Can YouTube’s New Music Play Mend Its Fences With the Industry?

Kyle Hilton

Music Key, the company’s years-in-the-works premium streaming service, arrives Nov. 17. But will consumers want to pay for something they’ve always had for free?

After a year of rumors, false starts and belabored label negotiations, YouTube’s streaming subscription service, Music Key, will arrive Nov. 17 through invite-only beta in the United States and select European territories. With agreements from all three major labels and the bulk of the indies, a $9.99 monthly price tag ($7.99 for initial invites) for an ad-free subscription and offline functionality, Music Key is Google’s bid to put a video spin -- with the mood-based ­playlists of Songza, which it acquired in July -- on a streaming-music market dominated by audio-only players like Spotify and SoundCloud.

“The goal is more ways to play music on YouTube, giving artists more ways to reach fans and make money,” YouTube spokesman Matt McLernon tells Billboard.

But with music videos estimated by IFPI to account for 38.4 percent of the 6 billion hours spent on YouTube in 2013 alone, will consumers pay to access something they’ve always had for free? That’s the billion-viewer question.

Russ Crupnick of market research firm MusicWatch says some consumers have a “subscription ethos,” believing the benefits of paid subscriptions justify the cost. But, Crupnick cautions, “many don’t share that. And free, with whatever constraints, limits or boundaries, is quite good enough.”

So why create a subscription service now? Look at the competition: Apple, through its acquisition of Beats Music, is certain to grow its share of the streaming market. Amazon is going after middle-of-the-road listeners with its limited-catalog Music Prime. And Spotify, currently campaigning the creative community for support after Taylor Swift pulled her catalog, has a 12.5 million U.S. subscriber head start (28 million worldwide in 2013, according to IFPI). Still, counters Jeff Price, founder of digital-rights administrator Audiam, “YouTube is already Spotify, if you close your eyes.”

Many industry executives are hopeful that Music Key will help YouTube clean up the “metadata” that often gets lost in uploads of master recordings and drives users to the original composer and purchase links. This has been a core asset of YouTube’s Content ID system, which helps copyright owners “claim” any video featuring their master audio (e.g., the “Harlem Shake” meme), and has disbursed more than $1 billion in revenue since 2007.

“YouTube is responsible for more than 70 percent of music consumption and less than 3 percent of revenue; anything they do to rectify this injustice we support,” says Robb McDaniels, founder/CEO of Isolation Network, which owns digital distributor INgrooves. Martin Bandier, chairman/CEO of Sony/ATV Music Publishing, also voices frustration with Music Key’s compulsory license, which would pay out 10 percent of revenue. “The rate is not reflective of the value of what songwriters do and should be higher,” he says. “Nowadays, 95 percent of hit songs are written by someone other than the artist. [Is YouTube] saying that doesn’t have a value?” Other skeptics include Irving Azoff, who recently threatened to pull 20,000 songs represented by his Global Music Rights publishing venture in order to secure better performance royalties for his clients.

YouTube touts its conversion rate as the ultimate selling point, but while it certainly has a large audience to work with, size doesn’t always matter in digital music -- Microsoft’s 99-cent offer for Swift’s 1989, for example, made nary a blip in the singer’s first-week numbers. What does? The user experience, for which Google has long erred on the side of simplicity, and with enticements like offline, mobile and background listening, YouTube might be the smarter bet to actually pull it off.

This article first appeared in the Nov. 22 issue of Billboard.


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