For Erik Huggers, CEO of Vevo, the giant signs outside his office building are a grating reminder of what he’s up against. The Market Street tower in San Francisco advertises its other illustrious startup tenants, Uber and Square. But Vevo, whose sprawling offices offer sweeping views of the city from the 21st floor, doesn’t rate a mention. Huggers believes Vevo deserves a spot among the marquee names of the digital era. After all, its music videos are watched by millions of fans every day. But the Vevo brand languishes in obscurity. And as CEO, Huggers is on a mission to transform his company from YouTube’s underappreciated business partner into a top streaming platform in its own right.
Vevo, the majority of which is owned by Universal Music Group and Sony Music Entertainment, two of the “big three” music labels, is trying to do for the mobile era what MTV did for TV: be the premium destination for music videos from popular and up-and-coming artists. Already many of the videos it distributes–on Vevo-branded channels on YouTube and also on Vevo.com–are among the most popular anywhere. “Hello,” by Adele, for example, has been viewed 1.7 billion times on YouTube, making it the sixth-most-watched video ever on that site. JustinBieberVEVO, the artist’s YouTube channel, is the site’s third most popular. And that’s precisely the challenge. Most viewing of Vevo clips takes place on YouTube, not on Vevo.com or the company’s mobile app, and music fans barely register the white Vevo logo on the bottom right corner of the screen.
Huggers wants to change that and lure more music fans to Vevo itself. But stepping out of YouTube’s shadow will be challenging. Vevo was born in 2009 out of the tense negotiations between Google-owned YouTube and the music labels, which were unhappy with the dollars they were getting from YouTube. The labels, leveraging their massive catalogs, pressured Google into a new deal: The two sides would create Vevo as both a stand-alone site and a provider of artist-specific channels on YouTube. “The record labels said, ‘Let us launch Vevo, or else,’” says Mark Mulligan, an analyst at MIDiA Research. Google and Abu Dhabi Media ended up with minority stakes.
The alliance has been fruitful. Huggers tells Forbes that Vevo anticipates $500 million in revenue this year, much of it from its ad-revenue-sharing deal with YouTube. (That’s roughly half of Pandora’s 2015 revenue and about a quarter of Spotify’s.) An average of 25 million people watch a Vevo video each day on its own site or on YouTube. That not only makes Vevo a major player in digital music but also puts its audience on par with that of a top-five cable-TV channel.
Huggers was brought on as CEO in April 2015 to push the business further. By shifting even a fraction of the YouTube audience onto its own site and app, Vevo could collect far more ad revenue, given that YouTube keeps a large portion–neither side will say exactly how much–of what it makes from clips played on its site. “Today Vevo is just a watermark,” he says. His dream is to turn it into a youth lifestyle brand. Working with more than 325 employees in New York City, San Francisco and other cities, Huggers, the former head of Intel’s media division, has made strides.
In July Vevo released a slick redesign of its website and app aimed squarely at luring YouTube viewers. Now when you open Vevo on your computer or phone, a video launches immediately, an experience much like radio, where music is playing when you turn it on. As with many streaming services, you can create your own playlists or follow those of others and see suggestions for artists you might like based on your viewing history. Huggers says the Vevo app is a place where people can find the best music and won’t “stumble upon videos about how to feed a giraffe,” as they might on YouTube. Huggers scored a coup in August when Warner Music Group, the other big-three label, finally agreed to distribute its content through Vevo, plugging a major hole in its catalog. (Warner still has a separate distribution deal with YouTube.)
Vevo’s cry for attention is well-timed. Spending on digital video advertising is projected to reach $10.3 billion this year, according to eMarketer, with 43% of that going to mobile. By 2019 it could reach $16.3 billion. Much of that will target Millennials, who don’t mind watching on a small screen. It’s an audience that’s especially hungry for the kind of content Vevo offers. But YouTube is not about to cede its music fans to anyone. It launched its own dedicated app, YouTube Music, in November 2015. This summer, around the time of the Vevo redesign, it launched a national marketing campaign to promote it. “The feedback from music fans so far has been great,” a YouTube spokesperson says. In September YouTube hired industry veteran Lyor Cohen, a former Warner exec and founder of the independent label 300 Entertainment, for a new role called global head of music. Part of his job will be to mend YouTube’s fraught relationship with major artists, some of whom argue that the company pays them too little for their content. In a letter to his new crew, Cohen said he looked forward to “helping the music community embrace the technological shifts we’re seeing in music today, so we can help take the confusion and distrust out of the equation.”
Despite the open rivalry for eyeballs and ad dollars, both Vevo and Google insist the relationship is cordial. “In any relationship there are ups and downs, but it’s been mutually beneficial,” Huggers says. Google is similarly neutral: “We work hand in hand with them to support artists in making connections with fans around the world,” a spokesperson says. As he seeks to make his mark, Huggers faces yet another challenge. While music-streaming companies like Spotify have experimented with adding videos to their services, no company based specifically on music videos has yet taken off. “I don’t think anyone has figured out a competitive model based purely on music videos,” says Woody Marshall, a Spotify investor and board member.
Huggers believes Vevo can beat the odds with its recent redesign and an upcoming subscription service. The company plans to start out with a free tier and then phase in a premium service. But it, too, faces long odds. YouTube’s own subscription service, YouTube Red, allows fans to “use the music app to listen to music videos offline–without an Internet connection–and uninterrupted by ads or when their phone’s screen is turned off,” a spokesman says. Red also gives users access to ad-free videos and original YouTube shows. None of that will stop Vevo from forging ahead. Its subscription service is likely to launch in the first half of next year. “We’ll ship it when it’s ready,” Huggers says. For Vevo the bigger question may not be when it will be ready but whether anyone will care.
This article was originally published in the November 8, 2016 issue of Forbes.