I recently sat in on panel featuring Rio Caraeff, President/CEO of VEVO, a music hub set to launch later this year. VEVO will revolutionize music video viewing, linking music videos online. VEVO is more than a website that will allow users to view videos. Actually, VEVO will thrive even if most users do not actually visit the VEVO website. The way this music hub will work is quite interesting.
VEVO operates as an intermediary to bring music videos from record labels to the online community. The partnered companies – so far Google and Universal Music Group – will provide high quality music videos online, while allowing for user interactivity. For example, VEVO will serve as an intermediary to bring a video from, say, Interscope to the Interscope Geffen A&M Records YouTube Channel while allowing the viewer to do more with the video than the user currently does on social networking sites.
VEVO developed in order to revive the financial appeal of music videos. VEVO’s aim is to make music videos more profitable to artists and record labels by appealing to advertisers. This is an innovate step towards creating a new, profit generating business model for the music industry.
Music videos brought in millions, if not billions, of advertising dollars back in the MTV/VH1 heyday. Unfortunately once consumers began to watch videos via free online services, advertisers withdrew advertising dollars. VEVO’s aim is to reclaim advertising dollars by maximizing revenues per user rather than profits per unit.
The music industry traditionally profited by moving units – that is, selling the album. In the digital age, it is more profitable for record labels and artists to focus on what each user is willing purchase, increasing individual consumer consumption. Under this scheme, instead of aspiring to sell one album to 5 millions fans, it will be more profitable to sell digital downloads, t-shirts and concert tickets to each of the 1 million individual fans.
Music videos come into the mix because more users are looking to online music videos and other online services as a means of listening to music. Additionally, users now desire to do more online, thanks to the inter-connectivity of social media and social networking websites. By feeding the user’s desires, the music industry will keep apace with the new generation of fans. Appealing to these desires make online music video viewership more profitable to advertisers,which, in turn, will generate greater profits within the music community.
Music industry personnel are looking forward to the late 2009 launch, watching to see if this hub will bring popularity back to videos. If VEVO proves successful in its initial launch, other major record labels and companies would be foolish to not join the VEVO collaboration. It is just a matter of time to see if VEVO becomes a video goldmine.