Warner Music sees material Web video rev in 2008

By Yinka Adegoke

NEW YORK (Reuters) - Warner Music Group Corp. (WMG.N: Quote, Profile, Research, Stock Buzz) Chief Executive Edgar Bronfman Jr. said on Friday his company will start seeing meaningful advertising revenue from online video deals, such as the one with wildly popular YouTube, in 2008, as it works to accelerate digital growth.

Warner Music has been among the more aggressive of music companies to court new customers on the Internet and cellphones, becoming the first music company to negotiate a deal with the controversial video sharing site YouTube, now owned by Internet search leader Google Inc. (GOOG.O: Quote, Profile, Research, Stock Buzz)

"You'll begin to be able to measure those revenues in '07," Bronfman told the Reuters Media Summit in New York, regarding revenue from online video. "They'll become more material in '08."

YouTube has been an object of envy and suspicion in the traditional media industry as it quickly rose to become the top destination for viewers to watch video clips, many of which are pirated from traditional media companies. But the company has since landed revenue sharing deals with Vivendi's (VIV.PA: Quote, Profile, Research, Stock Buzz) Universal Music Group and Sony BMG, in addition to Warner.

The music industry, ravaged by piracy of its product on peer-to-peer networks such as Napster, has struggled with falling sales of CDs as consumers now split their time on the Internet and playing video games.

Warner Music's revenue from digital music sales rose 126 percent in the last fiscal year ended September 30 to $355 million, representing about 10 percent of 2006 overall revenue, the company said on Friday.

Bronfman said that, as an industry, he expected digital sales would contribute more as a percentage of overall sales. Advertising revenue is also expected to play a role in future growth.

"We as an industry create compelling emotional experiences between consumers and artists, which theoretically should create a very robust advertising opportunity. Yet as an industry, we essentially have no advertising," he said.

In recent weeks, Universal Music Group has filed a lawsuit charging popular social network MySpace, owned by Rupert Murdoch's News Corp. NWSa.N, with promoting the pilfering of copyrighted content.

Asked whether he preferred to reach a deal with MySpace or challenge it in court over pirated copy, he said: "We've said we prefer to innovate rather than litigate.

"It is important that companies recognize the legitimacy of copyright and compensate copyright holders. It's important that MySpace and News Corp. come to that conclusion and make the deals that are available to them to make. I have every hope and expectation that will happen."

(For more coverage of the Reuters Media Summit, please see our MediaFile blog at blogs.reuters.com/mediafile)