I want my Vevo: Will video site be next-gen MTV?

Vevo is the Web music-video service built by the big record labels with help from YouTube. Can it make an MTV-like splash?

On August 1, 1981, a cultural and entertainment juggernaut flickered onto TV screens and rocketed out of obscurity with these six words: "Ladies and gentlemen, rock and roll."

With that, the iconic cable network, MTV, was launched and a popular entertainment category--music videos--was born. Now, 28 years later, MTV has largely abandoned the genre and the record industry is preparing for the debut of a possible successor.

On Tuesday, video start-up Vevo is scheduled to launch. Supported by three of the top four largest record companies (sources say EMI has agreed to provide content to the site) and backed by the technological muscle of YouTube , Vevo is a Web site that will feature videos from many of the world's biggest recording stars, including U2, Cold Play, the Black Eyed Peas, Lady Gaga, Avril Lavigne, Bruce Springsteen, and Pearl Jam, according to the site's backers.

The move comes three years after Google's YouTube began proving that the masses still love music videos. Professionally made music clips are by far the most popular fare on the Web's No. 1 video site, accounting for 14 of the 25 most viewed clips ever. The labels involved with Vevo boast a combined total of about 15 billion views on YouTube.

Much of the music industry, including a score of independent labels that have recently signed on to the project, think it's time for music videos to take the next step in their evolution. They want a standalone site packed with high-definition clips from marquee acts.

Don't look for any user-generated content on Vevo, according to Doug Morris, chairman and CEO of Universal Music Group, the man who came up with the idea for the service. He said he wants to offer music fans as well as advertisers a more polished digital stage. That's one of the main reasons the venture was built, to charge advertisers premium rates in exchange for premium content.

Another motivation for building the site was to give the music industry a greater say in what happened to its content.

In an interview with CNET last week, Morris made no bones about the fact that by launching Vevo, the music industry is serving notice: no longer will middlemen or third parties profit from the labels' video content without giving up a fair share.

"What we're really doing is taking back control of everything...this is really like MTV on steroids. We're starting with that kind of audience. But now we're in control of it. We don't have to go through a middleman anymore."
--Doug Morris, CEO of Universal Music Group

"What we're really doing is taking back control of everything," said Morris, who operates the largest of the top four recording companies. "This is us taking control of our future...Vevo enables us to provide consumers with about 80 percent of all the music videos in the world. So, this is really like MTV on steroids. We're starting with that kind of audience. But now we're in control of it. We don't have to go through a middleman anymore."

The problem as defined by the music sector started with MTV and extends all the way to YouTube.

When MTV was created, everyone told the labels not to worry about getting paid because the cable channel helped promote artists. "It was good exposure," they were told. The experts said the same thing in 2006 when YouTube started to emerge as one of the Web's favorite music sources. For a long time, the record companies seemed happy to go along, even as MTV built a financial empire from the videos.

But this time around, the music industry can't afford not to be the one who cashes in. The rest of the business is in decline, as CD sales shrink and profit margins on downloads are sliver thin. Record execs have been criticized for not finding new revenue models, so that's what they are trying to do. They believe there's new money to be had from the videos, even as they readily acknowledge that getting to it hasn't always been easy.

Morris remembers seeing a video from a Universal artist posted to Yahoo a couple of years ago and asking one of his employees what the portal paid for it. The exec told Morris the video was considered promotional and Yahoo paid nothing.

Promoting what? The video was five years old and Yahoo was pocketing the ad money without sharing it with the creators, Morris recalled telling the employee.

"I then called up (former Yahoo CEO) Terry Semel," Morris said. "And I said, 'Terry, we want to be paid.' Semel replied 'Absolutely not.' Then, we took our videos down from Yahoo and AOL and their viewership declined, at which point they came back and they paid us. They paid us a percentage of a cent for each view."

Morris isn't implying that Vevo's music clips will no longer be used to promote music or that Vevo plans to charge to watch videos. No, they will still be offered to viewers free of charge.

"I then called up former Yahoo CEO Terry Semel and I said 'Terry, we want to be paid.' Semel replied 'Absolutely not.' Then, we took our videos down from Yahoo and AOL and their viewership declined."
--Doug Morris, Universal Music CEO

What is changing is that music videos, which often cost tens of thousands of dollars to produce, won't be treated as loss leaders anymore--not in this economic environment.

Nonetheless, Vevo faces plenty of challenges.

Nobody has proven whether advertisers are willing to pay top dollar for online videos, even professionally made music videos. There's also the question about whether interest in the genre will wane just as did with previous generations of music fans. After all, MTV switched to reality shows for a reason, no?

Rio Caraeff, Vevo's CEO, says the music video is only one of the site's features. The obligatory playlists will be available but music lyrics will also be offered. Visitors will have more access to their favorite performers than ever and Vevo's video quality will be as much as three times as what is typically available online.

All these upgrades were absolutely necessary to draw the kind of top advertising dollar that label honchos seek, according to Caraeff. He said typical ad rates for Web video run somewhere between $3 and $8 for every thousand views. Vevo's mission is to attract rates of $25 to $40.

"Successful was how we felt about YouTube, in terms of the shear popularity of our programming," Caraeff said. "But what we felt was that there could be a better way to drive a business around it. Advertisers had some reticence and some reluctance to fully embrace music videos on YouTube. We felt that there was work to be done to restore the premium luster and really create a better experience for advertisers."

In the short run, look for Vevo to be an online music store where downloads are sold as well as the merchandise created by artists, such as clothes and perfumes. In the long run, a music-video subscription service could be rolled out, one that offers full-length concerts.

"I do believe we will have a subscription service where we will stream live concerts from all over the country to viewers for a monthly fee," Morris said. "This is futuristic. We have not built this yet, but we're working on it."

 

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