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11 March 2013

YouTube’s new streaming music platform takes on Spotify

Rachel Hawkes, account director, Elemental By Rachel Hawkes

YouTube launches new music serviceLast week, it was reported that Google owned YouTube is launching its own music subscription service this year – challenging current market leader Spotify.  

The new service is believed to offer users streaming music for free with the addition of ads, or ad-free for a fee.  This was an inevitable move from YouTube, and something that we (Elemental) discussed in an article for Media Week more than two years ago in January 2011:  

“The one to watch is YouTube.  They have the music video space absolutely cornered, and they have also added a music discovery and playlist feature, which makes for a killer combination.  It doesn’t have the recommendation quality of Last.fm for example, but its very early days and it will undoubtedly improve with Google’s technology behind it.  They also have offline element and video arm sorted – for example, the new partnership with Sundance Film Festival to make rental movies of Sundance festivals.”

Just a few months after that article, in August 2011, Google announced the launch of Magnifier, a music streaming and discovery service which looked promising.  Just a few months ago, Google phased out Magnifier and the features were rolled into Google Play, Google’s service where you can stream, download and store music, books, music, videos, magazines and Android apps.  

According to the Fortune article reporting on the story; it’s believed that Google Play and the new YouTube music streaming service will operate separately.  Fortune quote a YouTube spokesperson as saying, "While we don't comment on rumor or speculation, there are some content creators that think they would benefit from a subscription revenue stream in addition to ads, so we're looking at that."

Google bought a 10% stake in music video website Vevo in January of this year.  Universal and Sony, two of the biggest record labels in the world, created Vevo back in 2009 in an effort to capture some of the digital music revenue. In September 2012, Vanity Fair stated that Vevo was the ‘second largest web video property after YouTube.’  Vevo, which hosts official music videos of artists from almost all major labels, has a ‘special partnership’ with YouTube that makes Vevo available in over 200 countries.  It also means that YouTube occupies the first and second largest digital video sites. Vevo’s deal with Google is reported to be worth £42 million.

YouTube monetisation exampleIn 2011, we said that the only thing YouTube really lacked to dominate the streaming music space was having discovery functionality – something it introduced with Magnifier and now Play.  Google already affectively monetises digital music by pre-roll and overlay ads on not just official music videos but it also uses it’s Content ID technology to scan more than 100 years of videos per year to find videos that feature music of some kind.  Underneath the video, viewers have the ability to buy the songs and they are they also monetised with ads; these Content ID videos now account for more than a third of YouTube’s monetized videos.

Such is YouTube’s power in the music space that Simon Cowell has teamed up with YouTube to launch ‘The You Generation’ to uncover the next global talent (not exclusive to music).  There are over four billion hours of video watched each month on YouTube, and over 25% of those views happen on 400 million mobile devices.  As we all become more mobile, being able to dominate the music space ‘on the go’ is vital for all players in this space.  

YouTube already leads the way when it comes to capturing the attention and trust of a mobile audience for videos and it is one of the most visited destinations for listening (or watching) music already.  With Google’s ad technology, YouTube has already monetised content on the video platform and it’s not a stretch to conclude that its music streaming service will be equally as successful; both for the parent company, the labels and most importantly the artists.

Many have tried and tried in this space, most notably MySpace which just last week announced yet another ‘new MySpace’ relaunch

Categories: Social media, Marketing, Elemental

Tags: youtube, Google, Spotify, Vevo, music, music streaming, MySpace, music videos, ads, monetisation

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