Vevo founder and Sony Music CEO Doug Morris tells the LA Times that it might be taking its content elsewhere. That’s big news and certainly worth a second look. That bombshell comes just before an otherwise vanilla Q&A the paper did with Morris:
Morris… is talking tough when it comes to renewing Vevo’s contract to distribute its videos on Google’s YouTube when the deal expires at the end of the year.
That’s a serious threat given that Vevo — which features videos of Katy Perry, Justin Bieber, Rihanna and about 11,000 other artists — is YouTube’s most popular channel, according to ComScore Inc. In May, Vevo’s videos generated 617.8 million views on the site, which Google acquired in 2006 for $1.65 billion.
“Google is charging us a lot of money to put our videos on their platform, and we would like them to reduce their fees,” Morris told The Times in the first public airing of his grievances. “If not, there are at least three other companies who want to take our videos.”
Among the companies eager to lure Vevo’s formidable traffic away from Google are Facebook Inc., Microsoft Corp., Apple Inc.and Amazon.com Inc., Morris and another top industry executive familiar with the matter said.
Does this make sense?
Airing contract disputes in public isn’t rare, but it’s not a terribly productive tactic. Here’s why: all Morris could really hope to do here is remind YouTube that 1) he isn’t happy and 2) he has other options. But I’m guessing that YouTube already knew that. And as Forbes points out, there are at least five reasons why a split would be bad for both YouTube and Vevo.
As the Forbes piece also points out, Vevo’s deal with YouTube is a little different than what YouTube partners get. Instead of a revenue split, Vevo sells it own ads and pays to be distributed on YouTube. Apparently, Vevo wants more, with the argument being that YouTube isn’t anything more than a platform, and there are plenty of those, right?
The Times article indicates that Facebook, Apple, Amazon, and Microsoft could all be alternative platforms for Vevo. I’ll throw Hulu and Yahoo in there just for a laugh. Actually, if we’re just talking about distribution, maybe Vevo should consider building its own player and posting its videos on a Tumblr account. Heck, they don’t even need Tumblr. Morris could just tweet the videos, or maybe he should get Bieber to do it.
Here’s the thing: YouTube may be overcharging, but right now it can afford to overcharge when it comes to music videos.
For all the social activity on the site, it’s not clear Facebook is anyone’s go-to source for music video content. And Facebook’s player isn’t all that great. Plus, there audience seems more allergic to ads than just about any other online audience.
Amazon would be intriguing if we were talking about a movie or television library, but Vevo owns music videos. And remember, for the most part Amazon is about selling content. People aren’t buying music videos (with few exceptions they never really did), and a lot of companies are wondering if kids today will ever buy content. Apple, by the way, has the same problem to a greater extreme because they don’t give any content away.
As for Microsoft, it’s hard to see how they are a viable threat. My guess is they were tossed in there because they are always a competitive bidder with Google.
Bottom line: none of these alternatives really make good business sense. But all of them do have the ability to pay (really overpay) so it’s entirely possible that one of them could lure Vevo away, whether or not the deal makes long-term business sense.
Why this fight might be a good thing for the industry
Right now there isn’t a lot of excitement around acquisition and licensing stories. YouTube and its competitors sign content deals and nobody beyond the two parties involved really cares much. One of the reasons for that indifference is that there’s just so much content out there. A particular video may be unavailable, but from a user perspective scarcity isn’t an issue.
So what’s the bright side of a spat like this? Well, it’s a test of the value of content, isn’t it? If Vevo leaves and succeeds elsewhere or if YouTube caves, content producers will know that at least some content is worth more than present valuations. On the other hand, if Vevo caves or fails, well then we’ll know that content is still cheap.
What’s interesting about Vevo is that their library is just big enough to matter but not so big that it has YouTube over the barrel. That’s a good thing, because over time we’ll start to see more Vevos, and as we do we’ll see real negotiations between YouTube and content producers, instead of the take it or leave it deals that currently dominate online video. That would be good news.