Vevo could be the next billion-dollar digital music business by valuation, but the emphasis remains very much on the “could” in that sentence.
The music video service’s desire to find either an outright buyer or a major new financial backer is hardly a secret, but with no news after months of rumours, attention is starting to focus on why Vevo might *not* be as appealing to bigger companies at its anticipated $700m-$1bn valuation.
DreamWorks, AT&T, Yahoo and Verizon are among the companies linked with Vevo, as well as investment groups The Chernin Group and Guggenheim Partners, but Billboard has a source suggesting that Vevo’s owners – specifically major labels Universal Music and Sony Music – may be one of the reasons for investor skittishness.
“The economics all depend on licenses from the major labels. If it’s sold, at what terms? The sellers can make Vevo look like it’s worth $1 billion or zero dollars,” as they put it. “Whoever buys it will have to contend with the complications of dealing with rights holders.”
An argument that can be applied just as much to Spotify, or any digital music service in which labels own equity. Note: this didn’t stop Apple pouncing for Beats Music’s parent company with a $3bn offer, although rightsholder complications are something Apple has more experience than most dealing with.
Vevo will surely still find its backer eventually, but the report is a reminder that while equity stakes make tempting golden geese for music rightsholders, they may still be perceived – within the tech/financial communities at least – as having the potential to scramble the golden eggs in the event of a lucrative exit.