YouTube Announces Music Video Service with Universal Music Group

Posted by: Rob Hof on April 9, 2009

In the latest of several announced and rumored deals with major studios, Google’s video sharing service YouTube has just announced a partnership with Universal Music Group. Set to launch later this year, the service, called VEVO, will be a “premium online music video hub” that will include UMG’s catalog of top artists and content. This will be the first time YouTube has operated a separate site outside YouTube itself, and Google says it hopes this will be a new model for partnerships with studios.

There will also be a VEVO channel on YouTube, and user-generated videos will continue to be allowed to use UMG content on YouTube. The companies will share revenues from ads on both sites. (The full release is after the jump.)

David Eun, Google’s vice president of strategic partnerships, said during a conference call with reporters that the two companies were aiming to go beyond a typical limited licensing agreement to provide a range of ad-supported services. Google said it’s Universal Chairman Doug Morris is talking with other music labels to join VEVO.

The UMG deal follows Warner Music removing its music videos from YouTube last December, saying the two companies couldn’t agree on terms. However, Sony Music Group signed a deal with YouTube in February. Music videos are among the most popular clips on YouTube.

Ever since Google bought YouTube in late 2006, many people have questioned whether the video sharing site, which by one estimate may be losing $500 million a year, could ever make enough money to justify the search giant’s $1.65 billion check. Indeed, even Google CEO Eric Schmidt has expressed disappointment that the company hasn’t been able to crack the code for advertising on its videos, particularly the vast majority that are contributed by amateurs.

This and other recent and pending deals could start to break down the reticence of major studios, including TV and movie studios, to release content on YouTube that is more profitably run on cable networks where advertising is much more lucrative. YouTube has a prickly relationship at best with many studios. Viacom two years ago sued Google, alleging it didn’t remove from YouTube copyrighted material that users posted from Comedy Central and MTV cable channels and its Paramount film studio. That case remains in the courts.

Talk of a separate partnership with Sony was hinted at earlier this week on CNET’s News.com and confirmed today by Bloomberg.

Meanwhile, YouTube has been signing some other deals with studios, such as CBS, MGM and most recently Disney. And although YouTube’s revenues, variously reported as anywhere from $120 million to $500 million this year (probably on the higher side), haven’t set the world on fire, the video giant is finding new ways to make money from the 100 million video viewers it gets every month. According to a recent Advertising Age article, YouTube is selling ads on 9% of its video views in the U.S., up from 6% a year ago.

Here's the release:

UNIVERSAL MUSIC GROUP AND YOUTUBE TO LAUNCH REVOLUTIONARY PREMIUM MUSIC AND VIDEO SERVICE

VEVO - UMG’s Premium Music Service Powered By YouTube To Launch In Coming Months

NEW YORK, NY and SAN BRUNO, CA, April 9, 2009 - Doug Morris, Chairman & Chief Executive Officer of Universal Music Group (UMG), the world's leading music company and Eric Schmidt, Chairman of the Board & Chief Executive Officer of Google Inc., today announced that UMG and YouTube, a Google subsidiary, are working together to launch VEVO, a music and video entertainment service that will feature UMG’s premium video content.

In addition to VEVO, YouTube has renewed and extended its successful partnership with UMG that allows users to continue creating and watching user-generated videos containing UMG sound recordings and Universal Music Publishing Group’s compositions on YouTube through various territories around the world. The two companies will also share advertising revenue on YouTube and VEVO.

Launching later this year, VEVO will be a premium online music video hub built for consumers, advertisers and content owners that will blend UMG's broad catalog of top artists and content with YouTube’s leading edge video technology and user community. YouTube will provide the technology infrastructure that will power VEVO and host UMG’s extensive library of professionally-created music videos on the new site. On YouTube, this content will be exclusively available through VEVO.com and a new VEVO channel through a special VEVO branded embedded player.

“VEVO will bring the most compelling premium music video content and services to the world's single largest online video audience,” stated Mr. Morris. “We believe that at launch, VEVO will already have more traffic than any other music video site in the United States and in the world. And this traffic represents the most sought after demographic for advertisers, especially as advertising dollars continue their shift from old media to new. VEVO will be uniquely positioned to monetize this opportunity and a host of others as we grow it to become “the”
destination for premium music video content online. For music lovers who want the best in music videos, the VEVO experience will be second to none. At the same time, VEVO will expand the premium video marketplace, generate new revenue streams for content creators, and provide brand advertisers an unprecedented opportunity to get in front of a highly engaged audience. We couldn’t be more excited about the huge potential we see in the VEVO service.”

“Technology has allowed fans to discover music in endless ways while creating new business opportunities for artists and labels alike,” said Mr. Schmidt. “At Google, we are committed to promoting greater innovation and choice and are thrilled to be working with UMG in what will surely be an exciting new service for consumers, advertisers, content creators and the music industry at large.”
At launch, people will be able to access UMG’s entire catalog of premium music video content, including professionally-created and full-length videos on VEVO, as well as artist-generated content and user-generated content hosted on YouTube. VEVO will also serve as a syndication platform, expanding the reach of the VEVO brand. This innovative platform is aimed at providing consumers the very best in digital music content while further extending UMG's lead in the direct-to-consumer market.

Presently, UMG's YouTube video channel has more than 3.5 billion views, making the UMG channel the most watched on YouTube.

Reader Comments

Mergen

April 11, 2009 7:13 AM

It is great that all these websites are finally becoming profit-conscious. In a way, it's still hard to fathom somethings as popular as YouTube, Facebook, etc are not profitable.

By the way, why couldn't YouTube SHARE profits made from advertisement slots into user-generated videos? That will accelerate user involvement in videos and viewership of ads at the same time.

Tchiky

January 29, 2010 7:57 AM

Vevo doesn't work in my country
this does http://www.tv243.com
also grabs music videos to shuffle from youtube
love it because i cand find similar artists like at last.fm

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Bloomberg Businessweek writers Peter Burrows, Cliff Edwards, Olga Kharif, Aaron Ricadela, and Douglas MacMillan, dig behind the headlines to analyze what’s really happening throughout the world of technology. Tech Beat covers everything from tech bellwethers like Apple, Google, and Intel and emerging new leaders such as Facebook to new technologies, trends, and controversies.

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