Thursday, October 24, 2013

YouTube Said to Introduce Paid Music Service

BEN SISARIO/The New York Times

Stephanie Diani for The New York Times
YouTube will soon unveil a paid subscription service for music that will compete with outlets like Spotify, according to several people briefed on the company’s plans.

YouTube, a division of Google, plans to introduce it by the end of the year, perhaps as early as next month, these people said. Subscriptions, at about $10 a month, would be tailored to mobile devices, and give users access to YouTube’s vast catalog of music videos without interruptions from advertising. The service will also let customers temporarily store videos on their smartphones and tablets to watch offline, according to these people, who were not authorized to discuss the service publicly.

YouTube declined to comment directly on its plans, but said in a statement: “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.”

The news of the imminent arrival of the service, which has been rumored in the music industry for months, was first reported by Billboard.

The new service, whose name was not known, would solve problems for both YouTube and the music industry. Mobile access to YouTube has exploded lately — Google recently announced that 40 percent of YouTube’s traffic is mobile, compared with 6 percent just two years ago — but the lower advertising rates on tablets and smartphones have caused some music labels to block their content from those devices. Through the subscription deals, YouTube would gain the licenses it needs to stream music to any device.

In exchange, record labels and music publishers, which have long complained that YouTube’s per-stream payouts were very low compared with other services, would earn higher royalty rates. Music companies would also be able to tame somewhat the chaos of content on YouTube by organizing music in full albums and playlists. Executives say that would be a help in promoting artists on the service, which has become the default listening platform for young consumers.

YouTube’s subscription deals would cover artists’ official music videos as well as user-generated content incorporating commercially released music -- for example, wedding videos with a popular song playing in the background.

The service would follow other experiments in paid channels introduced by YouTube earlier this year for programs like “Sesame Street” and Ultimate Fighting Championship. If YouTube’s music service reaches the marketplace by the end of the year, it could beat another anticipated competitor being prepared by Beats Electronics, the company behind the popular Beats by Dr. Dre headphones.

News of YouTube’s plans to develop a paying music service emerged early this year, but negotiations with music companies were slow as the service took shape. The talks were also complicated by the fact that Google has separately introduced another Spotify-like subscription service, Google Play Music All Access, which grew out of Google’s download store and was introduced in May. According to music executives, Google and YouTube had separate teams making the rounds of licensing talks around the same time.

It is believed that All Access subscribers, who pay $10 a month, would get access to the new YouTube service free.

YouTube is believed to have signed agreements with the three major record companies — Universal, Sony and Warner — but it is unclear how many independent labels have signed up.

Smaller labels have frequently complained that licensing negotiations with digital services tend to favor the major companies; the big labels, for example, can collect advance payments that run into hundreds of millions of dollars, but those are seldom available to small players. The terms of YouTube’s licensing deals were not known, but a number of people involved in talks said that some independents had refused to sign licenses over financial advantages available only to the majors.

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