In recent times, the demise of physical music sales has forced many who rely on music generated revue for survival to think outside the square, whilst still remaining ethical and ‘fair’. Many have debated the rippled effects on online music streaming and its impact on both physical sales and artists’ revenue, but one budding CEO has set his sights on restoring the credibility of sourcing music online.
Rio Caraeff, CEO of video streaming service VEVO, which essentially acts like a more exclusively musical focused version of YouTube, has added his voice to the chorus of commenters on the current state of the music industry, of which streaming services and online digital distribution play a crucial role.
VEVO’s business operation is all about giving music fans access to their favorite acts for free, funded by advertising; or to put it another way, giving consumers an alternative to owning songs.
The CEO believes the key is undoubtedly adaption, saying: “I believe the future is access, not ownership, not iTunes as it is today,”he says. “we’re not trying to sell people music; our customers are not the small amount of people that want to buy music. We are about providing access: it is the only scalable model for the music industry.”
VEVO, which currently features almost 50,000 music videos from over 11,000 artists worldwide since its launch in 2009, has earned the backing of three of the ‘big four’ (Sony Music, Universal Music, and EMI), and uses its high internet traffic to generate revenue for content contributors. Namely, bands and artists are opting to open up further revenue streams through the music video service.
Another point Caraeff raises is that YouTube, of which VEVO gets around half of its traffic from, has focused on user-generated content while VEVO is pushing for officially sanctioned videos. “There are no duplicate copies [of music videos] on YouTube, there were thousands before. The official versions are only available from us. They don’t threaten us. YouTube is a place where people can upload any video in the world; we’re not trying to compete.”
This does however beg the question; how do you do that and make money? The VEVO CEO reassures that the company is making “hundreds of millions of dollars” outside of its hosting costs and upkeep, but the youthful entrepreneur wishes to focus on providing an alternate revenue stream for artists. Commenting on the need for such a service, Caraeff passionately said “we wouldn’t have created VEVO if we didn’t need it. The industry felt it was necessary.”
He also questioned the motives of fellow video services, but also some of VEVO’s partners, in saying “If MTV was doing a great job paying royalties, if YouTube [was], there would have been no need. We have invested tens of millions to be responsible for our own destiny. We can’t sit back and say, ‘I hope Apple or whoever figures this out’.”
Later commenting on the financial worth of online music services, Caraeff said: “The revenue generated has historically been low. I don’t think it makes sense or is fair. I want to restore the premium lustre of music. Aggregation makes it as valuable as sport, VEVO is the catalyst.”
VEVO relies heavily on advertisers purchasing invaluable product placement on the site, but has displayed his concern over the misconception that advertising through online music videos is inferior to its prime-time TV counterpart.
“The audience that loves music is vast and promising,” he continued, “it should be treated as if it were as valuable as the World Cup [audience to advertisers] or as premium TV content, not treated like it is a second-class citizen where advertisers don’t want to pay a premium.”
The service currently gives more than half of gross revenue to content owners – the label, artist or licenser – with the remainder being kept by VEVO or paid to partners such as YouTube.
Caraeff also claimed that VEVO has paid back about $US 100 million in royalties to the industry in its short lifespan, saying “it is a tremendous figure, more than MTV has ever paid out. It is important to let artists, songwriters, record companies and anyone else in the business of music know that there are new, viable revenue streams growing rapidly. That in a time of gloom in the sale of recorded music there are positive stories.”
Caraeff does admit that “nothing is going to completely fill the gap” in the decline in CD and physical sales, but puts forward that VEVO is providing real returns to labels and artists, which bodes well for an industry that has struggled to adapt to the digital age.
With the addition of VEVO however, many will be pondering on the recent discussions on music ownership and its effect on both owners and consumers.
With the rising popularity of streaming services, and Caraeff’s comments that the future is about access, not ownership, it seems that the idea of the traditional music library may one day run its course, an issue we explored in our opinion piece.
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