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LOS ANGELES (Reuters) - Its characters may feel like a bunch of unloved high-school misfits, but the quirky musical TV comedy "Glee" is putting smiles on the faces of music industry executives searching for new revenue in an era of plunging album sales.
Two months into the 2009-10 TV season, "Glee" is drawing a weekly audience of 8.6 million viewers to the Fox television network. Fans have bought more than two million tunes sung by the show's cast on iTunes, and soundtracks are being compiled and sold in traditional stores.
Revenues are being split among Fox and the record company, and artists and music publishers are being paid licensing fees for songs "Glee" uses in musical numbers in each episode.
"Record labels have been desperate for new revenue," said Steve Knopper, contributing editor for Rolling Stone magazine. "They are trying to figure out any way to make money and one pretty reliable way is to sync up with a hot TV show."
That's exactly what Sony Music Entertainment's Columbia Records did last January when the Fox network shopped a pilot of "Glee" to record labels months before it aired.
Columbia won the deal to partner with News Corp's Fox on the release of all "Glee" music on Apple Corp's iTunes, as well as on traditional soundtrack albums.
Columbia also has broad "360" deals -- all-encompassing agreements -- with the previously unknown actors playing the "Glee" kids. The deals cover first rights to recording contracts, and a percentage of earnings from concert revenue, endorsements, merchandising and ringtones.
The first "Glee" soundtrack was released last week, a second is due out on December 8, and discussions are underway for a national cast tour and several more albums.
Neither Fox nor Columbia would give disclose financial details. But Glen Brunman, soundtrack consultant at Columbia, said: "We are hopefully going to make history together."
"We felt (in January) that it wasn't just a TV show but that it had the potential to be a pop culture icon," Brunman told Reuters. "It is unique and it is an approach with a TV show that hasn't existed in the past."
Digital downloads are released each week of "Glee" cover versions before the show is broadcast, allowing Columbia to capitalize on the appetite of fans to buy immediately.
In a sign of just how popular some of the tunes have become, the "Glee" cast's rendition of the 1981 Journey song "Don't Stop Believin'" was certified gold last week after more than 500,000 digital sales.
Rihanna's "Take a Bow" single saw a 189 pct sales increase after it was covered on "Glee". Now Madonna, eager to get in on the act, has offered her catalog for an upcoming episode.
Knopper said industry economics are such that the revenue from TV partnerships "is pretty much a drop in the bucket" in the multi-billion dollar record business.
Still, the music industry has fallen on hard times. Album sales are off 40 percent over the last 10 years, and in 2009 U.S. revenue is down 13 percent at $287.6 million.
Leonard Richardson, vice president of music at the CW network, said that in an era of piracy and changing consumer habits, the music industry is now fighting for every dollar.
"TV has basically become the new radio. It is about exposure and making an impression," Richardson said.
The CW, whose programs are aimed mostly at 18-34 year-old females, also cuts deals with record labels to promote music in tune with its shows' audience.
"Record labels are very aggressive these days in letting us know what they have coming," said Richardson. The CW gets a reduced rate on music licensing in return for showing ads on screen for songs featured in dramas like "Gossip Girl".
"Our demographic is watching TV. They are on their computers and they are on their cellphones. So with the ad cards, they can go immediately to CWTV.com and purchase the song right then and there," said Richardson.
The music deals build on a trail blazed by RCA -- also part of Sony Music Entertainment -- with Fox TV show "American Idol", which has produced multi-platinum recording stars like Kelly Clarkson and Carrie Underwood.
"That (deal) has been incredibly lucrative for them and in a barren time has provided them with some of the most reliable superstars," said Knopper. "If Columbia can tap into 'Glee' the way RCA did with 'American Idol', they are going to see a pretty big bright spot".
Editing by Bob Tourtellotte