Google Believes in the Music Video
Google is reaffirming its support of the music video as a viable Internet commodity with a new investment in Vevo, one of YouTube's most visible partners. Bloomberg News' Andy Fixmer and Brian Womack report YouTube is negotiating a $50 million investment in Vevo, which would give Google a slightly less than 10 percent stake in the so-called Hulu for music videos. The potential investment already gives Vevo a new $500 million valuation. Peter Kafka at AllThingsD first reported YouTube had agreed to make a new investment in Vevo last month, though the exact figure wasn't known at the time — because Google and the Sony-Universal venture had been squabbling even then.
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It's a bit of a turnaround in a relationship that was souring as early as December. YouTube's revenue sharing deal with Vevo (you know, over those long pre-roll music-video ads before the actual music videos) was expiring, and the two sides were reportedly far apart on a deal. The central issue was thought to be the percentage of advertising profits that YouTube pays Vevo for every 1,000 impressions on a video page. Vevo's founder, Doug Morris, who is also the CEO of Sony Music Entertainment, had publicly spoken about bringing Vevo's business elsewhere — maybe Facebook, maybe Amazon — if their deal with YouTube didn't work better for their terms.
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The rev-share deal still has to be finalized, but now Google is all-in. The partnership as well as the new investment certainly makes enough sense for both parties to stay together: Vevo, and the music-label giants it represents like Universal and Sony, gets to distribute their music, with ads, through the biggest video platform on the web. YouTube gets to host and profit from the popularity of those music videos, which push billions of views to the site. And Google gets a stake in the big-media pop viability that YouTube once spent so long policing, ad-free. Vevo is only growing, too. The official numbers aren't out yet, but the company was expecting to post $280 million in revenue in 2012 — nearly double what they made in 2011. And Vevo just struck a music video deal with Disney, which usually never hurts a company's bottom line.
