New York — Hot on the heels of the just announced their Click-to-Buy expansion service, Google’s YouTube, the popular video sharing site and Universal Music Group, the world’s largest of music recording company, on Thursday unveiled their latest joint venture: that they will launch a premium music video website called “Vevo” as they bid to increase revenue from YouTube’s huge usage later this year. YouTube will manage the technology while Universal Music supplies the content. The two companies will share ad revenue.
Planned to be launched in the coming months, a collaboration between Universal Music Group and Google the partners expect to be the leading music video service in the world from day one. Vevo will also incorporate with YouTube as a “new VEVO channel through a special VEVO branded embedded player,” according to AllThingsD.
Google confirmed the news Thursday that all of Universal Music Group’s video assets (music videos, interviews, concert footage video) will be live on Vevo, and that YouTube – and eventually, AOL, MTV and Yahoo – will embed Universal’s videos from Vevo rather than licensing the content directly from the labels.
The companies stated that at this point it seems that Universal’s content and artists will be the only label represented on the site. However, Doug Morris, Universal Music’s chief executive, said in a conference call with the media that he is in negotiations with other top record labels and is confident they will join.
Google CEO Eric Schmidt during the same conference call that YouTube and Universal Music have renewed their existing licensing agreement. YouTube will continue to be licensed to allow visitors to use songs from Universal Music. Professionally made videos from the label will only appear on Vevo, the companies said.
This is the first time that YouTube has launched a satellite Web site, Schmidt said but he added that he hopes there will be more.
Peter Kafka of AllThingsD also states that this is a win-win for the two media companies:
YouTube, which now commands the market for Web video but can only sell ads against a small portion of the clips it shows, gets to hang on to valuable, advertiser-friendly inventory.
The deal is expected to give a major boost for YouTube, which has been under increasing pressure from music labels and publishers who are frustrated that the popular site has been unable to pay higher fees for rights to use their music and videos.
Discussion were unfruitful late last year between YouTube and the No.3 music company Warner Music Group. Last month YouTube was forced to block all music videos in the UK and last week it had to do the same in Germany in a similar dispute with song publishers over money.
Vevo is seen as an unwavering effort to address this disparity between YouTube’s popularity, it has 100 million users in the U.S. alone according to comScore, and its relatively low advertising rate or CPMs (cost per thousand page views) as it is called.
The new site will be a music video hub wholly owned by Universal, a unit of French media group Vivendi. It will feature higher-quality videos, as opposed to the typical grainy and often user-generated videos on YouTube.
The goal for Vevo is to lure big-name advertisers and other content-owner partners.
“The rationale is to help make Vevo a place that brands feel more comfortable,” said Rio Caraeff, executive vice president of Universal’s eLabs.
“Ultimately we think it will increase in effect the CPMs and drive more revenue to YouTube and more revenue to the music business than they can have today,” said Caraeff.
YouTube and Universal Music will distribute advertising revenue generated by the site. Both sides are hoping that building a premium site will help increase advertising rates. Many big brand owners have avoided advertising alongside YouTube’s ad hoc mix of user-generated videos.
David Eun, Google’s vice president of strategic partnerships, said the higher quality professional content would appeal to advertisers.
“As we continue to work more closely with advertisers and potential sponsors we have a good sense of the type of content that they’re attracted to,” said Eun.
Although terms of the deal were not disclosed, Google’s licensing concerns with Universal are over. The label will be satisfied with its share of revenue from Vevo, YouTube and wherever else these videos end up — including the control it will have over the Vevo service. In the end, this is another in a string of deals in which major labels have sued a social media network, settled, licensed, then gained equity in the service (imeem, MySpace and now YouTube).
“Universal owns the site, but Google/YouTube is providing the technology,” said a Google spokeswoman by e-mail. “We will be sharing revenue with Universal on both Vevo and on YouTube. Other labels could join Vevo; they are in talks currently.”
Industry watchers will likely compare Vevo with Hulu, a high quality online video service jointly owned by NBC Universal and News Corp with about a third of the number of users of YouTube.
Hulu which features popular TV shows and some movies, has been more successful at selling advertising inventory to big brand owners than YouTube.
Vevo will also serve as a syndication platform called the Vevo Music Network which will power music videos on partner sites.
The purpose behind Vevo is to sell advertising at higher rates than YouTube does now. If that means loads of overlays, pre-roll and post-roll advertising, users might revolt.
“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,” Morris said in a statement, presumably referring to the traffic Universal sees at its YouTube channel. “And this traffic represents the most sought after demographic for advertisers, especially as advertising dollars continue their shift from old media to new.”
When it comes to challenges, the new alliance faces plenty. While Universal Music’s YouTube is by far the largest on the site, with nearly 4 billion views, nobody knows for sure whether a standalone music-video site can attract a big audience or ad revenue.
The question is whether Universal Music’s content is attracting viewers to YouTube or whether visitors stumble on to the videos while they are already on YouTube. Either way, the companies say they are confident that the site would not have any trouble drawing fans.