Is YouTube Hungry for More?
Google’s (NASDAQ:GOOG) YouTube is primarily known as a video distributor, but the service is increasingly looking to increase its footprint and gain ownership of the content providers whose videos populate its site. After acquiring a $35 million stake in Machinima, a network aimed at gamers, YouTube is now looking into Vevo, a joint venture between content owners Universal Music and Sony (NYSE:SNE) and investor Abu Dhabi Media.
As AllThingD’s Peter Kafka reported on Wednesday, the deal has not yet been finalized, as Universal and Sony have yet to sign off on the agreement, but Google and YouTube have agreed to make an investment in the content partner.
If terms are agreed upon, “it will allow the two sides to continue with a symbiotic — and at times contentious — relationship that has gone on for three years,” Kafka wrote. YouTube will be able to continue streaming music videos from big labels and Vevo will be able to show its clips on the world’s largest video distribution site. Vevo’s current contract with YouTube allows the distributor to host its videos in exchange for approximately one-third of the advertising revenue…
But Google is not the only company that has held discussions with Vevo in recent months. The New York Post reported in May of last year that Facebook’s (NASDAQ:FB) Mark Zuckerberg was also interested in a partnership with the music-video service, a deal that would give the social network access to a large online audience and hefty advertising revenues.
YouTube has been evolving its service in other ways as well. Google has spent hundreds of millions of dollars to develop professional content channels in an effort to make the site more like television, mixing original programming and clips from around the Internet. With this new format, the technology company hoped to draw more viewers to YouTube and convince advertisers to spend more on ad spots.
Following Google’s most recent quarterly earnings release, it seems the investment has paid off. Nomura Equity Research analyst Brian Nowack commented in a research note seen by Barron’s that based partly on the service’s “new channel format and higher-quality content,” YouTube would likely generate $3.2 billion for 2012.
Investing Insights: Are People Too Bearish On Google?