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Vevo- Another Failed Venture or A Virtual Video Goldmine?


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There has been a lot of press lately surrounding the new Vevo site, due to launch today, but what is it all about exactly? Here we will give you everything you need to know about this new service. Vevo is a project between Google, Universal Music Group, Sony Music and Abu Dhabi Media Company for a “premium content” music video streaming site in the US and Canada. 

Vevo’s intention is for consumers to access official music videos, interviews, backstage content as well as user-generated content that uses major label audio…other user-generated content however is not allowed to raise the standard for advertisers. On top of music videos and promising ‘extra content’, playlists will be available as well as music lyrics. It’s also being reported that the video quality will be as much as three times as what is typically available online. Other options in the future range from an online music store for downloads and artist-created merchandise to a subscription service offering full-length concerts for a monthly fee.

As for partners, there has been many announced in the past couple of weeks. Last Thursday came the announcement of a deal with CBS Radio and Last.fm. The deal mainly includes behind-the-scenes video content and artist video profiles to boost the “premium content”, however none of Last.fm’s or CBS Radio’s audio content will be included since videos are easier to monetize (having visuals means a better chance of the user paying attention to the window and seeing the advertisements). PaidContent reported the site is launching with about 20 sponsors including AT&T, McDonalds and MasterCard, and there are rumors of Ticketmaster discussing ways to offer tickets and merchandise (http://paidcontent.org/article/419-vevo-brings-on-board-emi-videos-no-equity-launch-tomorrow/).

Also, three of the four majors on board, with EMI just joining yesterday. Most noted with the deal yesterday that EMI was not joining Vevo as an equity partner, but rather expecting an advance against revenue upfront. Wired reported, “rather than a snub, according to one insider, this represents part of EMI’s distributor-agnostic strategy when it comes to licensing its music and videos” and it is also worth noting EMI arranged another deal with video streaming site Hulu just last month, also just for licensing (http://www.wired.com/epicenter/2009/12/emi-licenses-content-to-vevo-in-eleventh-hour-deal/). 

For those unfamiliar, Hulu is a video streaming site in the US that focuses on television clips and is a joint venture between networks Fox, ABC and NBC. It’s presently 2nd to YouTube in terms of traffic and streaming, but it has proven itself strongly in the past 19 months of operation; back in May NBC CEO Jeff Zucker said Hulu was already cash-flow positive and would be profitable “very soon” (http://www.billboard.biz/bbbiz/search/article_display.jsp?vnu_content_id=1004044610). 

Warner Music Group is the only label to not have been signed up as of yet, although negotiations are apparently underway. Billboard also reported there are “a number of independent labels, artists and digital aggregators are on board with Vevo as well” but there hasn’t been any press releases stating such (http://www.billboard.biz/bbbiz/content_display/industry/e3ibbd28f12604b5531a065472e3142be93).

Doug Morris, CEO of UMG said in an interview with CNET last week, “What we’re really doing is taking back control of everything…this is really like MTV on steroids. We’re starting with that kind of audience. But now we’re in control of it. We don’t have to go through a middleman anymore.” (http://news.cnet.com/8301-31001_3-10410217-261.html?part=rss&tag=feed&subj=News-DigitalMedia). 

The interesting (and promising) aspect is Google’s part in Vevo. Music videos on Vevo will be kept on YouTube’s servers and will be searchable from the YouTube site, but in order to watch the clip users will be redirected to Vevo (Universal’s “non-premium content” will still be available on YouTube however).  However, Vevo is not exactly a joint venture; it’s a wholly owned subsidiary of Universal Music Group. They provide the content and staff, YouTube provides the technology as well as a start-up sales force.

All Things Digital made a fair point about its success, “even if Google’s technical expertise makes it easier for UMG to get a decent site up and running, neither company has a real track record when it comes to getting big brands to pony up for video ads, which is supposedly the whole point of the site” (http://mediamemo.allthingsd.com/20090410/can-universal-music-run-its-own-hulu-its-going-to-try/). However, in another article though they concede, “in theory, there could be a lot of dollars to go around. When Vevo opens its doors later this year, it is expected to generate some 450 million video streams a month. In theory, the fact that a single company controls the way the videos are displayed and distributed will make those streams more attractive to advertisers (http://mediamemo.allthingsd.com/20090923/vevo-universal-musics-hulu-for-video-gets-a-sales-boss/?mod=ATD_sphere).

The other main reason for Vevo of course is to charge premium rates in advertising in exchange for premium content.  Vevo President and CEO Rio Caraeff (Universal’s veteran digital guy) in the EMI deal press release said that the site is about “immediately providing advertisers with the scalability they desire and access to the most sought after demographic on the Web”. Caraeff has also been reported to say, “typical ad rates for Web video run somewhere between $3 and $8 for every thousand views. Vevo’s mission is to attract rates of $25 to $40” (http://news.cnet.com/8301-31001_3-10410217-261.html?part=rss&tag=feed&subj=News-DigitalMedia).

While that is quite a strong mission, the launch of Vevo comes at a time of revolution in label strategy on digital licensing, as its importance is mounting in terms of revenues for the industry. Steve McClellan from Adweek reported the shift of strategy “should result in a boost of online music-video ad spending in the next three years of between $100 million to $500 million across the music business” (http://www.billboard.biz/bbbiz/search/article_display.jsp?vnu_content_id=1004021561). 

Video streaming is more important than ever, a recent survey of 1,000 15-24 year olds found that 38% use YouTube as the primary website to check out new artists, in comparison to 15% for an artist’s MySpace or web page (http://www.marrakeshrecords.com/Youth%20and%20Music%20Survey%202009%20%28c%29%20Marrakesh%20Records%20Ltd.pdf). Hulu was the first “premium” content video streaming site to show labels that higher advertising rates were possible. Now Vevo plan to take it from there and focus on the music industry and with Universal being the most popular on YouTube with nearly 4 billion views, they certainly have the upper hand in negotiations. If Vevo are able to get a large share of independent labels, along with Warner on board, it could prove to be an extremely strong force, as well as a profitable one.

However it is necessary to remind it is only for the US and Canada. Are there plans for expansion? Licensing rates are still a matter of contention in certain countries and especially with YouTube still having difficulty with licensing videos in the UK and Germany there doesn’t look to be a positive outlook yet for expansion.



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