Vevo seeking $500m for expansion

Vevo’s plan to launch a subscription service by the end of the yeartakes one step further as it hires top investment firm Goldman Sachs to hunt down US$350 to $500 million in capital funding.

This will be used to expand to more countries, develop more original programming (for the subscription service), acquire companies that will help its service and develop new mobile, television and “discovery” offerings.

According to one analyst, “The company now embarks on the path it arguably should have been on since its inception; owning the music video — and videos about music — sector of the global content industry.”

The online video service draws nearly 20 billion music video views a month. It is primarily owned by two of the world’s biggest record companies, Universal Music Group and Sony Music, who own 40% each with smaller stakes by Google-owned YouTube and the Abu Dhabi Media Company.

It is available in 14 markets – including Australia where this month it became part of Southern Cross Austereo after it bought out Authentic Entertainment’s radio & digital businesses. It has offices in Los Angeles, San Francisco, Chicago, Portland, New York, Berlin and London.

In recent weeks, Vevo has begun a more aggressive strategy, mooted since new CEO Erik Huggers came on board last April. Huggers lead the team that created the BBC iPlayer. Last month he redesigned Vevo’s apps and website (adding features as a Snapchat-style vertical video option for watching music videos) and again intensified the push for more original programming (which would include bringing in hosts and curated playlists) and the subscription service.

In early August, Vevo finally struck a content deal with the third largest record company, Warner Music Group. The wider catalogue including acts as Bruno Mars and Ed Sheeran was “an important step in that direction” to the subscription model, Huggers said.

Vevo is moving into a space that is rapidly changing its goal posts. Its two leaders, Spotify and Apple Music, are aggressively expanding to video, new revenue sources and finding new subscribers. As a number of other digital start-ups discovered in the past, Vevo’s inability to keep up with these changes will lose it the right to keep existing.

Vevo has for 16 months been planning how to be less reliant on YouTube. YouTube streams more free music that Spotify and Apple Music put together, and recently launched a subscription service of its own. It is currently in talks with major labels over licensing rates.