Vevo Aims to Help Music Companies Cash in on Video

Universal, Sony, and EMI are teaming up to offer premium music videos through Vevo, although history has frowned on previous efforts

By Tom Lowry

Nearly three decades after MTV's launch, it appears that music videos still matter.

In the old days record labels would provide videos for free, viewing them as just a part of their promotional arsenal to sell CDs. But with music sales reeling and music companies desperate to create new businesses, videos are being recast as potential revenue generators, beyond the sales they generate as downloads on iTunes (AAPL).

Still, the industry's four big music companies disagree as to what might constitute the best advertising-supported model for videos. On Dec. 8, in one of the biggest music industry collaborations of recent years, an online music video service called Vevo will be unveiled. It will essentially be the music version of Hulu, the popular TV-shows-and-movies streaming site owned by three broadcast networks.

New York-based Vevo is a partnership launched by Universal Music Group and Sony Music Entertainment. EMI Group announced Monday, Dec. 7, that it is taking a stake as well. Google's (GOOG) YouTube is also a partner. Abu Dhabi Media is an investor. The service, from which the partners will share advertising revenues, will make its debut with 15,000 videos.

The Internet is awash with music videos, both polished and camera-phone raw, at such sites as YouTube, Yahoo! Music (YHOO), AOL Music, MySpace (NWS), Imeem, and MTV's Web sites. Vevo's goal is to become a central hub for videos of a premium quality "that enhance the music experience for fans," says Rio Caraeff, Vevo's CEO and a former top digital executive at Universal. Video streams of Sony and Universal artists alone top a billion hits a month on YouTube, adds Caraeff. All of that traffic will shift to Vevo.

Warner: A bigger stake in its artists

History may be against Vevo. Industry collaborations are notoriously short-lived. Remember the subscription services pressplay and MusicNet, both music company partnerships that fizzled in a few years? Other ballyhooed, industry-backed digital initiatives such as MP3.com and Jimmy and Doug's Farm Club similarly failed.

That track record may be one reason why Warner Music Group (WMG) has so far balked at joining Vevo. Another may be that CEO Edgar Bronfman Jr. believes Vevo's portal-like approach takes away from the only brands that matter in music: the artists. That's why any video that Warner syndicates to other Web sites drives fans to the artists' own sites. This makes business sense for Warner because half its talent roster is now signed to so-called 360 deals in which Warner owns a greater share of the artists' rights. Warner stands to gain from any concert tickets or merchandise sold on these artists' Web sites.

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