As the digital giant confirm a joint bid with their Google paymasters to become heavyweight contenders in the world of subscription streaming, Ben Gilbert takes a look at the headline features, potential disruptive power and reaction from an industry keen to bridge the infamous “value-gap”.
After months of speculation, YouTube and Google have finally, officially announced their joint bid to become heavyweight contenders in the music streaming game. The launch of YouTube Music confirms that the pair of digital giants are edging towards a showdown with reigning champions Spotify and Apple Music. More than that, the decision serves notice of a long-awaited subscription model to bridge the infamous “value-gap” between their epic global reach and the comparatively small financial kick back for the industry.
What are the headline features?
YouTube Music’s streaming service will be available either for free with ads or through a premium model via “a reimagined mobile app” and a new desktop player charged at $9.99 per month. The initial roll out, which included the US, Mexico, South Korea, Australia and New Zealand, continues over the coming weeks to encompass 13 European countries, including the UK and Canada. But what are the headline features?
Backed by a global monthly audience of almost two billion users, it’s clear that YouTube are in a position of considerable power within the market. With an unrivalled library of music videos and official tracks, they’re keen to highlight a range of further differentiators that make this a serious move within the industry. Equally, the integration with Google’s AI technology promises to deliver a level of personalisation beyond those currently available to consumers.
But is there anything truly disruptive among these components? Mark Mulligan, music industry commentator and analyst at MIDiA Research, told Synchtank. “YouTube Music is not breaking new ground for music experiences but what it is doing is bringing to an ad-free environment much of what makes music on YouTube as a whole unique, such as rare tracks, bootlegs, covers, comments, likes/dislikes. On this front YouTube has remained far ahead of the rest of the streaming marketplace, building out highly social features in its core platform that others have not.”
“YouTube Music is not breaking new ground for music experiences but what it is doing is bringing to an ad-free environment much of what makes music on YouTube as a whole unique, such as rare tracks, bootlegs, covers, comments, likes/dislikes. On this front YouTube has remained far ahead of the rest of the streaming marketplace.”
– Mark Mulligan, MIDiA Research
How did YouTube announce the news?
YouTube Music product manager Elias Roman confirmed the news in a blog post, commenting: “YouTube was made for video, not just music. On Tuesday, May 22, we’ll be changing that by introducing YouTube Music, a new music streaming service made for music with the magic of YouTube: making the world of music easier to explore and more personalised than ever. The days of jumping back and forth between multiple music apps and YouTube are over. Whether you want to listen, watch or discover, it’s all here.”
Meanwhile, the company’s global music head Lyor Cohen has been keen to address the importance of rebuilding their fragile relationship with the music industry. “It’s good for consumers to have the choice,” he told Rolling Stone. “We have a really really powerful advertising business and are going to build a really powerful subscription service. We wanted to make sure that we heard the record industry. And they want two engines on the plane.”
The inference is clear. YouTube’s ad revenue in 2017 was $9.6 billion and a subscription-based music service runs counter to this model. So, why are they doing it? Because without the labels, artists, publishers etc. onboard, their access to the content that flicks the switch on this annual windfall is at risk. “YouTube needs to show that it is a good partner to the labels. The labels are focused on subscriptions so YouTube needs to demonstrate that it is helping build that marketplace, though of course its core focus will remain ad supported,” explained Mulligan.
“YouTube needs to show that it is a good partner to the labels. The labels are focused on subscriptions so YouTube needs to demonstrate that it is helping build that marketplace.”
– Mark Mulligan, MIDiA Research
Of course, both Google and YouTube already have separate music subscription services and this move will merge the two, with the intention of providing a more streamlined and cogent vehicle for both the audience and the industry. But what happens to current subscribers? Google has approximately five million signed up to Play Music, with a similar figure on YouTube Red. Both audiences will be rolled into new subscription models as the company looks to retain its existing audience, while expanding the overall reach.
How will this impact the streaming world?
Online streaming is now categorically big business and the music industry’s biggest source of revenue. Recent figures confirm that record company revenue in 2017 grew at a speed not seen since Britpop more than 20 years ago. Combined takings from streaming, downloads, physical sales and licensing rose more than 10% to £839 million. Significantly, the main contributor was streaming, which increased by 41%, to £389 million, for the first time overtaking physical formats. In total, global revenue from streaming amounted to 38% of all recorded music, according to the International Federation of the Phonographic Industry (IFPI).
Apple Music and Spotify have approximately 125 million subscribers. However, these figures are dwarfed by YouTube’s ad-funded and free music proposition, a business model that allows the company to circumvent traditional piracy fears and many of the economic and creative rules that govern their competitors. But are YouTube really serious about the subscription game, given that it runs counter to their predominant method of making money? Mulligan continues: “YouTube is not about to become the biggest music subscription service on the planet, but it will become a major second tier player. Meanwhile it will be able to focus its core efforts on building its ad supported business – which will increasingly compete with Spotify now that the latter is beefing up its radio replacement strategy.”
“YouTube is not about to become the biggest music subscription service on the planet, but it will become a major second tier player. Meanwhile it will be able to focus its core efforts on building its ad supported business – which will increasingly compete with Spotify now that the latter is beefing up its radio replacement strategy.”
– Mark Mulligan, MIDiA Research
How has the music industry reacted?
This news comes as the music industry enjoys a long-awaited renaissance and further supports the buoyancy highlighted in these financial figures. At the top end, major labels UMG, Warner Music Group and Sony are starting to reap the rewards of digital music’s successful commodification. YouTube’s evolution will surely only amplify the financial rewards that saw the three majors make more than $14 million a day from streaming services like Spotify and Apple Music in 2017.
This announcement also confirms the ongoing thaw in relations between the industry and YouTube and follows their recent Music In This Video initiative, which seeks to formalise artist, songwriter, label and publisher credits across the platform. That move was warmly received by figures across the industry, who have also reacted enthusiastically to the latest news.
Michael Nash, Executive Vice President of Digital Strategy at Universal Music Group, said the move would benefit “the entire music ecosystem”. Meanwhile, Warner Music’s CEO of Recorded Music Max Lousada proclaimed the decision, calling it an “important step in recognizing the power of artists, their music and the value they create”. He said: “Music has helped attract a global audience of almost two billion to YouTube, so the potential prize here is huge.” With an audience of such magnitude, this is already the world’s most popular digital music service. But how many of them are ready to pay for it?