POWER MOVE: Huge global growth and surging ad rates put YouTube’s largest channel partner in a powerful negotiating position.
THE RUNDOWN: Last year, Rio Caraeff’s music video venture Vevo delivered $100 million to artists and other music rights-holders — double what it had paid in the prior two years. What’s more, he built up his entire business without charging its 239 million viewers a penny.
Since launching Vevo in 2009 as a joint venture among Sony Music Entertainment, Universal Music Group and Abu Dhabi Media Group, Caraeff has built a diverse global audience. International expansion was a priority in 2012, when Vevo expanded its coverage from four countries to 10. As a result, 3 billion of its 4 billion streams were outside North America. Its videos also became popular on more platforms, beefing up its mobile, tablet and connected-TV viewing by 420%. “The shift in viewing behavior is happening extremely rapidly,” Caraeff says, “and we were able to shift right along with it.”
Caraeff has been effective so far in persuading advertisers that Vevo deserved a substantially higher ad rate than what’s being charged by everyone else online — including those at its biggest distribution partner, Google’s YouTube. Vevo’s rates and its split with YouTube have been the subject of intense negotiations between the two as they hammer out a deal for this year and beyond.
Caraeff and his team have two main points of leverage. First, Vevo continues to be YouTube’s largest channel partner, delivering 50.5 million unique viewers to the site in December, according to comScore — about one in three audience members. Second, Vevo has had enormous success in driving up its ad rates. In the United Kingdom last year, Vevo grew its ad cost per 1,000 impressions more than tenfold, from more than €2 at the beginning of 2012 to more than €20 today.
So who will get the upper hand in the Vevo-YouTube deal? Caraeff wouldn’t say, holding his cards close to his vest. “We’re close [to getting a deal hammered out],” Caraeff says, “but we’re not finished yet.”
Rio Caraeff photo by Matt Furman