artists' music videos online.

Savvy labels have begun to view Flash technology as a tool to produce relatively low-cost, innovative, animated music videos. And content creators are finding opportunities to produce online music videos, with production costs absorbed by record label marketing budgets.

Roy Lee, an executive at Bender-Spink, a Los Angeles-based talent management and production company, says music labels generally pay between $25,000 and $100,000 for a Flash animated video. In comparison, Lee estimates that traditional music videos cost around $800,000 on average, with some of the more outrageous videos costing millions.

The cost advantage is undeniable, but Lee still believes that creators face significant hurdles to win new contracts, as they must prove themselves to record executives -- many of whom are just beginning to realize the creative potential of Flash animation. Some content creators have chosen to sign on with an agency, such as Bender-Spink; others have had success networking on their own.

One Infinity (www.oneinfinity.com), a digital artists collective, has independently established itself within the music industry. The collective began creating promotional works for record labels in 1999, when it produced a couple of Flash-animation "e-cards" for the hip-hop band, De La Soul. The e-card project, which Seth Fershko, president and CEO of One Infinity, describes as "ghetto Shockwave singles," didn't earn much money. But it did provide the company with a proof of concept and a gateway into one of its next projects -- a TV broadcast-quality video using Flash technology for the single "The Thin Line Between Raw and Jiggy," from the first solo effort of The Roots' Dice Raw. The animated video was first broadcast on cable station BET in October, and appeared in November on the popular animation portal Shockwave.com.

"Production values are so reduced by the medium that you don't need to be doing the same things you would do for MTV."

Los Angeles-based Fullerene Productions (www.fullerene.com) has also produced animated videos intended for dual distribution (both on TV and the Web), for artists such as Beck and Duran Duran. Jeff Ellermeyer, president of Fullerene Productions, describes animated video production as an "incidental and emerging part of his business," which primarily focuses on Web design. Nonetheless, Fullerene is in the process of finishing up two more animated videos for Sting and The Queens of the Stone Age.

While videos created for dual distribution are causing a buzz, online videos can also be a great alternative for newer bands with smaller budgets. "Production values are so reduced by the medium that you don't need to be doing the same things you would do for MTV," says Aaron Foreman, vice president of new media at MCA Records. Foreman commissioned the TV broadcast-quality video for Dice Raw, but has also commissioned a Web-only video for the song "Heat" by the underground rap group, Common.

Animated videos are currently very popular on the Web because they are well suited for low-bandwidth users. Shockwave restricts the size of its animated videos, called "Shockwave singles," to 2MB. Keeping the average 56Kbps modem user happy, allows Shockwave to reach the broadest audience possible and provide record labels with the best possible consumption data. The Shockwave single for Madonna's hit "Music" -- an animated video produced for the Web only -- received over 500,000 hits in its first 10 days. "Music" sparked a viral marketing spree, and was particularly sticky because it featured an interactive game in which the viewer had to click on and collect coins, according to Stefanie Henning, vice president of the Shockwave Network.

While MTV has positioned itself as the place to showcase music videos on television, content creators and record executives alike are thrilled by the opportunity the Web presents for widespread distribution. "We want to create value for the artist and the video promotion, so whoever can do that offers a benefit to us," says Foreman.

Content sites, on the other hand, prefer to negotiate exclusivity for the Web rights to music videos. Shockwave sweetens its bid for Web exclusivity by providing its singles with home page promotion and e-mail blasts. Shockwave is also funding a handful of new, exclusive singles to help the creators and the idea grow further, according to Henning.

For the new animated video industry to gain popularity, each new animated video needs to maintain a high level of creativity and production quality, says Fullerene's Ellermeyer. He also noted that, while Flash may be an off-the-shelf product, talent is still key.

To that end, One Infinity and Fullerene Productions are good examples of the creative forces that are driving the industry forward by producing quality digital animated videos. Bender-Spink's Lee believes that we've only seen the beginning, and that demand will definitely increase in the coming months.

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