Perhaps the only digital music startup these days that can demand a $300 million valuation before even launching is Vevo, the JV between Universal, Sony, and YouTube.
PaidContent’s Rafat Ali cites multiple sources as saying that CEO Rio Caraeff is currently on the road pitching investors on the online video site that will feature music videos and original programming from Universal and Sony artists.
At first that may seem a bit high for a company that hasn’t even officially launched yet. But, there is certainly value in the massive library of content both Universal and Sony lay claim to. In addition, demand for music videos online is well-proven: Universal and Sony run the no. 1 and no. 3 most watched channels on YouTube.
As we’ve written before, digital music has not been a very good investment for most VCs. However, for the most part this mainly includes selling MP3s or streaming music sites, some of which have unsucessfully tried to make money off of ads. There is money to be made in online music video given the growth of online video viewing and the high CPMs video commands. And with the labels controlling both the content and the distribution, it won’t be necessary to pay a guaranteed royalty payment per stream to the labels, which will inevitably help profitability.
We’d love to get our hands on the business plan used to pitch the VCs on Vevo since there must be additional revenue streams included in their forecast beyond ad-supported video. As the audience for Vevo grows, the site would be a great platform for merchandise and ticket sales in addition to sales of MP3s.