We already knew that Google Play has sought licenses for a subscription music service, but now comes word that Google's YouTube wants them, too. Fortune reported today that YouTube will launch a subscription service sometime later this year and already has signed a deal with Warner Music Group, one of the three largest music labels.
Music industry sources confirmed most of Fortune's story with The Verge, but they said the YouTube deal is largely an extension of earlier negotiations with Google Play. Two weeks ago, The Financial Times broke the story that Google was in talks with the big record companies about acquiring music subscription rights. Industry insiders told The Verge at the time that Google hopes to launch Google Play's service sometime after July.
There's a bit of gamesmanship going on
Typical with any negotiation between Google and entertainment companies, there's a bit of gamesmanship going on. A Google spokesman indicated that the company is considering subscription service at the request of those in the music sector. "While we don't comment on rumor or speculation," Google's spokesman wrote, "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."
The reason the labels want Google execs to try their luck with subscription is partly because Google Play hasn't done much in revenue, and partly because the music sector sees much more potential in YouTube. At Google Play, the service offers downloads. Formerly known as the Android Market, Google Play was launched in October 2011 and integrated music, video, and apps in a single storefront. The service struggled early to entice the millions of Android users to buy songs. Since then, sales at Google Play have improved but still aren't generating "significant revenue," according to multiple music industry sources with knowledge of the numbers.
"64 percent of teenagers prefer YouTube over any other music listening and discovery engine..."
By contrast, YouTube is gargantuan. Professionally produced music videos account for hundreds of millions of views, and represent some of the site's most popular fare. All of YouTube's music videos are available free of charge but Google indeed generates significant revenue by selling ads against the videos. Yet, some of the shine comes off YouTube's figures when set against the overall number of users. Music industry sources say that on a per-user basis, YouTube isn't making that much money. The labels want it improved.
Some in the music industry still worry that YouTube chokes off demand from more profitable outlets, such as Apple's iTunes and Amazon. The Fortune story offered a telling stat: "64 percent of teenagers prefer YouTube over any other music listening and discovery engine," according to Nielsen's "Music 360" report from 2012.
The fear is that YouTube, Spotify, and all the other services that give away songs enforces the perception that music has no value. That horse, some might argue, left the barn long ago.