YouTube, Universal Hook Up for Music Video Site

Google’s YouTube and Universal Music Group (UMG) are partnering to launch Vevo, amusic video vehicle featuring UMG’s videos. The site will launch inthe 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.

That’s enough, though, for the industry to begin speculating about whatthis 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 uponthe perfect combination of quality content and a platform veryfamiliar to users — the only winning model thus far, he said. “Everyattempt by studios and labels to put their own content online hasfailed except for Hulu.” Hulu has succeeded, he said, because it deliversa customer experience good enough that viewers don’t mind thebuilt-in advertising.

“Vevo is an attempt to create a destination site like Hulu, wherethey hope consumers will go for their desired content. Including themusic videos from other companies — majors and indies — will becrucial to making this the go-to site for music videos,” Jeffrey M.Liebenson, whose law practice at New York-based Herrick, Feinstein focuseson digital entertainment and the business of music, told theE-Commerce Times.

Vevo’s path may not entirely follow Hulu’s, however. The two sites arealike in the sense of predictable success from auser volume perspective, Candace Carlo, head of the entertainmentgroup for Greenberg Glusker, told the E-Commerce Times. Also, bothsites are joint ventures of major media players, and both will use advertising models as their primary revenue sources. “However, Hulu is asuccessful TV and film site; Vevo is likely to be the dominant — or adominant — music video site. It seems like Vevo will have a moreviral aspect, and its content will be made easily accessible to otherportal sites.”

Larger Impact

Perhaps Vevo’s greatest impact — at least for now, before it is actuallyoperational — is the apparent white flag the entertainment industryseems to be waving in the online content wars. Simply put, Hollywood and music studios have long assumed all they had to dowas slap content online and users would come. “But it turned out theywere very bad at building those applications,” FanSnap’s Garg said.

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

A destination site needs to offer special advantages to make itsuccessful, such as a great user interface, simplicity of use,value-added content, low price or some other advantage, Liebensonsaid. “If the site disappoints in any way — too many clicks requiredto purchase, for example — consumers are likely to go elsewhere.”

YouTube wins as well from this arrangement. For starters, Google hasnot realized the advertising gains it had expected when it paid over US$1 billion to acquire YouTube years ago. “It has haddisappointing advertising revenue so far because it includesuser-generated content, some of which presents concerns for someadvertisers,” Liebenson said. “Limiting Vevo to professionallyproduced content may address that concern, to the extent that itotherwise is a great site.”

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

YouTube has been working to smooth over alleged DMCA (Digital Millennium Copyright Act) infringement issues over time, using both both filtering technologies andlicensing deals, Richard Neff, chair of the intellectual property and technologydepartment at Greenberg Glusker, told the E-Commerce Times. “This fitsinto that ongoing model.” Still, he said, while a byproductof this sort of deal is to lessen their exposure — the morecontent 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 theWeb through aggressive deals, obtain the most eyeballs from variousforms of content in different media, and thereby obtain the mostadvertising dollars — and success”.

Industry Game Changer

The site’s success has the potential to remake related parts of theindustry as well, Andrea Belz of Belz Consulting told the E-CommerceTimes. “It will be interesting to see if this arrangement changes howartists work with their labels. Will artists decide that they wouldrather work with UMG in order to increase their visibility on YouTube,especially if there is a link to buy their songs?” Other labels havenot had good relationships with YouTube, she noted.

“In addition, will the advertisers work more closely with the artistsin product placement? No one does online advertising better thanGoogle, but this could step it up to a new level.”

Ultimately, Vevo is another step in the process of labels becomingagents instead of publishers, Belz concluded. “If they don’t makecreative deals like this one, they will be eliminated as middlemen.”

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