Music labels bet Vevo.com is next MTV

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In a grainy black and white Web video, similar to footage from an in-store security camera, you can make out the muscular frame of rapper 50 Cent, smashing dozens of TV sets with a baseball bat.

None too subtle in its message, the clip is part of a advertising blitz by Vivendi's Universal Music Group and Sony Music Entertainment, two music giants hoping that their new website, Vevo.com, will finally put to rest any idea that TV is a place for top flight videos.

Launched on Tuesday, Vevo offers music from both Universal and Sony, as well as EMI Music, and contains programing from CBS radio stations and Last.fm, both owned by CBS Corp. In all about 30,000 videos are available.

The idea is to create an MTV for the digital age, a music site where all the latest and archived videos can be found. It's a business model similar to that of Hulu, the popular TV and movie site.

Vevo's debut comes as music companies are losing revenue and profits at a rapid tick due to the combined impact of falling sales of CDs, online piracy and evolving methods fans discover new music.

Moreover, MTV Networks, owned by Viacom Inc, is no longer considered a major outlet for playing music videos, and while Google Inc's YouTube has been an important music discovery tool for the record companies, it has failed to attract premium advertising dollars.

But Vevo has landed just the sort of blue-chip brands that have shied away from YouTube and its the random user-generated clips. That's largely because of the high production value of the videos, and the top flight artists they feature.

Indeed, Vevo launched with the support of nearly 20 new advertising partnerships, including names like Colgate-Palmolive Co., MasterCard Inc., McDonald's Corp., and AT&T Inc.

These advertisers will pay a near premium rate of around $20 to $45 for every 1,000-page views, Vevo Chief Executive Rio Caraeff said in an interview.

We're offering advertisers opportunities that they can't buy off the rack, said Caraeff, who has hired more than two dozen executives to sell ads.

CHANGING THEIR TUNE

Across the industry, music companies and their technology partners are increasingly banking on the idea that fans are prepared to either pay for access to a site or will tolerate targeted advertising in exchange for their favorite songs.

Owning music, either in a physical format or even as a digital file, is also no longer as important as it once was, the thinking goes.

One indication of this came last week when Apple Inc's iTunes Music Store bought Lala, a digital music service that streams songs on a variety of sites.

The move surprised many long-time Apple watchers because iTunes is easily the dominant online music retailer, controlling about 70 percent of the U.S. market.

Apple is also not known for buying technology companies, preferring instead to painstakingly develop its own software to seamlessly fit within the Apple ecosystem.

Apple's music strategy is always primarily about delivering a differentiated, high-quality music experience on its devices, said Mark Mulligan, an analyst at Forrester Research. But social music and other streaming services have shifted the momentum of digital music away from downloads.

What has changed for iTunes is similar to the thinking behind Vevo: Modern music fans expect to have access to their songs on demand.

Services like Europe-based Spotify, News Corp's MySpace Music and YouTube have done well with fans because of the ease with which they can find their favorite songs.

The challenge is making the all-you-can-hear model work. Spotify delayed its launch in the United States till next year because it is still working out agreements with music publishers.

It's like having your entire CD collection and that of all your friends with you wherever you are, said Daniel Ek, founder of Spotify. That being said, music should be about choice - there will be some who will continue to prefer ownership over access for a time yet.

(Reporting by Yinka Adegoke; Editing by Paul Thomasch, Leslie Gevirtz)

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