Vevo Out to Prove There's Life Beyond YouTube

Music-Video Service Plans Growth With Mobile Apps, MTV, Facebook

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Music-video service Vevo was born on YouTube, but it's spent the past year preparing for life beyond it via mobile apps and distribution agreements on Xbox, MTV , Boxee and most recently, Facebook.

Today, Vevo says that 30% of its video views in the U.S., Canada and Europe are coming from outside YouTube. That was before Vevo launched on Facebook last fall -- the social network is now its fastest-growing distributor and responsible for 100 million views as well as 20 million to 25 million "shares" of music videos each month.

By the end of 2012, Vevo CEO Rio Caraeff expects to have as many viewers off of YouTube in the U.S. as on YouTube, largely thanks to Facebook. "The activity on Facebook is our greatest chance to get to 50% of view off of YouTube," he said in an interview.

Another bonus: While Vevo shares revenue with its distribution partners, such as YouTube and MTV , it doesn't share ad revenue with Facebook.

Music videos were YouTube's most popular genre before Vevo launched in 2009, and YouTube continues to be Vevo's key distribution partner, responsible for 3.2 billion views a month worldwide. But growth is coming faster outside of YouTube. Indeed, YouTube's U.S. ComScore numbers have been flat since last fall and dropped significantly to 16.7 billion in February from 18.6 billion U.S. views in January.

Vevo's views on YouTube have also been falling since last fall -- to 697 million in February from 871.6 million in November. Mr. Caraeff said he believes the decline is a result of YouTube's reorganization into "channels," which designed to make viewing a more TV-like experience on YouTube.

The strategy is meant to get people to watch longer-form videos on YouTube which could, theoretically cut down on the number of views. "There are always fluctuations in views based on things like seasonality, device usage, flow of content and tweaks to how we suggest videos," YouTube said, in a statement.

Running a business entirely dependent on another company is a tough position to be in. Just ask Zynga, the social-game marketer that is trying to establish itself outside of Facebook. Then there's the fact that Vevo's distribution deal with YouTube comes up later this year. "Any business strives for balance -- you don't want to have all of your eggs in one basket," Mr. Caraeff said. "You don't want all your traffic consolidated in one place."

Vevo says it now has 15 million mobile users, including iPad and mobile phone users, and says its Xbox app is a "top-five" application on Xbox, though Microsoft hasn't disclosed user metrics. Vevo also relaunched its own website, designed to keep viewers there longer.

Vevo, a joint venture between Universal Music Group and Sony Music Entertainment, launched as an effort to make ad dollars a bigger revenue stream for the music labels and to help bring brand dollars to YouTube.

Vevo has first right to sell ads into YouTube and elsewhere. If an ad goes unfilled, then a distribution partner can sell the advertising and shares revenue with Vevo. The lone hold-out is Warner Music Group.

Music and music-related videos are among the priciest categories of content on YouTube. A sales document obtained by Ad Age prices the music "category" on YouTube at $62.5 million for the year, including an exclusive on newly launched music-related YouTube channels.

But Vevo is out to prove its more than YouTube, and more than just music videos, for that matter. The company already airs music-related web series such as "Live on Letterman" and "Sylized." The company is expected to unveil a slate of originals at its upfront presentation later this month.

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