Vevo has helped Universal and Sony Music monetize their music video catalogs, to the tune of annual revenue that reached an estimated $250 million in 2013 (56 percent, or $140 million, went to the labels). But with the company on the block as it eyes life post-YouTube, its distributor since 2009, what is the music video hub worth to potential investors?
The Vevo sale is being led by Goldman Sachs in partnership with The Raine Group, with a valuation that could land in the reported range of $700 million to $1 billion, according to multiple sources. Interested parties have included virtually every major player across every media sector, from DreamWorks (which placed a bid in April) to firms The Chernin Group and Guggenheim Partners (parent of Billboard) to telecom giants AT&T and Verizon to Yahoo and Amazon, the latter two of which are eager to expand their footprint in streaming video. A Vevo representative declined to comment.
Marketing materials began circulating in August, and executives familiar with Vevo’s pitch are bearish on its prospects. Google’s minority investment in 2013, valued at a reported 7 percent stake, has made the company worth a minimum $650 million sale, a price tag that many are balking at given Vevo’s ultimate value without YouTube’s valuable display ad dollars, which make up a bulk of the company’s current earnings. Another potential hurdle: Vevo owners aren’t aligned on sale strategy.
“I don’t think they’re going to be able to sell it,” says a senior financial executive. “The book [Vevo’s financial data] is bullshit. The economics all depend on licenses from the major labels. If it’s sold, at what terms? The sellers can make Vevo look like it’s worth $1 billion or zero dollars.” Indeed, Vevo’s fate in the market is looking like that of streaming-video site Hulu, a well-known brand with little value outside of its content licenses. In 2013, Hulu held advanced talks with potential buyers before ultimately taking itself off the block. Says a corporate insider who opted not to bid for Vevo, “Whoever buys it will have to contend with the complications of dealing with rights holders.” Not always a pretty picture.