Business Matters: The Numbers Behind Vevo's Potential Facebook Move
Business Matters: The Numbers Behind Vevo's Potential Facebook Move

What If Facebook And Vevo Really Did Get Together?
Facebook and Vevo are reported to be in early talks to move Vevo's catalog of popular music videos and original programming after its deal with YouTube expires in about a year. Whether or not Vevo takes its highly valued videos to Facebook is anybody's guess, but the scenario involves a handful of interesting factors. How much is Vevo worth to Facebook? What terms will Facebook offer Vevo? And will Facebook provide the traffic artists, labels and publishers have become used to from YouTube?

We don't know the exact value Facebook can place on a Vevo deal, but a very rough (emphasizing both "very" and "rough") estimate is possible. Vevo had about 717 million streams in January, according to comScore. With the generous assumption that Vevo got a $25/CPM (the low end of the CPM range, according to Vevo's public statements) on all videos and all videos were supported by advertising, Vevo's videos generated a maximum of $17.9 million in advertising revenue in January. YouTube accounts for about 90% of Vevo's views, according to statements in the past by CEO Rio Caraeff (that may have changed over the years as syndication partners have been added). The remainder of views come from Vevo properties and syndication partners. But, for this example, let's stick with that 90% figure and conclude that views at YouTube accounted for roughly $16.1 million of Vevo's $17.9 million of revenue in January.

Business Matters: Vevo Tightens Facebook Partnership, Kim Dotcom Rails Against Copyright Law

Assuming Facebook takes the 30% share of revenue it takes for Facebook Credits transactions, its share of Vevo's January advertising revenue would have been $4.8 million, or $58.1 million at an annualized rate. Over a four-year deal, and at a static pace, Vevo would be worth $232 million in revenue. Vevo views roughly doubled in 2011, so let's figure growth in a Facebook deal would slow to 80% in year 1, 60% in year 2, 40% in year 3 and 20% in year 4. In that scenario, Facebook's share of revenue would be $281 million over four years.

However, the actual value of the deal to Facebook would be far less due to hosting and streaming costs, as well as the cost to build an anti-piracy filter similar to Google's Content ID to allow rights holders to monetize videos and prevent unwanted uploads.

Variables play havoc with these calculations. For this deal to happen, Facebook may need to offer a lower share of ad revenue. The value of the deal to Facebook would drop as a result. It may get a deal longer than four years, which would increase the value of the deal.

What's in it for Facebook? A report at the New York Post claimed Facebook wants Vevo to increase its value before its eventual IPO. But these calculations suggest a short-term deal with Vevo would not greatly impact Facebook's market value when it goes public. Facebook's offering price could imply a market value of $100 billion. The value of a Vevo deal would barely move the needle.

The Message of Facebook's IPO Filing: Social is Your Future

Vevo could have greater value for Facebook as a cornerstone content partner. Facebook needs to combat its stagnating growth in the U.S. It can't get many more users, but it can get existing users to spend more time at Facebook and access Facebook from more devices. Music videos could help solve that problem because they attract viewers and are popular for viewing on multiple screens. Thus, Vevo could be the first of more content partners - both short- and long-form video - that will keep Facebook users engaged for longer periods of time.

MTV Reunites With Vevo, Now Has Licensing Deals From All Four Majors

But there is one key reason for Vevo to stay with YouTube: the site is the most popular video site in the world. It's synonymous with online video. Thus, Vevo's videos may not get as many views at Facebook as they would at YouTube. While Facebook may offer a better deal in terms of revenue share - YouTube is said to take 35% of ad revenue generated from Vevo streams - it may not be able to match YouTube's ability to generate streaming volume.

Google+ Hangouts May Start Replacing Skype
It's about time to start paying attention to Google+. It still lags far behind Facebook as a social network, but people are starting to find the Hangouts feature, which allows Skype-like group video chatting, is a really cool tool. Musicians have been using it to talk with and perform for fans - kind of like virtual living room shows. And one well-known venture capitalist is jumping on board, too. Union Square Venture's Fred Wilson writes at his blog, A VC, that he's ditching Skype in favor of Google Hangouts. "Skype is the only piece of desktop software I have on my various machines other than a slew of web browsers," he writes. "But my decision last year to leave the world of files and apps and get to the cloud has been incredibly liberating. I want to finish it off. And so Google Hangouts here I come." ( A VC)

"Epic Battle Looming" Over Copyright Reversions
The attorney who landed at #93 on Billboard's Power 100 for his digital royalty lawsuits is setting his sights on 1978 copyrights that revert to artists. In a blog post at Forbes.com, Nashville-based Richard Busch declares "an epic battle is looming" over the fight between artists who will file to reclaim their works and the companies that have owned the works for the last 35 years.

Consumers and businesses could get caught in the crossfire, warns Bushch. "Spotify, iTunes, and other music providers could be prohibited from providing specific tracks. Injunctions related to and uncertainty in copyright ownership could take down commercials and prohibit, for at least a period, advertising containing copyrighted material in dispute." He later added, "Every copyright from sound recordings, to your start-up's brochure, to the photograph on your website is subject to the Copyright Act and is thus subject to a potential termination."

SXSW attendees can learn more about the topic at "How Stella Got Her Groove Back: Reversion Rights" at 1:30pm on Thursday, March 15. Hosted by Daryl Friedman, Chief Advocacy & Industry Rel Officer for the Recording Academy, the panel features Ken Abdo of Lommen Abdo Law Firm and musician Gloria Gaynor.

If Gaynor's recent comments to the Austin Chronicle are any indication, the panel could be both informative and entertaining. As Gaynor sees it, "I Will Survive" wouldn't have made her record label so much money if she hadn't been singing it all around the world over the years. "It makes absolutely no sense whatsoever that I should be making a pittance from it while the record company makes all this money just because they put up the initial money."

The topic will become more visible, and the conversation more heated, over the course of 2012, writes Busch. "With the first terminations not becoming effective until January 1, 2013, the battle so far has largely consisted of posturing on the part of the labels. That is likely to change in the next few months. Once the calendar turns to 2013, the copyright termination battle will go public." ( Forbes.com)

Questions? Comments? Let us know: @billboardbiz

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