YouTube Shakes Off Ads with Subscription Music Service

by Glenn Hower | Nov. 12, 2014

As I stroll and speak around CCW-SATCON today, there is plenty of talk around how OTT rights and licensing are going to affect traditional video distribution methods. However, Google (being Google), decided to crash the party with their announcement of YouTube Music Key, an ad-free subscription service that will allow users to watch, download, and listen to music offline or with the screen locked. The new music service is interesting, and there are a few key takeaways from the announcement.

  • As long as the support services and infrastructure necessary for payments are in place and cost-effective, this should not really change much about what YouTube does. It creates an alternative revenue stream, but YouTube will continue to rely heavily on advertising as the majority of viewers are likely to continue consuming content for free.
  • YouTube answered certain viewer complaints about consuming music on its service including audio playback with the screen locked, curated music playlists, and full album access. Those willing to pay for it and listen to ad-free music probably will pay for it.
  • Compared to their Google All Access service, YouTube carries a potentially stronger brand for Google that people already associate with music and music videos. This is easy brand leverage for Google. 
  • Music is already a tough sell to stingy consumers, with most consumer use cases for music being highly passive and unengaged. Anything to bring in incremental revenue and a higher level of engagement is a boon to YouTube, the record label, and the artist alike. 

Overall the move into subscription music is slightly surprising for YouTube, in which free access is one of its defining features, but it seems to be a logical one. The question that will be answered in the coming months is whether or not enough consumers are willing to pay for it to justify the service.

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