Vevo on the Block after Failed Bid for Independence

Vevo, the leading purveyor of online music videos and one of the largest Web video services in the world, is for sale: the company and its bankers have begun taking meetings with a veritable who’s who of media and tech companies that have signaled they could be buyers.

It’s a disappointing turn of events for a company that once had grand dreams of moving beyond music and transforming itself into a major independent producer of entertainment and lifestyle programming. A secret effort to pursue such a path came to naught, and the impending sale offers a stark lesson in the pitfalls of certain types of joint ventures and the collective decision-making that they require.

Owned by two of the three top music record labels, Vevo earlier this spring hired investment bank Goldman Sachs and Raine Group, a boutique M&A advisory firm, to work on a strategic plan and talk to potential suitors who are interested in taking a minority or controlling stake in the company, according to three people who have been involved in the process. The company is on track to post about $350 million in revenue this year, according to a person with access to that information, and is considered a particularly attractive property because its artist-driven music videos command high advertising rates.

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One lesson to draw from the episode is that joint ventures where the interests of the owners are not aligned with the interests of the company can readily end in tears. It also spotlights the fraught issue of who calls the shots at joint ventures. At both Vevo and Hulu, there isn’t a single decision maker. The same was true when electronics giant Sony and wireless networking firm Ericsson in 2001 created a joint venture to produce mobile devices, with each owning 50%. After some initial success, the venture failed, and Sony took it over in 2011, though other factors contributed to that outcome. By contrast, Verizon Communications and Vodafone created Verizon Wireless, which rose to be the No. 1 wireless carrier in the U.S. It was mainly controlled by Verizon, which owned 55% and earlier this year completed a deal to buy out Vodafone’s stake for $130 billion.


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By the fall of 2013, it also became clear to many of Vevo’s directors that the company would have trouble attracting new investors and becoming independent without securing long-term licensing deals from the labels first.