IBC 2016: Vevo CEO Discusses New Direction

Erik Huggers, CEO of music video company Vevo, has some big plans to turn his service into the Netflix of the music video world.

Huggers, a keynote speaker at IBC this year, is a former BBC executive who led the development of the BBC iPlayer. Subsequently, he oversaw Intel Corp. (Nasdaq: INTC)'s web TV service, OnCue, before it was sold to Verizon Communications Inc. (NYSE: VZ). Brought in a little more than a year ago, he was reportedly given the job of improving the Vevo product, especially on mobile devices favored by younger viewers.

Huggers is currently working on a new strategy for Vevo to extend its reach beyond YouTube Inc. Today, he pointed out, Vevo is the most watched catalog on YouTube even though older generations may not be as aware of it.

On average, 19 billion Vevo videos are viewed every month, which translates into 900 hours of video. He pointed out that Facebook counts a video as "viewed" after just three seconds, while Vevo has a 70% completion rate for its longer videos, offering far greater proven video engagement.

Huggers also highlighted the youthfulness of Vevo's viewers. The average age of the Vevo user is 33, compared with 53 for broadcast TV in the US. Within the key 18- to 49-year-old demographic, Vevo reaches more people than anyone in the US, including the four big broadcast networks (ABC, NBC, CBS and Fox).

Huggers is now trying to take advantage of these strengths and create a new growth path for Vevo. He has identified four key areas of improvement: product, content, brand and monetization.

Improving the product was his first priority and he believes they have achieved that now. He said the company has significantly built out its product team, pointing out that new releases are now launched every two weeks compared with nine months when he joined the company.

Vevo is also producing more content, creating new programs to help emerging artists gain recognition and working with more established ones to create unique content and streamed events. Vevo has also retained new "hosts" to facilitate a new brand experience that is more social and engaging. These are young musical influencers, according to Huggers. In particular, he spoke of YesJulz, a Miami-based Internet personality who has built a following by sharing practically every moment of her life on Snapchat.

On the monetization element, Huggers was less clear. He stressed that Vevo has a very successful business today, built on monetizing billions of views via advertising. According to him, Vevo is able to command "TV-like CPMs" today.

But moving forward he wants to see more curation. He compared YouTube to a flea market (though then quickly stressed it was a "great flea market"), but is now interested in also rolling out a boutique store. He also wants the Vevo experience to be more social, personalized and immersive, and he wants to give users more control over their playlists while using an Apple TV or iOS phone.

But given the number of streaming video services that exists today, it would take a brave team to launch another one.

"Everyone knows Netflix," according to Huggers, "but there are a lot of smaller ones [OTT video providers], with more of a niche appeal." He listed Fandor, a site for independent films, and Crunchroll, which streams anime content, as examples. He agreed that there is an inevitable cycle to these things, and eventually someone would come along and bundle them again since it would become too difficult for users to navigate all their preferred content.

But there's isn't much for music, in his opinion. Or rather, he clarified, there are services but they are mostly audio-only. He pointed out that on Vevo, 60% of viewing is active, i.e., viewers are watching the video rather than using Vevo just to listen to the audio while they performed other tasks.

"There are no music video subscription services and if you see some of the statistics, there is so much pent-up demand. If you think about it, music videos are a relic from the eighties, but they're ideal for mobile phones -- and we know that's where the youth are watching."

But he wasn't sure how to price and package this yet. "We don't know what the model will be," he said. "Right now, we are still focused on creating the best product and attracting the best artists. Then we can figure out the best approach for the business models."

"We also need to determine what features we can put behind the paywall, what content should be in front, what should be behind. We still have to figure it out, but we will," he said. "It will be a great free product but an even greater premium product behind the paywall."

Huggers' presentation was long on enthusiasm but short on specifics. He did share a very impressive set of viewer numbers for Vevo, but didn't offer much detail on how this new initiative would work. There's also the question of getting consumers to pay. Moving from a free to pay service is a huge shift for users, and won't be navigated easily.

Music videos themselves are going to be difficult to charge for, especially since they will still be available online via other sites. So it would have to be some kind of curated/created content. And it's not easy to see what Vevo can come up with that would be so compelling that people would pay for it.

It's more likely that the premium service will offer more control over the same content, such as creating playlists, sharing comments, music suggestions and recommendations and creating other ways for music lovers to engage with the platform and each other. But even if Vevo got this it exactly right, it's not clear that it could get a substantial number of younger viewers to actually pay. We've all seen how tough it is to do that.

On the other hand, the company is owned by the deep-pocketed Universal Music Group , Google (Nasdaq: GOOG), Sony Music Entertainment (SME) and Abu Dhabi Media. I don't think it risks its existing ad-sponsored business by trying to move to the next level and attempting to create a new revenue model. And this was clearly Huggers' mandate when he was hired: the investors were shopping the company two years ago but were unable to get the deal they wanted.

— Aditya Kishore, Practice Leader, Video Transformation, Telco Transformation