YouTube’s Music Key may not have launched yet but it promises to be highly disruptive to the streaming space as we know it, David Balfour suggests
14 November 2014 - Press releaseYouTube’s Music Key announcement puts a cat amongst the pigeons during a period where streaming music models were already receiving possibly unprecedented debate and analysis.
That YouTube planned to launch a music subscription service has been one of the worst-kept secrets in recent industry history. Highly publicised licensing disputes around the planned launch have meant that what is now known as Music Key has been much anticipated. What has been more uncertain however has been the exact form that this new service would take. This week’s launch answers a number of those questions.
Google has made a clever move in announcing that Music Key will initially launch only in beta and to a very select group of users. This enables YouTube to launch Music Key with a product that is not yet fully formed, enabling it both to adapt to real consumer feedback and to escape the kind of super-critical type of attention that tends to get applied to new music tech launches.
Whilst Music Key has some amount of development to go, core characteristics of the service are becoming clear. The paid subscription service will enable ad-free music streaming, offline caching and the ability to listen to music whilst using other apps.
The standard pricing will be £9.99, with a significant and lifetime discount to £7.99 being made available to early adopters. Subscribers will also be granted access to Google’s All Access Music subscription offer, a service which we’ve always found to be very solid and worthy of wider attention. One could question the ultimate motivation behind the £7.99 test pricepoint, but aside from that, the paid service hardly seems to be bringing anything radically new to the subscription market. That’s not to say that it isn’t distinct from other services in the market. What YouTube enjoys which other rivals do not is access to huge amounts of UGC content, live content, tribute content, parodies et cetera that are not typically found on ‘full content’ streaming services.
Whilst YouTube will undoubtedly enjoy the largest catalogue of any music streaming service, one gets the impression that it’s the licensed content from the major labels, Merlin and other indies – and not the UGC - that will be the main focus of the subscription service. Why deliver paying users with UGC of uncertain quality if you can deliver hi-res content with clean metadata? This is absolutely what paying subscribers will demand. But, we wonder, is Google’s end game really pushing to build a large base of paying subscribers?
It’s worth noting that the launch of the paid Music Key subscription also brings with it a deep and fundamental development of the core, free YouTube platform. It appears that new, fully licensed content from labels and publishers will also be equally available on the free platform, albeit with ads and with a more limited range of functionalities. So YouTube as we know it develops from being a free platform with almost everything on it, to become a free platform with absolutely everything on it, in guaranteed quality.
We already know from research that many free YouTube users felt little inclined to pay for a streaming service, before the announcement of the changes that will come with Music Key. Indeed research from MIDiA suggested that only 7% of YouTube users would pay for an ad-free version of the service. Will new mobile functionalities strengthen that upsell proposition? One might suspect that the advantages of the new paid tier for users are not hugely compelling, whilst the underlying strengthening of YouTube’s free model is obvious indeed. If, as reports suggest, full album streams will also come to YouTube’s free tier by default, strengthening its video by default model, YouTube may soon have a significant competitive advantage over the free tiers of other streaming services.
We’re forced to make a fair amount of speculation as to exactly what shape the final Music Key service will take, only time will tell. It’s hard not to feel however that it’s the changes to the free YouTube service which are the truly significant thing here, and that the arguments for upgrading to the paid service are not as strong as they might be. This would not conflict with Google’s underlying business model of attracting huge numbers of users and selling the opportunity to advertise to them. Is it a good strategy for the music industry however?
The relationship that record companies have with YouTube has always been complex. Whilst many have come to benefit hugely in recent years from revenue made on YouTube, there’s also long been a feeling that YouTube’s very existence undermines the outlook of some of the better-monetised platforms in the market. There’s little in the new launch that would appear to strengthen the hand of companies like Spotify or Deezer, quite the opposite. It’s a little confusing therefore, in the same week that the Wall Street Journal reports that major labels are seeking to reduce the availability and strong appeal of free services, a new service launches which seems to only enhance the appeal of free services and the amount of content available on them. One thing that is beyond doubt is that this new launch will be highly disruptive of the streaming space as we know it. If we look forward several months and factor in a possible impending global launch of Apple’s new streaming service, it’s likely that the streaming market we see a year from now is significantly different from the one we see today. We can only hope that the balance of these changes will turn out to be positive for artists and rightsholders.
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