Video is the fastest growing segment on the Internet and a quick glance at the top ranked videos on YouTube will reveal music videos occupying almost all of the top slots. Lady Gaga, for example, recently reached one billion views. But does YouTube track and monetizes Lady Gaga? Not really, for it is mired in a copyright conundrum over its content. The answer is that VEVO.com does. And, following a recent agreement, Google, who owns YouTube, is now moving all full-length professional music videos to the VEVO platform.
VEVO.com was created by Universal Music Group, Sony Music Entertainment, and the Abu-Dhabi Media Company. It was meant to satisfy the demand for access to music video programming of popular artists. It features the most extensive catalog of high quality music video on the web. It is available thanks to exclusive distribution and advertising deals with The Orchard and many other independents, as well as all the major labels except Warner. The service uses YouTube’s technology and is available through VEVO.com, the VEVO-branded embedded player, and VEVO on YouTube. Official high quality music videos appear on YouTube through a customized VEVO channel. Any other music videos on YouTube – streaming outside the VEVO channel – are likely unofficial violations of copyright law and subject to immediate removal. About four-fifths of VEVO’s business comes from a syndication deal with YouTube, which is the largest video website in the world.
The Business Model
Delivering high quality content to a targetable audience, and creating a scarcity of advertising real estate, is the basis of the VEVO business model. So far, labels have licensed music to multiple online services for a share of the advertising revenue sold with those videos. Before VEVO, the competition between all services for the same advertisers drove ad rates down even while views were on the rise. VEVO is hoping to push rates up and create a single point of negotiation for advertisers who wish to buy ad space on music videos. For Videos viewed on YouTube’s VEVO channels, the advertising profit would split between the too.
VEVO receives over 500 million views a month with almost 60 million unique users in the United States and Canada and 1.4 billion views per month worldwide, according to Comscore (as reported by Digital Music News, Oct. 13, 2010). During VEVO’s launch in December 2009, Rio Caraeff, the company’s CEO, stated that VEVO’s objective was to become one of the top twenty sites in the world, driving over 500 million streams per month. The goal was quickly realized, and the site is already the third largest source of videos on the web.
VEVO’s platform allows the user to create personal music video playlists with a selection of over 50,000 videos and 8,000 artists, through the syndication deal with YouTube. The goal is to extract value and meaningful revenue for the rightful owner, while reaching a large audience. VEVO is offering advertisers access to the connection between the fan and the artist- -and especially fans in the sought after, younger demographics. Caraeff claims that the total revenue generated to date is in the tens of millions, but with more than half of the money going straight to the labels and artists, VEVO may not yet be profitable.
Originally, artists used to get one cent per stream on YouTube views. Certain artists and licensors, however, have been able to increase these numbers because the lifespan of a “hit” is longer on the Internet than on TV, allowing revenue to add up over time. Since the content is consistently professional, it draws advertisers and companies to pay a $25-30 cost per thousand views (CPM) versus the $5 marketers used to pay for placement next to regular YouTube content. Most videos are still on YouTube, but now they appear through the VEVO customized channel in high quality. Overall, VEVO reaches more people and runs fewer ads while splitting the revenues with YouTube.
With such aspirations, it only makes sense that VEVO would expand the availability of its content and platform to other mediums. A new mobile app was launched this past August, and it has already been downloaded over 3 million times to iPods, iPhones, iPads and Android devices.
Converging to a TV Near You
Furthermore, VEVO finalized a partnership with Google TV to expand into the realm of home entertainment systems. This means that VEVO’s content is available through any Google TV device that connects to an existing television, via on-demand or auto-play. Google TV combines a television’s screen and sound with the intelligence and power of the Internet in a single entertainment experience. Android devices and iPhones can even be used as remote controls. There used to be a time when there were only a few networks, but today, viewers have limitless options between TV channels and web content. This partnership is not surprising, considering VEVO’s close relationship with YouTube and its owner, Google.
In addition to VEVO, Google TV comes preprogrammed with many apps such as Twitter, Chrome browser, Netflix, Amazon Video on Demand, NBA real time scores, YouTube, Pandora and Napster. It displays CNBC, HBO, CNN, USA Today, but not Hulu, ABC, CBS and NBC. These networks are reluctant to join and might be making the mistake the record labels made a decade ago. All of the Internet channels and apps are customized specifically for the television.
VEVO’s app has a simple, elegant design, complete with a list of channels and their descriptions. It has an enhanced user interface with a search engine to access all of VEVO’s licensed content, as well as information regarding music channels and new artist projects. To expound upon VEVO’s programming, the channels include: VEVO Top 10, music charts, VEVO 24, and the most popular – Music Videos on Demand. VEVO acquired global rights from its label partners, and it is directly working with artists to create original programming and live events.
Shades of MTV
Sound familiar? The comparison to MTV is inevitable. MTV has had a great history of offering music videos and shows about music, although recently, reality shows have seemingly taken over. Google TV aims to reclaim the music video experience with VEVO’s help. Consequently, MTV and VEVO are competing to be the top online destination for music. The most recent statistics show that MTV.com is in the lead.
What separates MTV from VEVO? Warner Music Group’s videos and ads appear exclusively on MTV.com. However, UMG’s licensing deal with MTV.com has expired, so MTV has to syndicate VEVO if they wish to access UMG’s catalog. Likewise, VEVO has to have a syndication deal with MTV if they wish to access WMG’s catalog. Syndication would allow VEVO to sell ads on MTV’s properties and to target MTV viewers. MTV is reluctant to grant VEVO such valuable access, and as a result, their negotiations have failed up to this point. Despite MTV’s deal with Warner, Google does not credit MTV for the views of Warner videos on YouTube. Google has clearly sided with VEVO, and when Google TV launched the VEVO app, VEVO gained an insurmountable advantage over MTV. Yet VEVO and MTV cannot live apart, for VEVO users cannot access Warner’s videos without MTV. CEO Rio Caraeff stated that in the long run, VEVO hopes to offer a complete music catalog on the Internet.
In contrast, while MTV provides a comprehensive experience that includes music news, interviews, live streams, music videos and more, VEVO is a video search engine. And VEVO is definitely seeking to expand their content beyond music videos. Whereas music videos used to be a means of increasing record sales, lately, videos have become a promotional means of spreading awareness, generating revenue, and interesting sponsors (still, given the current cutbacks in the industry, labels are investing less on music videos—which might threaten VEVO’s medium term viability).
Videos that Sell
Ultimately, VEVO has a strong influence over its future since it operates its own platform. Record labels have long desired an important platform with such authority in the Internet world. VEVO does have the potential for reinventing the music video and its commercial exploitation since MTV’s peak. Indeed, thirty years after MTV’s first broadcast, VEVO is hoping to revive a languishing format. “Let’s hope VEVO can salvage something that used to be amazing,” said singer Mariah Carey at the launching event of VEVO on December 2009. VEVO may be on the right track, for the Internet will soon make its way into our living-room TV.
By Itay Rahat
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