YouTube, Universal team up to launch premium music video site

11 April 2009

YouTube has partnered with Universal Music Group (UMG) to launch a new music video service called Vevo. Under their agreement, YouTube will provide the infrastructure for a new site at Vevo.com, to be populated with video from artists on UMG-owned labels such as Decca, Def Jam, Mercury Records, and Verve.

YouTube will also host those videos on its own site, where they'll be housed in a Vevo channel via an embedded player. The companies will share revenue for ads served on both Vevo and YouTube. The free-to-view package will carry ads, including video spots of up to 15 seconds preceding the music video.

"We believe that video is the best opportunity for revenue generation right now," said Rio Caraeff, executive vice president of Universal's eLabs digital business strategy unit. "The advertisers and brands are more comfortable with video as a vessel for their message and their advertising spends. Streaming audio is harder to monetize under an ad-driven model right now."

As an added incentive to Universal, the player will feature a button enabling users to easily buy the tunes digitally through Apple Inc.'s iTunes and Amazon.com Inc., which send most of the revenue from music sales to the labels. For now, videos will not be for sale.

Universal will spend tens of millions of dollars on the project and Vevo will be a wholly owned Universal subsidiary, Caraeff said. YouTube, a subsidiary of online advertising and search leader Google Inc., will provide the technology.

The move had been rumoured since last month and it teams up the largest video Web site and the largest music company. The idea is that the site will be able to sell higher-priced ads around the professional content, like Hulu, the joint venture between NBC and Fox, does with TV shows.