YouTube Confirms Subscription Service Imminent, Warns of Takedowns

YouTube has confirmed it is close to launching its music subscription service, even as it in the process of pulling down some of the biggest indie label acts in a dispute over payments.

Acts like Adele, Arctic Monkeys and Vampire Weekend, who account for up to 10% of all the music for which YouTube typically has rights to feature, are likely to be pulled down as the world’s largest video service has been unable to reach an agreement with the some of the leading independent labels, including the Beggars Group.

The crux of the dispute is that YouTube and the labels are unable to agree on royalty terms the subscription service in addition to existing terms with its free service.

YouTube executives argue that they cannot offer music on the free service without it also being available on the paid service as this would disappoint its subscribers. The solution? To take down songs that can’t be available on both services.

“We’re adding subscription-based features for music on YouTube to bring our music partners new revenue streams in addition to the hundreds of millions of dollars YouTube already generates for them each year,” said a YouTube spokesman in a statement. Google-owned YouTube is testing the service internally, but will not give a date for its launch yet. The dispute with the indies is not likely to hold up its plans, according to person familiar with the company.

The music industry is excited for more entrants into the streaming business, which is the fastest-growing music distribution format. But there remains caution about giving up too much control to Google. Even after nearly a decade of working together, some executives still privately worry about Google’s track record with respecting content owners’ rights. YouTube is the leading music platform with its free video service and said it has paid more than $1 billion out to rights-holders in the "last several years."

But many in the indie label community in particular have long grumbled of unfair treatment, especially when compared with other digital services.

"We are treated equitably and fairly by Rdio, Spotify and Rhapsody, and about 20 services, but obviously not YouTube," Rich Bengloff, president of the independent label trade association A2IM, told Billboard. "I filed a complaint with the FTC last week.” (Read the letter here.)

Amazon is another major new player in the music streaming service with the launch of its Prime Music service and new reports that it will soon launch its own smartphone with AT&T.

Additional reporting by Andy Gensler