RealTime IT News

Report: AOL Close to Video Deal

America Online is close to wrapping up a deal to gain exclusive access to Sony BMG's online music video catalog for its own online video-on-demand service, according to a report in the New York Post.

AOL is expected to pay Sony BMG, the world's second-largest record company, more than $25 million in the deal, potentially opening up a new source of revenue for the label, according to the report.

Representatives for AOL and Sony BMG declined comment.

The move comes at a time when the music industry has been digging for new revenue sources and a share of the video-on-demand market would likely translate into much needed millions for their sluggish businesses.

As sales of compact discs continue to face stiff competition from all angles. With illegal downloads and online music services like Apple's iTunes Music Store among the growing list of alternative entertainment sources, music executives are looking to hook up with big-time Internet players like AOL, Yahoo and MSN to help move their merchandise.

Although inking an exclusive deal is a departure from recent online music video deals, where labels have tended to branch out to more than one service, the move can be seen as a big deal at the relative minor expense of non-exclusive agreements between music labels and online companies.

The deal also appears to be a logical fit for AOL, as the company continues to extend its services beyond the traditional portal offerings and continues adding streams of value-added content.

Last month, AOL announced that it reached a similar deal with Warner Music Group and Universal. About 22 million users visit AOL Music each month, and advertisers are taking notice.

Universal Music, the largest music label, has deals with AOL, Yahoo and Microsoft's MSN.