YouTube subscription music service to go for mobile dollars

Oct 29, 2013 by Dawn C. Chmielewski
YouTube

As YouTube prepares to launch its subscription music service by the end of the year, the digital music giant is seeking to capitalize on music fans' desire to have access to their favorite songs everywhere they go.

The company's free online video site already is the most popular on-demand service in the world and has surpassed radio as the leading way teens and young adults listen to songs.

The new service, designed to give paying subscribers commercial-free access to music videos on their portable devices - as well as the ability to store videos and playlists on these gadgets - underscores the importance of smartphones and tablets to YouTube's future.

"Mobile is becoming absolutely enormous for YouTube," said Forrester Research analyst James McQuivey. "The fact is that music has always been a medium that most people are going to want to carry with them and have available at all times. When ... you add the visual component of the music video, you're simply sweetening a pot."

YouTube executives have said about 40 percent of its viewing already happens on mobile devices. Indeed, more than 50.5 million Americans watched videos each month on their cellphones in the second quarter of the year, according to measurement firm Nielsen.

Music videos are among the most sought-after content for YouTube's 1 billion global users, with a popular song like Miley Cyrus' "Wrecking Ball" or Robin Thicke's "Blurred Lines" attracting hundreds of millions of views.

This has made YouTube the dominant online music site, dwarfing its few competitors.

"YouTube is the No. 1 music search directory in the world. The vast majority of the most-viewed videos on YouTube are music," said Richard Greenfield, a BTIG media analyst. "It's a natural evolution to figure out a way to generate increased engagement around music."

YouTube's mobile application lets smartphone or tablet users watch an unlimited number of music videos on these devices, so long as they are connected to the Internet. In some cases, this free mobile access is limited to the official version of the . The proposed subscription service, which could launch as soon as December, would allow the user to store, or "cache," these videos or an entire playlist on their devices and watch without the need of a wireless connection.

"Caching is what's critical to mobile," said longtime label executive Ted Cohen, who runs a digital media consulting firm. "Music services are easier to use in St. Louis than they are in New York City because they still haven't wired the subways with Wi-Fi."

A spokesman for YouTube said the Google Inc. unit had no news to announce, but added, "We're always working on new and better ways for people to enjoy YouTube content across all screens, and on giving partners more opportunities to reach their fans."

YouTube's entry in the music subscription business will raise the competitive stakes for such players as Spotify.

"This is a big game-changer for Spotify," Cohen said.

Subscription services are a modest but fast-growing segment of the music business, which in the United States derives more than half of its income from digital sources.

Revenue from subscription services such as Rhapsody and paid versions of Spotify, streaming radio services like Pandora and non-subscription streaming through YouTube and Vevo accounted for about $1 billion in 2012, or about 15 percent of domestic music sales of $7.1 billion, according to the Recording Industry Association of America.

The YouTube subscription service also would integrate with Google Play Music All Access, which for $10 a month affords subscribers unlimited access to its music catalog, the ability to create personalized radio stations and recommendations based on an individual's taste, according to people with knowledge of the situation who were not authorized to speak publicly.

David Bakula, senior vice president of analytics for Nielsen, said the service would leverage YouTube's strength in .

"Obviously YouTube understands the importance of the music consumer to their site," Bakula said. "The volume that we see coming from music streams on YouTube, that kind of volume comes with great potential, great potential for monetization, great potential for serving their viewers."

A premium would provide a source of recurring revenue for the music companies, which also receive proceeds from advertising associated with music videos on the site.

Evidence of YouTube's growing clout in the music industry will be on display at the inaugural YouTube Music Awards, to be held Nov. 3 in New York. The show is scheduled to feature appearances by such major acts as Avicii, M.I.A., Eminem and Lady Gaga.

Explore further: YouTube readying paid music service (Update)

1.5 /5 (2 votes)
add to favorites email to friend print save as pdf

Related Stories

YouTube readying paid music service (Update)

Oct 25, 2013

Google's video-sharing arm YouTube is preparing to launch a subscription music service to allow consumers to watch videos and listen to music ad-free, industry sources said Friday.

YouTube launches first music awards

Oct 01, 2013

Video-sharing service YouTube has announced its first music awards, which will be presented at a live event November 3 featuring Lady Gaga, Eminem, Arcade Fire and others.

Music video platform Vevo comes to Germany

Sep 02, 2013

US online music video channel Vevo said Monday it will launch its services in Germany this year after reaching a licensing deal with GEMA, the country's publishing rights agency.

Warner Music turns to YouTube tastemakers

Oct 16, 2013

To promote its new song from platinum-selling country music artist Hunter Hayes and Grammy winner Jason Mraz on Tuesday, Warner Music Group didn't book its stars on "Good Morning America" or "Late Night With Jimmy Fallon."

Recommended for you

A Closer Look: Your (online) life after death

15 hours ago

Sure, you have a lot to do today—laundry, bills, dinner—but it's never too early to start planning for your digital afterlife, the fate of your numerous online accounts once you shed this mortal coil.

Web filter lifts block on gay sites

15 hours ago

A popular online safe-search filter is ending its practice of blocking links to mainstream gay and lesbian advocacy groups for users hoping to avoid obscene sites.

Protecting infrastructure with smarter CPS

23 hours ago

Security of IT networks is continually being improved to protect against malicious hackers. Yet when IT networks interface with infrastructures such as water and electric systems to provide monitoring and control capabilities, ...

Apple helps iTunes users delete free U2 album

Sep 15, 2014

Apple on Monday began helping people boot U2 off their iTunes accounts after a cacophony of complaints about not wanting the automatically downloaded free album by the Irish rock band.

Habitual Facebook users: Suckers for social media scams?

Sep 15, 2014

A new study finds that habitual use of Facebook makes individuals susceptible to social media phishing attacks by criminals, likely because they automatically respond to requests without considering how they are connected ...

User comments : 0