Vevo seeks to raise $500m in bid to chart own course

Vevo, the online music video service owned by the world’s largest record labels, has hired Goldman Sachs to secure up to $500m of capital from new investors, according to three people briefed on the plans.

The fundraising comes as the company, majority-owned by Universal Music Group and Sony Music, is developing a paid subscription service. Vevo aims to raise between $300m and $500m to fund international expansion, potential acquisitions and the development of new mobile and television services.

UMG and Sony Music each own more than 40 per cent of Vevo. Google’s YouTube video site and Abu Dhabi Media Company also own small stakes.

Vevo declined to comment on the fundraising. UMG and Sony Music also declined to comment, as did Goldman Sachs.

The fundraising comes as competition hots up among digital music services. Spotify and Apple Music have become the dominant players in music streaming but both are increasingly focusing on video. Meanwhile, more free music is streamed on YouTube than on both services.

YouTube, which recently launched its own paid music service, is the main online gateway to Vevo content. However, Vevo is known to be keen to become more self-sufficient — and less reliant on YouTube.

Last year Vevo hired Erik Huggers as chief executive to shape a new strategy for the company. Mr Huggers, who had previously headed up web video for the BBC and led the team that designed the BBC iPlayer, is keen to launch a subscription offering that emphasises original video content to complement Vevo’s music videos.

Vevo this month secured the rights to Warner Music content, filling what had been a missing piece in the company’s music catalogue and better positioning itself to compete with other streaming sites. At the time, Mr Huggers said the deal with Warner was “an important step in that direction [of a paid subscription service]” — which he aims to launch by the end of this year.

Last month Vevo revamped its apps and website and announced it would bring in hosts to offer original programming and curated playlists. It has also made technical upgrades, adding features such as a Snapchat-style vertical video option for watching music videos.

Spotify remains the leader in subscriptions, with 30m paid users, although it faces growing competition from Apple, which reported in June that it had reached 15m customers. Amazon’s Prime and Jay Z’s Tidal are also competing for music subscribers.

Vevo’s move towards a subscription-based model come as streaming has displaced digital downloads as the biggest generator of music revenue in the US.

Meanwhile the biggest record labels, weighed down by shrinking album sales, are in a row with YouTube as they negotiate new licensing terms with the site. YouTube has been criticised by artists and music companies who argue it is exploiting copyright law to pay below market rates for content.