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YouTube, Universal Hook Up for Music Video Site

By Erika Morphy
Apr 10, 2009 11:55 AM PT

Google's YouTube and Universal Music Group (UMG) are partnering to launch Vevo, a music video vehicle featuring UMG's videos. The site will launch in the coming months. Few details have been provided about the launch; however, both companies will share in the revenues, and additional deals with other music labels are being negotiated, the companies said.

YouTube, Universal Hook Up for Music Video Site

That's enough, though, for the industry to begin speculating about what this development will mean for the way music videos are viewed online.

The Next Hulu?

"This has all the makings of becoming the next Hulu," Rishi Garg, cofounder of FanSnap, told the E-Commerce Times. Vevo has hit upon the perfect combination of quality content and a platform very familiar to users -- the only winning model thus far, he said. "Every attempt by studios and labels to put their own content online has failed except for Hulu." Hulu has succeeded, he said, because it delivers a customer experience good enough that viewers don't mind the built-in advertising.

"Vevo is an attempt to create a destination site like Hulu, where they hope consumers will go for their desired content. Including the music videos from other companies -- majors and indies -- will be crucial to making this the go-to site for music videos," Jeffrey M. Liebenson, whose law practice at New York-based Herrick, Feinstein focuses on digital entertainment and the business of music, told the E-Commerce Times.

Vevo's path may not entirely follow Hulu's, however. The two sites are alike in the sense of predictable success from a user volume perspective, Candace Carlo, head of the entertainment group for Greenberg Glusker, told the E-Commerce Times. Also, both sites are joint ventures of major media players, and both will use advertising models as their primary revenue sources. "However, Hulu is a successful TV and film site; Vevo is likely to be the dominant -- or a dominant -- music video site. It seems like Vevo will have a more viral aspect, and its content will be made easily accessible to other portal sites."

Larger Impact

Perhaps Vevo's greatest impact -- at least for now, before it is actually operational -- is the apparent white flag the entertainment industry seems to be waving in the online content wars. Simply put, Hollywood and music studios have long assumed all they had to do was slap content online and users would come. "But it turned out they were very bad at building those applications," FanSnap's Garg said.

Vevo, in other words, illustrates the recognition that destination sites are the online model most likely to succeed. However, not just any destination site will be a sure-fire hit in the online community.

A destination site needs to offer special advantages to make it successful, such as a great user interface, simplicity of use, value-added content, low price or some other advantage, Liebenson said. "If the site disappoints in any way -- too many clicks required to purchase, for example -- consumers are likely to go elsewhere."

YouTube wins as well from this arrangement. For starters, Google has not realized the advertising gains it had expected when it paid over US$1 billion to acquire YouTube years ago. "It has had disappointing advertising revenue so far because it includes user-generated content, some of which presents concerns for some advertisers," Liebenson said. "Limiting Vevo to professionally produced content may address that concern, to the extent that it otherwise is a great site."

Linking up with UMG may also mitigate the legal issues that occasionally arise.

YouTube has been working to smooth over alleged DMCA (Digital Millennium Copyright Act) infringement issues over time, using both both filtering technologies and licensing deals, Richard Neff, chair of the intellectual property and technology department at Greenberg Glusker, told the E-Commerce Times. "This fits into that ongoing model." Still, he said, while a byproduct of this sort of deal is to lessen their exposure -- the more content that is licensed, the less infringement risk there is -- that's probably not YouTube's primary motivation.

Its "primary motivation is to be the dominant content player on the Web through aggressive deals, obtain the most eyeballs from various forms of content in different media, and thereby obtain the most advertising dollars -- and success".

Industry Game Changer

The site's success has the potential to remake related parts of the industry as well, Andrea Belz of Belz Consulting told the E-Commerce Times. "It will be interesting to see if this arrangement changes how artists work with their labels. Will artists decide that they would rather work with UMG in order to increase their visibility on YouTube, especially if there is a link to buy their songs?" Other labels have not had good relationships with YouTube, she noted.

"In addition, will the advertisers work more closely with the artists in product placement? No one does online advertising better than Google, but this could step it up to a new level."

Ultimately, Vevo is another step in the process of labels becoming agents instead of publishers, Belz concluded. "If they don't make creative deals like this one, they will be eliminated as middlemen."

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