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Google Inc.’s YouTube on Tuesday confirmed that it has a renewed its agreement with Vevo, a music video and content distributor owned by Universal Music Group, Sony Music Entertainment and Abu Dhabi Media Group.
In addition to retaining VEVO’s videos on YouTube, the deal calls for Google to invest in Vevo’s business. The investment, reported by The Financial Times on Tuesday and Billboard in February to be worth between $40 million and $50 million, gives the Silicon Valley technology company a roughly 7 percent stake in Vevo.
“We made an investment in Vevo,” YouTube said in a statement. “We are excited by their future prospects and to provide YouTube users with the best possible music experience.”
Vevo is planning to use the money to expand its international presence and invest in creating original music-related content to augment its growing library of official music videos from Sony and Universal, but not those from Warner Music Group, which operates competing YouTube music channels.
Terms of the deal, as well as the timing of the agreement, were not disclosed. Vevo did not immediately respond to a request for comment.
Vevo’s contract with YouTube ended in April and has been operating under a temporary extension while the negotiations took place. At issue was the ad revenue split that YouTube would be able to claim for Vevo’s videos. In May, VEVO accounted for 50.2 million unique viewers on YouTube, making it the top channel partner on YouTube, according to comScore’s monthly Media Metrix report. With so many viewers, YouTube could ill afford to lose Vevo. On the other hand, the vast majority of Vevo’s video views come from YouTube users.
The multi-year renewal ends the uncertainty around Vevo’s symbiotic relationship with YouTube, bringing a level of stability to VEVO’s business model.
Vevo has been busy trying to raise capital for its ambition to grow into a global media brand centered around music, retaining Allen & Co. earlier this year to facilitate negotiations and financing. Among the companies approached back in February is Guggenheim Partners, which owns Billboard’s parent company, Prometheus Global Media.
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