With the contract between YouTube and music video distributor VEVO officially expired, the possibility of the two companies parting ways is more plausible than ever. It’s reported that VEVO is seeking a larger ad revenue share from YouTube, which is currently somewhere between 51% and 75% with a 10% sales commission taken off the top.
The joint contract expired on December 9, 2012, putting a 120-day extension in place that will push the deal through early April. Currently, it looks like the two digital content providers will strike a deal. John Hirai, head of music partnerships for YouTube Japan and Korea spoke about the partnership at last year’s MU:CON in Seoul saying:
“… what I can tell you is that I think you’ll see YouTube and VEVO continue to have a partnership for the next coming years.”
While YouTube and VEVO share a symbiotic partnership, signs of their inevitable departure from one another have begun popping up within the past year. However, looking at the roles each company plays, it is clear that YouTube needs VEVO as much as VEVO needs YouTube.
Why YouTube needs VEVO
Simply put, VEVO generates an enormous amount of views and revenue for YouTube. Among the top ten viewed channels, VEVO and Universal Music Group channels make up 50% of the list. Google recently announced their music discovery platform, Google Music, which is set to be an iTunes competitor and possibly an easy fix to the tech giant’s music licensing woes.
Without VEVO however, YouTube will no longer be able to legally stream music from Sony Music, Universal Music Group and Abu Dhabi Media without paying hundreds of millions in licensing fees. The music industry has become increasingly desperate over the years, and if past legal troubles are any indicator, a legal scrap between Google and the companies representing VEVO would be endlessly expensive for all parties.
Why VEVO needs YouTube
In early 2012, rumors that VEVO was in talks with Facebook started floating around various blogs and news sites. The strength of these rumors increased after Facebook integration was introduced in tandem with VEVO’s site re-design. In addition, VEVO founder Doug Morris has been quoted numerous times stating that he was comfortable moving the music video provider elsewhere.
For all their threats, however, VEVO has continued to stick with YouTube. The bottom line is that no platform is more fitting for VEVO’s content than YouTube. Aside from their own website, VEVO could never reach half as many viewers as they currently do without YouTube. The breakdown in negotiations with Facebook is clear evidence of this.
With talks between YouTube and VEVO still ongoing, the future of their partnership remains unclear. Although, as the number one destination for online video and the number one destination for music videos, it’s clear both companies simply cannot thrive without one another. It’s romantic, in a “let’s make copious amounts of money while crushing out competitors sort of way.”