Music videos started life online as giveaways to win bands new fans — much as they did when MTV actually showed videos. But now, as the future of music sales seems dim, music labels see gold in what they used to handout for free.
The change started about five years ago when labels began charging distributors for the right to show videos. Then the rise of YouTube brought enormous exposure for music videos online, but record labels claim YouTube’s payouts are skimpy.
Now, they’re convinced that videos should generate greater revenues — and that YouTube isn’t the place to do it. For the labels, the question is now which new four-letter, catchy- named corporate website will become the net’s hottest online music video star.
In a series of interviews, a number of music industry executives told wired.com that there’s a behind-the-scenes battle between Hulu, the established video service that already knows a thing or two about monetization, and Vevo, a Google-powered site that won’t be online until the end of the year.
As part of their collective quest to create a “higher-quality” music video site, capable of bringing in more ad dollars, the labels plan to separate major label videos from user- generated content with a virtual velvet rope, because advertisers don’t like showcasing their wares next to potentially low-quality user-generated videos. By creating an area with only major label music videos, backstage interviews, live footage, and other official content, the labels hope to create a valuable new revenue stream to make up for their dwindling sales figures.
Hulu, a joint venture between NBC and Fox, is one option. The labels are impressed with its popularity and high advertising rates, and more than one source involved in the negotiations (all parties declined to talk on the record, citing the ongoing state of the negotiations) described Hulu as a sort of template for the yet-to-be-launched Vevo service. Hulu showed the labels that it’s possible to command higher ad rates for “premium” content. Now the question is whether their videos will end up on Hulu, Vevo, or both.
Negotiations between the labels and both Hulu and Universal Music Group’s own upcoming Vevo service are only in the early stages, but already, a potential battle between the two services is already shaping up in this quest to eke more revenue from music videos. Ironically, videos were seen — until five years ago — as free promotional items.
Before they compete on design, features and performance, Hulu and Vevo are racing to license more music videos than the other. As YouTube has shown, people prefer to watch videos at one site that has everything, rather than hunting down one label’s music on one service, and another label’s music on another service. Most people have no idea what labels their favorite artists are signed to anyway.
This licensing race is where things get tricky. Universal Music Group is the sole owner of Vevo at the moment (Google is just a technology partner that will receive a share of ad revenue). It wants the other majors to join, possibly as equity partners, so that it can turn Vevo into the central repository for major label video content on the web. From there, Universal hopes to sublicense videos to sites like AOL, Yahoo, YouTube, and potentially Hulu.
The change started about five years ago when labels began charging distributors for the right to show videos. Then the rise of YouTube brought enormous exposure for music videos online, but record labels claim YouTube’s payouts are skimpy.
Now, they’re convinced that videos should generate greater revenues — and that YouTube isn’t the place to do it. For the labels, the question is now which new four-letter, catchy- named corporate website will become the net’s hottest online music video star.
In a series of interviews, a number of music industry executives told wired.com that there’s a behind-the-scenes battle between Hulu, the established video service that already knows a thing or two about monetization, and Vevo, a Google-powered site that won’t be online until the end of the year.
As part of their collective quest to create a “higher-quality” music video site, capable of bringing in more ad dollars, the labels plan to separate major label videos from user- generated content with a virtual velvet rope, because advertisers don’t like showcasing their wares next to potentially low-quality user-generated videos. By creating an area with only major label music videos, backstage interviews, live footage, and other official content, the labels hope to create a valuable new revenue stream to make up for their dwindling sales figures.
Hulu, a joint venture between NBC and Fox, is one option. The labels are impressed with its popularity and high advertising rates, and more than one source involved in the negotiations (all parties declined to talk on the record, citing the ongoing state of the negotiations) described Hulu as a sort of template for the yet-to-be-launched Vevo service. Hulu showed the labels that it’s possible to command higher ad rates for “premium” content. Now the question is whether their videos will end up on Hulu, Vevo, or both.
Negotiations between the labels and both Hulu and Universal Music Group’s own upcoming Vevo service are only in the early stages, but already, a potential battle between the two services is already shaping up in this quest to eke more revenue from music videos. Ironically, videos were seen — until five years ago — as free promotional items.
Before they compete on design, features and performance, Hulu and Vevo are racing to license more music videos than the other. As YouTube has shown, people prefer to watch videos at one site that has everything, rather than hunting down one label’s music on one service, and another label’s music on another service. Most people have no idea what labels their favorite artists are signed to anyway.
This licensing race is where things get tricky. Universal Music Group is the sole owner of Vevo at the moment (Google is just a technology partner that will receive a share of ad revenue). It wants the other majors to join, possibly as equity partners, so that it can turn Vevo into the central repository for major label video content on the web. From there, Universal hopes to sublicense videos to sites like AOL, Yahoo, YouTube, and potentially Hulu.
For more information contact All About Jazz.
