Video
Thats the goal of Universal Music Groups venture with Google Inc.s YouTube. Vevo.com, a new site announced last week, will stream videos from artists such as U2, Beck and the Rolling Stones. YouTube will then split advertising revenue with Universal, the worlds largest music company.
The agreement is a sign of progress in the record industrys efforts to make money from YouTube, the biggest online video service. Internet ads could help the labels rebound from a 45 percent plunge in U.S. album sales since 2000, according to Nielsen SoundScan. Working with YouTube also may let the industry rein in the wild-west nature of online music.
“As an industry or a company, we have to figure out how to derive some sort of revenue from the consumption of music, whether or not people buy it,” said Rio Caraeff, executive vice president of Universal Musics ELabs, which handles its e- commerce strategy.
Over dinner earlier this year in Paris, U2 singer Bono urged Universal Music Chairman Doug Morris to get in touch with Google Chief Executive Officer Eric Schmidt about working together, according to a person with knowledge of the talks.
Giving Away
The revenue-sharing plan is a shift from the 1980s and 1990s, when videos from artists such as Bon Jovi, Madonna and N Sync were given free to MTV for marketing purposes. With album sales falling, music stores closing and MTV moving to a reality-television format, videos need to start paying for themselves.
New York-based Universal, owned by Frances Vivendi SA, says its videos have been watched on YouTube more than 3.6 billion times.
“The video used to be just a cost center,” Jean-Bernard Levy, CEO of Vivendi, said in an interview last month. “We used to do lots of great artistic videos that we gave away to MTV and other people for free. We didnt get paid. Now its becoming a profit center.”
Universal and Google executives are asking the other major record labels to join their partnership. That includes Sony Music Entertainment, EMI Group Ltd. and Warner Music Group Corp.
Jeanne Meyer, a spokeswoman for EMI, said talks with YouTube are at a “very early stage.” Warner Musics Will Tanous declined to comment on the discussions. Claire von Schilling, a Sony spokeswoman, didnt return a call seeking comment.
High Hopes
“We have high hopes were creating a sustainable, profitable business model,” David Eun, vice president of strategic partnerships at Mountain View, California-based Google, said on a conference call last week.
YouTube, famous for the low-budget videos posted by its users, is trying to add more premium content. Of the top 100 most-viewed video producers on YouTube, 39 are from musicians and labels, according to David Burch, a marketing manager with the video-tracking firm TubeMogul Inc. in Emeryville, California.
Lingering Disputes
Still, Googles deal with Universal doesnt resolve YouTubes problems with other content providers. Warner Music Group, the first label to strike a deal with YouTube in 2006, pulled its videos in December when a new licensing agreement couldnt be reached.
Disputes with artists in the U.K. and Germany forced clips in those countries to be pulled. Viacom Inc., controlled by Sumner Redstone, is suing Google for allegedly not removing copyrighted material from YouTube.
“Historically, every new medium has required that this kind of battle happen,” said Aram Sinnreich, an analyst with Los Angeles-based Radar Research.
The negotiations are complicated by the lessons of MTV. As CD sales fell, it became apparent that the decision to allow videos to air on the cable channel without payment was a mistake, said Steve Gordon, a New York attorney. The author of “The Future of the Music Business,” Gordon specializes in music licensing.