How Facebook can go from villain to hero: Pinch Vevo from YouTube

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The MBW Review gives our take on some of the music biz’s biggest recent goings-on. This time, we consider Facebook‘s hire of the widely respected digital music exec Tamara Hrivnak – and what the social media giant could be plotting. The MBW Review is supported by FUGA.

It’s easy to get carried away by Facebook’s potential in the music business.

The company’s last confirmed active user figure of 1.79bn is around 15 times larger than Spotify‘s – and that doesn’t include the 600m people using Facebook-owned Instagram.

More enticingly, if just 30% of Facebook’s core audience were paying $5 a month for music, it would generate over $32bn a year.

That’s more than double the current annual revenues of the entire global recorded music industry.

Sadly, these figures suffer from a surfeit of fantasy.

Especially because, right now, Facebook pays precisely nothing to music rightsholders.

But with the hiring of former YouTube, Warner Music and Warner/Chappell exec Tamara Hrivnak, that all looks set to change.

The poaching of Hrivnak away from Google is a major coup for Facebook – and, in terms of industry harmony at least, also a big blow to YouTube.

The fact her departure from YouTube comes on the heels of Lyor Cohen‘s arrival (who was once Hrivnak’s Warner colleague) adds nicely to the music biz drama.

One senior major label source told MBW over the weekend that Hrivnak is “the most respected person at YouTube” and, even more damningly, is “considered the only credible voice there with the music industry”.

It’s a compliment which leads to the inevitable question: what does Facebook want with a music licensing expert?

One who top people at publishers and labels actually consider smart and copyright-friendly?

There are a number of possible eventualities resulting from Hrivnak’s hiring.

But one, more than any other, jumps out in the near term.

MBW has heard from robust sources that Vevo’s exclusive partnership with YouTube is due to expire later this year.

What that means in reality: the 200k premium music videos from Universal, Sony and the independents currently hosted on Vevo channels could – feasibly – soon end up tied to another third-party platform.

Any guesses?

Interestingly, Vevo just put out some new statistics which suggest around 43% of YouTube’s US users are viewing its videos on Google’s platform.

Such figures raise the debate of which brand really needs the other more.

When MBW put the possibility of Vevo switching allegiance to Facebook to the company’s CEO Erik Huggers last year, he gave us a very diplomatic – yet possibly telling – response.

“YouTube is, in today’s world, a very important partner to us,” he said.

“At the same time, we’re always looking at opportunities to improve the business and the economics of everyone involved.”

Never were three words more carefully chosen.

“In today’s world.”

Facebook, meanwhile, clearly realizes it has a major problem to address with the music business.

As MBW reported just before Christmas, some of Facebook’s key future ‘influencers’ – emerging artists recording cover versions of unlicensed songs – are seeing their budding careers being caught in the crossfire of a copyright war.

Universal Music Publishing Group has garnered a reputation for being particularly aggressive with its takedown notices on Facebook of late.

Its piracy boss David Benjamin was even singled out by songwriter and musicians’ rights activist David Lowery as a ‘hero’ for refusing to allow Mark Zuckerberg‘s platform to host unlicensed music.

A deal with Vevo would (alongside a related set of publishing deals) swiftly fix this fallout.

Not least because David Benjamin’s employer owns a 49% stake in it.

Another obstacle: unlike Google, sharing ad revenue isn’t in Facebook’s DNA.

But when you’re robbing your users of music – such an obvious driver of cherished shared experiences – by butting heads with rights-holders, it’s probably time to reverse your policy.

As SESAC boss John Josephson told MBW earlier this year: “Facebook has so many opportunities to optimize the user experience and enhance engagement with product innovations that also involve active monetization of music.

“My hope would be that they begin to move more aggressively in this direction, and that they secure the licenses required to do so.”

Tamara Hrivnak’s arrival certainly indicates the company is willing to meet this call.

The prospect of a Vevo/Facebook tie-up is not without its operational difficulties: Google remains a minority shareholder in Vevo, for one thing (alongside Sony and Abu Dhabi Media).

There’s also the issue of Warner Music Group which, although now a partner of Vevo, hosts its own channels on YouTube.

If Sony and Universal’s repertoire upped sticks for Facebook, you could bet WMG would make the most of the market share opportunity.

On Facebook’s side, there are other avenues available to make money in music: its 1.78bn users, for example, dwarf even Ticketmaster’s huge customer database – so perhaps there’s a live music play available.

Meanwhile, Facebook had $26.14bn in cash and cash equivalents in the bank at the end of Q3 last year; an acquisition of a serious music streaming player, even $8.5bn-valued Spotify, might not be off the table.

But last summer, Mark Zuckerberg laid down the gauntlet to YouTube, telling investors “the big theme and strategy that we’re executing is we’re going to become video first”.

If the music business has one obvious asset which could help him achieve this objective – while wrenching a significant audience away from his key rival – it’s Vevo.

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The MBW Review is supported by FUGA, the high-end technology partner for content owners and distributors. FUGA is the number one choice for some of the largest labels, management companies and distributors worldwide. With a broad array of services, its adaptable and flexible platform has been built, in conjunction with leading music partners, to provide seamless integration and meet rapidly evolving industry requirements. Learn more at www.fuga.comMusic Business Worldwide

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