Standing ovation for MVI format

Bronfman: Reviews 'outstanding,' penetration high

NEW YORK -- While Warner Music Group chairman and CEO Edgar Bronfman Jr. declined comment Tuesday on a potential last-minute takeover play for EMI Group, he did shed more light on the economics behind the company's recently launched MVI format, which the firm created to redefine artists' relationships with fans.

Linkin Park's new album "Minutes to Midnight," which bowed last month, was the first-ever release in MVI, or Music Video Interactive disc.

Speaking here at the Deutsche Bank Securities Media & Telecommunications Conference, Bronfman said the retail price of the MVI is only about $1 or so above a CD, and the profit margins are "very nearly what they are on CDs." Since the MVI does not play in cars, WMG is in the early going of packaging it with a CD.

WMG produces much of the content that goes on the MVI, including music videos, photo galleries, song lyrics and behind-the-scenes information. Additional content like interviews with the artists "doesn't cost much" to produce thanks to the use of webcams and the like, the Bronfman added.

Some of the content is available to all buyers. However, a registration opens access to additional existing and upcoming bonus material, such as artist blogs, future new tracks, concert ticketing opportunities and discounts on merchandise.

Bronfman said that early feedback shows that fan reviews of the MVI "have been outstanding" with a "very high registration rate." WMG said thousands of people have registered their Linkin Park MVI for the bonus content.

Bronfman said his hope is that the MVI will "deepen dramatically the relationship between the fan and the artist" to make a music firm do more than drop a new release from popular performers every 12-24 months.

Another datapoint pointing to consumers' appetite for bonus content in music releases is that the Linkin Park album also has been available in two versions on iTunes -- a $9.99 version and one priced at $11.99, which includes such bonus materials as videos and interviews. Bronfman said 97% of the digital albums sold in the early going were in the latter format.

"For fans, price is not the issue ... content is the issue," he said, adding that this is a sign that variable pricing would make sense in digital music sales.

Asked about a possible late bid for EMI, which recently agreed to be acquired by private-equity firm Terra Firma, Bronfman said: "we really can't talk about it." Sources and reports have said the firm is considering a counterbid or a possible deal with Terra to buy EMI's overall recorded music business or select labels.

In other WMG news Tuesday, Warner Music Corp. said its U.S. sales and distribution unit WEA Corp. has agreed to sell DVDs of shows from EW Scripps Co.'s line of lifestyle cable networks, including the Food Network and HGTV. Financial terms of the deal were not disclosed.
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