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Warner Music Group Nearing Deal With Vevo

Warner Music Group is in advanced talks with Vevo about a deal that would allow WMG artists' music videos to appear on and the Vevo app, a source tells Billboard.

Warner Music Group is in advanced talks with Vevo about a deal that would allow WMG artists’ music videos to appear on and the Vevo app, a source tells Billboard. The deal, which could be finalized as soon as this week, would end Warner’s long holdout against the video platform — owned by Universal Music Group, Sony Music Entertainment, Abu Dhabi Media and Google — and, for Vevo, bring the last remaining major label into the fold.

The agreement, negotiated off and on for more than a year, will exclude YouTube, on which Vevo maintains accounts for artists signed to UMG and Sony, with Warner artists retaining their own YouTube channels. It also is not an equity deal, as Universal’s and Sony’s are, giving WMG some flexibility in terms of releases. A representative from Warner Music Group declined to comment on this story, while reps for Vevo did not return requests for comment as of press time.

The news of negotiations between Vevo and Warner first emerged last August, with a source characterizing the talks as in the early stages; one person says it was unclear at the time what type of deal would be reached between the two companies. Now, this impending pact comes after a year of redesigns and changes at the video service propelled by CEO Erik Huggers, who took over for Rio Caraeff — the company’s top exec since its December 2009 launch — in April 2015. Those included an overhaul of the site’s desktop design, updates to its playlist and personalization features, new social components for users and a venture into original content with new music hosts and curators. In the past six months, Huggers has spoken several times about his desire to launch a paid subscription tier, though concrete plans have yet to materialize.

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In July 2016, Vevo claimed 18 billion monthly views, a number likely to rise significantly with the addition of Warner’s catalog. As it moves closer towards Hugger’s dream of producing documentaries, original series and paid tiers — it’s only current tier is fully ad- and funding-supported — Vevo has positioned itself by bringing in talent, cleaning up its mobile app and acquiring video aggregator Showyou last December. And the long-discussed subscription tier would come at a time when subscription streaming revenue is exploding in the music industry, rising 45 percent worldwide in 2015, according to the IFPI.

Those moves were attractive for WMG, which seems to be coming to view Vevo as more than just a bargaining chip for UMG and Sony in their advertising rate negotiations with YouTube. Since May, Warner has been making moves to make its music available in as many places as possible through licensing deals with Facebook and social video sharing app to allow its artists’ music to be monetized on those platforms, and acquisitions such as Indonesian label group ISS and Swedish digital compilation company X5 Music Group.

The deal is arriving at a time when YouTube has come under fire from nearly every corner of the music industry for its royalty structure and Content ID system, with artists, labels and managers complaining that the platform hosts illegal, copyrighted material and hides behind the DMCA. (Google, which owns YouTube, acquired a seven percent stake in Vevo in July 2013.) With the Warner deal, Vevo will have another important piece of its puzzle locked down.