Record Labels Get Proactive to Protect Revenue

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 |  Includes: SNE, WMG
by: Joel West

Tuesday was the North american launch of Vevo, the music video site owned by Universal, Sony (NYSE:SNE) and money from Abu Dhabi Media.

I find it encouraging that the record labels are taking this step. Faced with the decimation of their decades-long revenue model — the sale of tangible music discs — they are making pro-active experiments. If the plane is losing altitude, at least they’re trying to pull up, rather than take the controlled flight into terrain like so many other industries afraid of cannibalization.

Of course, this is a very mild step — stealing back unmonetized content views from YouTube in (probably forlorn) hopes of gaining meaningful revenues. Still, if it crashes and burns, it’s better than the controlled flight into terrain that most of Hollywood is on.

It’s interesting to see what it does to YouTube, since — as Wired notes — most of the most popular videos are music related. By my count, before Vevo launched, 14 of the 24 videos with 60+ million views were owned by labels or artists.

As the LA Times notes, this is the music industry’s version of Hulu — i.e. yet another Universal anti-YouTube site. The Times is skeptical about claims made Tuesday about how revolutionary it is:

Bono's opening remarks were quoted by Billboard: "Friends, we are gathered here today to mourn the passing of the old model that was the music business."

Perhaps Bono has some inside information on what Vevo ultimately will become. In a quick summary, Vevo offers on-demand streaming of music content with advertisements. YouTube offers the same, without the ads, and more content.

I agree with the Times that the business model is suspect: it doesn’t work all that well for YouTube at monetizing, even if Vevo has less of the drek cluttering up the site (like all the fake videos.)

For now, it also doesn’t have videos from my favorite bands on WEA (or anything else from Warner Music Group (NYSE:WMG). Perhaps the record cartel has a plan for the firms to take turn swimming against the industry tide to make it seem less cartel-like.

Of course, some of this is correcting the original MTV mistake — giving away music videos as advertisements for the real content, rather than treating them as valuable in their own right. But then that horse escaped the barn nearly three decades ago.

Will the labels offer their content on reasonable terms to other online channels? Or will the other channels decide that the numbers can’t be made to work, long before the labels throw in the towel?