Why MTV Must Acquire Vevo Before It's Too Late

Music Labels Got Digital Right for Once, and Now MTV Is Playing Defense

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Mike Henry
Mike Henry
Prior to 1981, music was a tightly controlled substance. You heard it on the radio. You bought the record. You relied on music labels to tell you what was cool. Then technology delivered cable TV, and with it MTV, and the balance of power to influence youth culture started to shift away from the music giants. They didn't realize it immediately -- or didn't care -- because music companies weren't driven by working with marketers. They sold records. If MTV could help sell more records (it did) then Big Music wanted their MTV as much as the rest of us.

MTV took that lane and turned it into something much bigger.

Today, the shoe is on the other foot: Vevo, the music video startup backed by three of four major labels and YouTube, is taking back that power from MTV.

Vevo exclusively distributes online music videos for Universal, EMI and Sony Music and has already surpassed MTV in monthly video viewers and views. MTV is now in the awkward position of having to negotiate with a competitor that didn't exist a year ago, just to keep the music videos they've long taken for granted up on their web properties.

Jabs have already been exchanged, with Universal Music pulling its content from MTV.com in August over control around selling ads. This is Big Music ready to go bare knuckles over advertising. Over advertising! It's unheard of. Unthinkable even two years ago.

But Big Music has picked a good strategy this time. They fully appreciate -- and have invested heavily in -- the relationship that today's youth has with at least one form of digital content that they control. This is why MTV should forget about a content deal with Vevo, admit they've been outmaneuvered, and buy Vevo outright.

A rare second chance
In the past five years, a new ecosystem -- centered on YouTube -- has sprung up around the once-decaying medium of music videos. Indeed, five of YouTube's top-10 videos of all time are now controlled by Vevo (seven of ten are music). Whether YouTube has Big Music to thank or the other way around, music videos are among the most-watched commercial video content online.

The most-watched YouTube video of all time.

But the ultimate prize for winning in this space is much bigger than ad revenue. It's about the power of music to influence youth culture and the media value of that power. Because even as the legacy model to support music has crumbled, music's connection with people -- especially young people -- has only grown stronger in the digital age.

Online music videos are also a forerunner for the future of television -- a world where survival will depend on striking a careful balance between dynamically served, data-driven media and innovative sponsorships and event-driven promotions that avail marketers of the halo effect that premium talent and content offer.

Today, technology and culture have pried open a door that has been closed since the iconic moon man made his first landing. Execs at Universal and Sony saw this opening and launched a bold strategy to gain rights over distribution, building them into a Hulu-esque company called Vevo. This company, by the way, has five-year, global rights to its content and far better terms than Hulu has with its joint-venture partners. In under a year, Vevo has built a great product and gained significant audience and ad revenue through targeted media sales, event-centric sponsorships and aggressive cross-marketing of artists.

Equal footing
Much more importantly, Vevo has gained mindshare with marketers targeting the youth market. "When I think about kids or music, I have to think about Vevo and MTV," was what the digital lead for one of the largest consumer advertisers in the world told me recently.

That's a pretty strong position for Vevo, less than a year out of the starting gate. Rather than relying on litigation or changing consumer behavior, with Vevo the music industry has given itself a chance at building a new business model that leverages their assets in a new direction.

But to survive means that they'll need to compete and win in a head-to-head battle with MTV, and Viacom can't afford to let that happen. Because while on the surface MTV no longer stands for music videos, its empire still stands on its ability to influence youth culture. Vevo is well-positioned to take back a very powerful connection that the music industry lost control of a generation ago.

Viacom will fight back with one hand and negotiate with the other, ultimately forcing cash-starved label executives to the table with a big check. Acquiring Vevo will be largely defensive -- a payoff for the next generation of youth marketing. But the marriage will also create a premium video property with scale second only to Hulu (which just announced that they will generate $240 million in ad revenue in 2010).

For their part, the labels should stake out a position that takes advantage of what MTV brings to the table -- audience and ad sales -- but gives them increased direct access to marketers for deeper support of artist-centric marketing opportunities. The future of record sales looks grim, but there is a lot of momentum and potential connecting music and marketing. Keeping that door open will be critical to music companies as they transition to a new model.

ABOUT THE AUTHOR
Mike Henry is CEO of Outrigger Media, and online video advertising firm that has worked with EMI, Warner Music Group, Hollywood Records and other independent labels and artists.
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