Two Days Before Deal Expires, Vevo and YouTube Far From Agreement

With less than two days before YouTube's deal with Vevo expires on Sunday, the two companies are still far from an agreement, according to a source knowledgeable with the negotiations. 

But because the contract has a 120-day automatic extension that keeps it in effect  through early April, neither side is pressed to get a deal done right away, despite the hundreds of millions of dollars in advertising money at stake. 

At issue is the revenue split that YouTube shares with Vevo for the advertising that runs on the music company's videos. Also being discussed is the "cost-per-thousand" ad rate that YouTube charges. Vevo believes that the rate should be higher, given that its channel contains premium content. 

YouTube typically gives "the majority" of the advertising money it collects to content partners such as Vevo. But the split could range from 51% to more than 75% going to partners, after a 10% sales commission is paid out. Neither Vevo nor YouTube has disclosed the details of their current arrangement. 

Vevo in November disclosed that it paid out more than $200 million, a portion of its overall revenue, to artists since 2009. Much of that revenue came from its relationship with YouTube, which continues to generate the vast majority of Vevo's views. 

Doug Morris, who led on the founding of Vevo in 2009 when he was head of Universal Music Group, and who is now chief executive at Sony Music Entertainment, earlier this summer threatened to take Vevo's videos to other platforms if YouTube doesn't sweeten its current deal. Other platforms could include Facebook, Microsoft, Amazon and Apple, he told the Los Angeles Times in July. 

Neither side, however, is eager to call it quits, because the arrangement is mutually beneficial. 

"We always hope to renew our relationships with valuable partners," YouTube said in a statement, declining to comment specifically on its talks with Vevo. 

Vevo is often the top channel on YouTube. In October, it attracted more than 52.1 million unique viewers who generated 603.2 million views on YouTube, making it the most popular channel, according to comScore Inc. On the other hand, YouTube accounted for 98.2% of Vevo's overall unique viewers. The rest came from Vevo.com and its extension on Sony Music's site.