How YouTube's Subscription Service Will Benefit Record Labels

YouTube's music-subscription service, which could launch as early as December, is about two things: big user numbers and monthly revenue. Spotify has 6 million paying customers, but a billion people view YouTube videos every month. "If YouTube has an opportunity to even get one-half or one-fourth or even one-sixteenth of the conversion rates that Spotify has, that's a tremendous business," says a source at a major record label. "Spotify doesn't have the marketing clout or user base that YouTube has, by not even a long shot."

The service is likely to grow out of YouTube's mobile app, and will add, for a monthly fee, ad-free music, off-line listening, a Pandora-like service for customizing radio stations and the ability to hear music while texting or using apps. YouTube reps wouldn't give specifics: "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. However, we have nothing to announce at this time," a spokesperson said in a statement. But a source familiar with the service clarifies what the service will not be. "It's not putting a paywall in front of music. That would just not be cool on many levels," the source says. "And it's not Spotify-plus-video."

Record executives hope the new service improves on YouTube's listening experience. Although the online-video giant's ad revenue has grown lately into more regular royalty payments for pop stars, songwriters and labels, it's hard for YouTube fans to do simple things like listen to a full album or find an official video. Compared to Spotify, a label source says, "It takes a lot of effort by the user to organize the [YouTube] experience."

YouTube has been contemplating a subscription service for months -- to the point that its executives made content deals more than a year ago with major labels. It could work in tandem with Google Play Music All Access, owned by YouTube's parent company, thus giving Google a formidable download-and-streaming hybrid.

:story: Rolling Stone