YouTube is testing a new subscription music service that will charge people in exchange for the ability to watch and listen to music without ads and download the music to their mobile devices.
The new YouTube premium service will dispense with ads and allow subscribers to download full albums for offline listening. Rumored to be called YouTube Music Pass, it’s expected to launch later this summer. Pricing has yet to be announced.
One thing for sure though, moving into paid services was always going to be a bit of a hurdle for YouTube, which has up to now been almost synonymous with ‘free’. The site has also in the past made much of its support for independent artists, as Kristoffer Rom, co-chairman of Danish independent label association DUP points out.
The inevitable streaming service has found itself embroiled in controversy, however, when it’s head of content and business operations, Robert Kyncl told the Financial Times that the service will block videos any from labels that do not sign licensing agreements for the new premium tier. The news caused outrage among independent labels, who collectively account for over 30% of the industry’s sales.
The Google-owned company will begin blocking videos “in a matter of days” according to Kyncl, to ensure that content on the platform is governed by it’s new contractual terms. The European Commission is already investigating a complaint by more than one organization, including the Worldwide Independent Network, WIN for short, that Google is using it’s dominance to attempt to force the smaller labels into unfavorable terms or risk being blocked.
Rom went on to say “YouTube’s self-proclaimed role as a ‘a distribution platform for original content creators and advertisers large and small’ is little more than hollow branding of a company that in reality is losing touch with the very creators and audience that have bloated the size of the platform into the stratosphere over the years, for a global mastodon like YouTube to further undermine the value of music to a level well below existing streaming services can spread like a virus and destroy the independent recording industry, labels and artists alike.”
“They have suffered a simple but catastrophic error of judgement in misreading the market,” WIN chief executive Alison Wenhan told The Guardian.
Independent labels are concerned that, without any collective bargaining power, they will be throttled by an inability to negotiate better rates. To that end, many labels have set up licensing agency Merlin to give them a collective bargaining power in negotiations. Merlin estimates that indies collectively account for a significant 32.6% market share of the recorded music industry’s sales and streams.
Realistically, a subscription service from YouTube could mean a powerful new stream of revenue for artists. YouTube has remained a popular outlet for consuming music, and a premium service allows artists to capture money from listening subscribers. Nielson reported that roughly 7% of the population use YouTube to discover and listen to music, while a whopping 64% of the teen demographic do.
Since it was acquired by Google in 2006, YouTube has paid out more than one billion dollars to the music industry through licensing deals that give rights holders a share of advertising revenue. That figure, Kyncl says, is going to double soon.
YouTube won’t disclose the terms of either agreements with three major record labels or with the independent labels, so the public is unable to determine if or what exactly the disparity between the contracts is. So for now, the battle will continue to rage on.