-By Steve McClellan

Vevo, the ad-supported music video channel launching in December, has signed AT&T as it first advertiser, the partners said today.

A rep for the channel said the partners weren't disclosing terms or the types of ads that would run, but said that each client (more deals are expected to be announced soon) will have a "tailored campaign that fits their brand and will best target their audience."

The deal represents what the music business hopes will become a major new revenue stream -- advertising and branded content -- enabling it to rely less on sales of physical music formats.

Partners in the Vevo venture include Universal Music Group, Sony Music Entertainment and financial investor Abu Dhabi Media Co. YouTube will power the channel.

Separately, Warner Music Group, which is not part of Vevo, recently struck a deal with advertising rep Outrigger to sell ads across every digital platform where WMG videos are distributed. Warner recently began to recapture rights from third-party distributors to sell ads on its videos. Instead, it will retain those rights, giving a percentage to distributors who run the videos.

Commenting on the AT&T deal with Vevo, Chris Schembri, vp, media services for AT&T, said, "When you can reach people while they're pursuing one of their passions and help them learn, do or share something important to them, you can more strongly demonstrate how your brand is valuable and relevant to their lives."

Rio Caraeff, president and CEO of Vevo, said, "AT&T is known for their innovative marketing and advertising programs, so their decision to join Vevo at such an early stage reflects not only their belief in our platform and content, but in our ability to deliver against AT&T's unique brand vision."
 
The efforts by music companies to sell ads, sources said, should result in a boost of online music video ad spending in the next three years of between $100 million to $500 million. Some say the figure may be even higher. By comparison, eMarketer predicts that total online video sales will grow from just over $1 billion this year to $3.1 billion in 2012.

PricewaterhouseCoopers expects consumer spending on CDs and other physical music formats to fall by almost half to $11.3 billion between 2008 and 2013. At the same time, digital music sales are expected to nearly double to almost $15 billion, leaving a shortfall of between $3-4 billion.

Nielsen Business Media