YouTube’s long awaited music subscription service, YouTube Music Key, is officially in beta (by invitation only). YouTube is the largest free music service in the world, and now people will be able to pay for it — don’t miss the irony here!
Consistent with how Google (the owner of YouTube) operates, the details are fuzzy and likely will evolve as Google learns from beta users.
The irony here is that YouTube’s biggest demographic, 18 to 34 year-olds, have no issues searching and listening to music for free on YouTube (and that slants lower to 14 year-olds). So now YouTube is offering a subscription ($7.99 or $9.99/mo depending when you start) that appears to be trying to solve a problem their biggest users are not complaining about…
A couple things might be at play here. YouTube is pressured to pay rights holders a bigger percentage than it does currently. A subscription tier would ensure more money goes out to rights holders than from advertising dollars. Here are some numbers: YouTube has 1 billion monthly users and has paid out $1 billion from its ContentID system since its launch 7 years ago. Spotify has 50 million users (12.5M paying) and has paid out $2 billion in 6 years ($1 billion just this last year!). Clearly, YouTube needs to pay out more money to rights holders.
Keep in mind that YouTube makes money from advertising, period. Diversifying its revenue stream with another offering is good business. Record companies want a bigger percentage, so YouTube Music Key is a way to placate that request. If users actually convert to paying subscribers, an avalanche of money will go to rights holders; but that is a big ‘if’.
The ability to play videos offline might just be the biggest attraction, success and differentiator for YouTube Music Key. Beats Music, Spotify and the other streaming services will be hard-pressed to compete there.
info via Re/code