The way you experience YouTube may be dramatically different before the end of the year. According to multiple sources, the world’s largest video-sharing site is preparing to launch its two separate subscription services before the end of 2015 — Music Key, which has been in beta since last November, and another unnamed service targeting YouTube’s premium content creators, which will come with a paywall. Taken together, YouTube will be a mix of free, ad-supported content and premium videos that sit behind a paywall.
With the exception of a few video rentals, YouTube has always been a free, ad-supported service. But the company is about to get serious about subscription services, offering new ways for the users that create videos to make money. While two subscription offerings for the same service might seem odd to some — with one music industry source calling it “strange on top of strange” — YouTube’s thinking was likened to that of a cable company offering different packages for sports and movies.
“Strange on top of strange.”
With over 1 billion users, YouTube is large enough to support multiple streaming services, but reaction within the music industry — which enjoys a mutually beneficial, yet strained relationship with YouTube — is mixed. The music labels are split on the idea of multiple subscription services, with some believing that YouTube won’t properly market Music Key. They point to a lack of advertising around Google Play Music as a prime example of Google’s lack of commitment to pushing its music services.
While one music industry source stated that they do like Music Key, they questioned the “strategic priority” of the music subscription service for YouTube and Google. Given the fact that some of YouTube’s deals with the major record labels are expiring in 2016 and the multiple delays of Music Key, which was announced last November, the source believes that YouTube is just attempting to appease the labels before negotiations begin, noting that “this feels very much [like] too little too late.”
There are questions about YouTube’s commitment to Music Key
Bickering between the labels and YouTube has gone on for years and is showing no sign of abating. The labels complain that YouTube doesn’t pay them enough for their music, which makes up a substantial amount of YouTube’s traffic, while YouTube says it has paid billions to the labels over the past few years. The labels are eager to push users away from free, ad-supported offerings over to paid subscriptions, which are more lucrative.
Despite the corporate squabbling, the biggest change for most YouTube users will be the music that inevitably finds its way behind the upcoming paywall. Despite Spotify’s growth, YouTube is still the largest music streaming platform in the world — 45 out of the 50 most-viewed YouTube videos of all time are music videos — and still the place where teens get the majority of their music.
The labels have begun early discussions about how to best capitalize on the paywall, but no firm decisions have been made. One option being floated is keeping the music free for a certain amount of time before pulling it behind the paywall — like after an album release — but sources were quick to caution that it’s still early and nothing has been decided as of yet.
There could be other subscription offerings from YouTube down the road
As The Verge reported back in April, the unnamed subscription service is aimed at YouTube’s most popular creators and their audiences, and will offer ad-free videos and the ability to save videos offline, as well as access to premium content behind a paywall. If all goes well, there may be more category-specific subscription services on the platform. Music Key — which already offers offline access and ad-free streaming — could be joined by subscriptions targeted at children’s programming or gamers in the future.
With two upcoming subscription services, YouTube, which pulled in $4 billion in revenue in 2014, could be on the path to finally turning a profit. But it will need to tread carefully in the transition away from a model where most everything has been free. YouTube suffered through a major backlash after it tried to sign up indie artists for Music Key last year, and threatened those who didn’t with the loss of their revenue-generating tools. The repeated delays around that service highlight the struggle YouTube has had launching even one subscription service, never mind a package of offerings across multiple kinds of content.
Universal Music, Sony Music, and Warner Music declined to comment. YouTube also declined to comment.