The beleaguered music industry has seen another saviour in the guise of Vevo, the soon-to-be-launched music video service that is said to be to the internet what MTV was to multichannel television. Sony, Universal and EMI have already signed up, so the opportunity to create a 'video Spotify' certainly exists. But before the music companies crack open the champers, it should be pointed that the economics of the music industry still don't stack up.
Certainly, things have improved since YouTube attained and established a much lower benchmark for residual payments to artists and songwriters, but the reality is that the artist, the songwriter, the label and the management are all likely to have their cut; the service then needs to pay for marketing and promotion, delivery (that is, bandwidth) and ad sales.
But as long as the service manages to play a commercial before every video and attain $15 gross CPM they might succeed (I won't go into the full maths, see past posts..), adding in e-commerce, PPV for live events and the kind of sponsorship MTV was famous for might help further.
However, the real irony is that the majority of the advertising is likely to come from the music industry, eager to break new stars in a fragmented world. This may seem self-sustaining, but this circular flow of revenue can quickly dry up.