By Dan Goikhman, CEO, Unreel Entertainment
Music video hosting service Vevo has ramped up its efforts to gain independence from Google’s online video titan YouTube. In seven years, Vevo has grown a large following as a licensed partner with YouTube. However, through syndicating the vast majority of its content to YouTube, the music platform has failed to launch its own brand, bound to the limits of the streaming giant.
As Vevo steps out of the shadow of YouTube’s reign, it has rebranded its app and refreshed its logo and senior management team. The video-first music platform wants to be up there with the likes of Spotify or Pandora, and its message to YouTube is clear: We’ve got Bieber and Rihanna, we don’t need you anymore.
Vevo faces a saturated video over-the-top (OTT) market, using the Internet to deliver video content without the need for traditional cable or service operators. This industry is dominated by the household names of streaming, from Netflix to Vimeo, none more powerful than its jilted partner, YouTube. The company is working to differentiate itself and it now must confront the mammoth task of persuading the vast majority of its following to abandon their YouTube viewing habits, providing user satisfaction while also monetizing its content.
As Vevo establishes itself as a true contender in this space, it faces many of the challenges emerging OTT platforms experience. What are the challenges Vevo faces, and is there still hope for new OTT platforms?
Going head-to-head with the gatekeepers of on-demand
A rise in connected devices, including a recent surge of smart TVs, and an increasing mass of digital video content has fueled the growth of OTT, as an alternative to traditional TV consumption through major broadcasters.
Still a nascent competitor on the video OTT scene, Vevo’s new app is up against giants like Netflix, Hulu and Amazon, in an industry estimated to reach $63 billion by 2020. Seven in ten people in the U.S. - roughly 181 million people - consume online video over the Internet, according to eMarketer’s 2015 report. YouTube is the obvious leader in this industry, with an average of 170.7 million monthly viewers that year.
Vevo hasn’t released stats regarding its YouTube versus native app viewership, though of its 400 million active monthly users and 18 billions video views, it’s known that YouTube contributes a huge part. Vevo has historically been the most-viewed YouTube partner, and Vevo accounts for 38% of YouTube’s unique monthly users.
Under leadership from CEO Erik Huggers, the company has a vision to build an OTT brand in its own right, taking a larger share of advertising revenues, rather than handing a big yet publicly undisclosed portion to the Google subsidiary. Centralizing its distribution to one independent platform means Vevo will have autonomy to run a popular platform as it wishes; offering users new tools to engage audiences, and a revenue model with fewer mouths to feed should put Vevo in good stead.
Building a profitable OTT model - the great debate
YouTube has reportedly claimed that 80% of global consumers choose to consume media for free, and 20% are willing to pay for this experience. Digital video ad spend in the U.S. is tipped to hit $9.84 billion this year, growing to $16.69 billion by 2020, according to eMarketer.
NewBay Media also claims that 73% of TV and video professionals will use advertising to monetize content, 59% will use subscriptions, 37% pay-per-view and 34% electronic sales. For example Buzzfeed recently announced the acquisition of startup Scroll, offering niche products such as state-scented candles for the homesick, as it experiments with commerce on the site.
Digiday argues that in the OTT industry, “subscriptions beat ads”. Users want quality content, and high production costs mean that platforms cannot deliver this on advertising profits alone. Vevo is taking a page out of Hulu and Spotify’s playbook -- offering a hybrid model, with a freemium option. On its own - Vevo will take a larger share of ad revenues, and it can begin to lure users to it’s planned premium subscription model. But it’s lost the luxury of scale, and is now working to build its app audiences and generate a following, independent of YouTube.
The future of OTT video will be community-driven
Vevo is pulling out the big guns to define its place in the market; partnering with Warner Music Group to increase its catalog, offering original shows, personalized mobile apps, live production, expert curated playlists, short-form content and more. The MTV of this generation. “Basically we have much more to offer than just a repository of music videos,” Huggers explained to CNBC.
The company has stated its goal: to become a source of information and discovery, lifestyle entertainment for the digital youth. Stepping out on its own, Vevo is seeking to transform itself into a social destination powered by personalized content that is centered around music and video. Truly owning it's distribution means users won’t be limited to selected genres, or lured to uploads outside of Vevo’s channels. Instead, hyper-personalization can enable greater engagement, free of pre-defined buckets.
53% of millennials expect recommendations on what to watch, and Vevo’s auto-playing videos and personalized artist recommendations cater to this. Similar to Spotify, Vevo fans can create their own playlists and follow profiles, feeding the algorithms with more data, and encouraging community interactions. Senior product manager Jose Gonzalez said these developments aim to make Vevo “personalised, immersive and engaging”.
Vevo’s decision to turn social reflects a larger trend in the OTT industry. Where TV has typically limited users to passive consumption, the connected online audience embraces interaction and conversations. After the premiere of the seventh season of AMC’s ‘Walking Dead’ almost half the audience, that’s some 7.6 million viewers, tuned in to watch the after-show discussion ‘Talking Dead’. On Twitter the hashtags #TWD and #TheWalkingDead made the show the top trending topic, with fans sharing personal reactions to major plot twists. Twitter has also begun to experiment with streaming, providing live footage of NFL games and political debates, using national events to engage audiences of millions on social media at the same moment.
As we're all seeing, the very near future of video is OTT, supported by increasing ad revenues and changing business models. The battle for new startups will be to differentiate in an already crowded market. Vevo has shown through its history that while a strategic partnership can help get you off the ground, autonomy is also an enabler.
As the industry continues to develop, the most successful OTT video enterprises will be those that identify their niche community. Using big data, recommendations and personalization to inspire conversations. The fight of the underdog in the face of reigning giants means startups need to creative, and new digital technologies and social capabilities will help independent content providers to do this.
About the Author
Dan Goikhman is the CEO of Unreel Entertainment, an OTT app provider that creates branded video apps for networks and businesses.