Vevo Must Break The Mould When It Goes Premium

Vevo has long been in search of an identity. In fact you could make an argument that it has had an identity crisis since its inception as a music industry appendage/Trojan Horse superimposed on YouTube (with the latter having little say in the matter unless it was willing to kiss label relationships goodbye). The fact Vevo still relies on YouTube for the majority of its traffic and that the majority of its users still don’t even know they’re not using YouTube all adds to the complexity. But for all its challenges, Vevo remains the record labels’ best bet of effectively monetizing music video. Now CEO Erik Huggers has taken that one step further with a pledge to launch a premium subscription tier for Vevo.

Huggers has gone on record stating that ad supported is not sustainable on its own. He has a point. Especially considering the fact that music video can no longer be relied upon as a marketing vehicle for music sales: the most likely next step of a consumer that has discovered new music on YouTube or Vevo is to stream it there again, not to go and buy anything. So music video has to wash its own face. However the massive challenge is that being free is the number one reason that people use Vevo and YouTube. In fact the music industry has spent the last 30 years educating consumers that music video is a free product, whether that be on Vevo, YouTube or MTV. A basic principle of product strategy is that it is nigh on impossible to start charging for something that has traditionally been free, unless you have a watertight control of supply. Vevo does not. For as long as YouTube allows users to upload music videos any Vevo video that is locked behind a Vevo paywall will swiftly find its way onto YouTube. And while Content ID means that videos can get taken down, the volume of uploads will massively increase when Vevo’s paywall comes up.

Vevo has the added challenge that the most valuable consumers that its advertisers want to reach are the exact same ones that are most likely to pay for a subscription to block out ads. So there will need to be a very careful revenue balancing act to ensure that subscription revenue is large enough to offset the impact of the resulting decline in ad CPMs.

Vevo Has To Do Premium Differently

None of this however means that Vevo should not pursue a subscription tier. Far from it. What it means is that Vevo has to tread carefully and that a standard freemium strategy will not work. The potential is huge. Music video is digital music’s killer app. 44% of consumers watch music video on YouTube or Vevo, rising to 64% for 16-24 year olds. But the vast majority of those users have no inclination to pay nor will they simply because a paywall goes up. So the free tier must remain compelling. One innovative solution would be unlimited free videos but not on demand, except for a rotated selection of front line videos of in cycle artists. A subscription (which would have to be much lower than $9.99) would unlock on demand playback, off line playback, playlist creation, exclusives, live streams, sessions, real time artist chat etc. No other pure play music service has the potential to create an interactive, highly visual, premium offering tailored for Digital Natives in the way Vevo does. The challenge for Vevo is whether it can up the ante sufficiently to create a proposition that breaks the mould rather than falling back on the freemium cookie cutter.