Universal Music Group Didn’t Help Veoh, but It Didn’t Kill It

Who killed Veoh? It’s convenient to blame Universal Music Group, which wrestled with the video start-up in court for years. But it’s wrong.

The music label’s suit made it very difficult for Veoh to climb out of the deep hole it found itself in last year. But it was the Web video start-up, not Universal, that dug that pit.

First, some housekeeping. CEO Dmitry Shapiro now confirms his company’s impending shutdown and Chapter 7 bankruptcy filing.

Plans to either sell or refinance the company came “close, in both cases,” he told me late this afternoon. “But we were unable to secure either option.”

Shapiro didn’t offer any details about the future of the Web site or the videos users have uploaded there over the years. I gather that’s because he doesn’t know himself.

He did, however, sketch out a brief picture of the company’s demise. Like others, Shapiro points out the problems caused by Universal’s copyright suit, which is broadly similar to the one Viacom (VIA) is still fighting with Google’s (GOOG) YouTube.

“Clearly the UMG lawsuit was a tremendous weight on the company. It was both financially draining and distracting, and it choked off the ability for any significant strategic deals, because everybody we talked to was terrified of getting sued immediately,” he said. “And we know that potential investors were thinking that, too.”

But the UMG lawsuit didn’t burn through $70 million of investors’ money. At most, sources say, the company spent something in the $6 million to $8 million range on legal fees.

Where did the rest of the money to go?

To fund Veoh’s YouTube-sized ambitions, apparently. Sources familiar with the company tell me that during its go-go days, it was spending as much as $4 million a month on a bloated staff and infrastructure.

But Veoh only generated something like $12 million in sales over its five-year life, and most of that was in the past couple years, sources said.

Veoh’s burn rate was cut back significantly after the economy crashed. And it shrank even more last April, when Shapiro returned to the company he founded and replaced then-CEO Steve Mitgang.

Could Veoh have raised more money at that point? It’s hard to see how, even if the Universal lawsuit wasn’t hanging over it. It was difficult to raise money for any online advertising venture in the spring of 2009, let alone a money-burning Web video site.

And it’s worth noting that Joost, another well-funded Web video start-up, more or less shut down a few months after Veoh’s restructuring.

On the other hand, France’s DailyMotion managed to raise another $25 million last October. So there are still people out there betting on Web video, and Shapiro says they’re right. But his company was too early, and it grew too fast–and ultimately, not fast enough.

“We were pioneers, and we were there in the first few years when there was no advertising market to speak of,” he says. “Over the next couple years, do I think that more and more brand advertisers are going to move into online video? Absolutely. Online video is going to be a success.”

AOL Begins Firing Employees Who Wouldn’t Leave

In November, AOL CEO Tim Armstrong said he needed 2,500 “volunteers” to give up their jobs, but not enough of them got the message–only 1,100 walked away on their own.

Now Armstrong is entering the second phase of his corporate slimdown and is firing some 1,000-plus employees.

AOL (AOL) officials say the company has begun notifying European employees of its plans to shut down many of its offices there and has started tapping some American workers as well. The bulk of the U.S. layoffs are slated for this Wednesday, the company says.

The goal is to cut payroll costs by a third.

The layoffs have been in motion for many months: Armstrong came onboard as CEO last spring and it has been clear since then that he would need to cut costs either before or after the company spun off from Time Warner (TWX).

AOL hasn’t released a breakdown of cuts by territory or by department. But I’m told that the company’s editorial/content production staff, which Armstrong and his lieutenants have been emphasizing as a priority in recent months, will not remain untouched.

Here is AOL’s statement explaining the cuts:

Since we’ve talked in the past about AOL’s restructuring effort, I want to update you. As you know, in November, we announced that the company would take a $200 million charge and that we planned to decrease the size of our global workforce by one-third. Late last year, we offered Voluntary Separation Program to enable employees to decide what was in their best personal and professional interest. We had approximately 1,100 employees opt to join the Voluntary program. At that time we announced the Voluntary program we noted that if we didn’t reach our target reduction of a third we would need to follow the voluntary program with an involuntary action. We did not reach that target.

The next phase of our restructuring plan will include an involuntary layoff. Our process internationally varies by country and is subject to local laws. We began meeting with employees throughout Europe today. For example meetings have already taken place in the UK, Germany and France, and we announced plans to shut down many of our offices in Europe, beginning with those in Spain and Sweden.  In addition, we will be beginning the consultative process with the Workers’ Councils in relevant countries this week.

In the United States, we will begin notifying a limited number of individuals impacted by the involuntary layoff today, with the majority of notifications taking place in the U.S. on Wednesday, January 13. As of this point, this layoff will not trigger the Worker Adjustment and Retraining Notification Act (WARN) in any of our locations. For many of the employees impacted in the U.S., Wednesday will be their last day in the office.

As you know from covering the company, since April, we have been moving through a process that started with strategy, then focused on structure, and has most recently been centered on aligning our costs with the company’s strategy and structure. As a part of this process, we’ve looked at every aspect of this business. We evaluated our competitive position and product portfolio in every market–and we asked the hard questions about areas that were no longer core to the strategy and our profit profiles in the businesses and countries where we operate.

We will be offering packages to impacted employees in the U.S. that will include severance, benefits and outplacement assistance, among other things.

All of our cost alignment work is about ensuring AOL’s sustainability and future success. Project Everest is the completion of phase one of AOL’s turnaround.

How to See a Handball: Watch France Cheat Its Way Into the World Cup

thierry henry france soccerIn the U.S., this is no big deal, but in much of the world this is now the sports equivalent of the Zapruder film: French soccer star Thierry Henry cheating, via a handball, and propelling his team past Ireland and into next year’s World Cup.

The Web is full of chatter about yesterday’s game, but video is hard to come by. Again, this appears to be a case of Google’s (GOOG) YouTube flexing its ContentID system on behalf of copyright owners, in this case the European sports marketing company Sportfive.

This is a theoretical victory for content creators, who want to be able to control how and where their stuff appears on the Web. But since there doesn’t seem to be an approved video, it’s not really a solution. If it’s a story that’s attracting most of the world’s attention, someone’s going to find it, somewhere.

For instance, a bit of searching did yield these two, at least for now: A high-quality YouTube version of what appears to be a French broadcast, via the Los Angeles Times, and what appears to be a German highlight reel, via DailyMotion and FootyTube, which consistently has great soccer highlights, legal or not (thanks to Zen Web Solutions for the reminder).

French Papers Aim at Younger Readers

The government detailed plans for a project called “My Free Newspaper,” under which 18 to 24-year-olds will be offered a free, yearlong subscription to a newspaper of their choice.