YouTube and Universal Music Group are building a new music video site called Vevo, which will be a subsidiary of Vivendi's Universal. YouTube will contribute technology and a sales force, and Universal Music will contribute music videos. The companies will share revenue from ads.
The upshot for Google (GOOG) is that it could have a better chance to make money off music videos under the new structure. And if Vevo is successful, Google could apply this model to other premium media such as TV shows and movies.
But it's important that Google doesn't mess up YouTube in the process.
One potential place for trouble is the hand-off between YouTube and Vevo: Music videos will be available in YouTube's search engine, but they won't actually be on YouTube. Viewers will be directed to Vevo's site to watch the actual videos. Maybe not as user-friendly as just watching the video on YouTube.
Vevo could potentially hurt YouTube's traffic metrics. Music videos are very popular -- Universal Music's YouTube channel has 3.5 billion views. While YouTube is big enough to take that hit from one label (or other "pro" content source), can it take it from all of them?
Moreover, without music videos (and TV clips, etc.) what's left on YouTube? User-generated stuff that Google can't sell ads on, some leftover pirated content, dogs on skateboards, and... what else? YouTube is popular because it has everything in one place for free. Fragment that into different sites with different experiences and YouTube could lose its status as the go-to place for video on the Web.
Then again, that status isn't making Google any money right now, and isn't likely to in the near future. So let's hope that Vevo is the next Hulu and not the next PressPlay.
