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YouTube to begin offering premium music service

YouTube will begin a new music service.

YouTube, the free on-demand video website owned by Google, could be heading into the streaming-music business. According to a report in Billboard, YouTube will offer a premium music service by subscription later this year, likely charging approximately $10/month. YouTube would join a crowded field -- with Spotify, Rdio, iTunes Radio, and others.

Billboard quoted a statement from YouTube in response to its story: “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."

YouTube is already one of the top sites for streaming music videos, supported by ads, says technology analyst Carl Howe at the Yankee Group.

“I think the challenge is to figure out why people who are getting their music from YouTube would want to go there and pay the subscription fee,” says Howe. “They’ve got to figure out a way to add value.”

That added value would reportedly include access to entire albums, and the ability to cache songs and videos, then listen to or watch them offline on mobile devices, without ads.

Entertainment analyst Russ Crupnick at the NPD Group says YouTube already has a huge footprint among consumers, especially among young consumers. It’s their go-to site for music video, and also for playing music on their devices when there’s not a full-blown music video associated with the song. 

“The problem with trying to monetize it, at least through subscription, is that this is an audience that simply is not willing to pay for music—or at least hasn’t been willing to pay up until now,” says Crupnick. Another problem with this demographic, he says: “Many of them don’t have access to the means to pay, in terms of a credit card.” He suggests YouTube might go the way of iTunes, offering pre-paid cards that parents can buy for their kids or kids can buy with cash.

But, teens and twenty-somethings may just keep streaming music videos in their bedrooms and dorm rooms -- for free. That would leave YouTube dependent on selling access to their eardrums and eyeballs to advertisers, to support its free service.

About the author

Mitchell Hartman is the senior reporter for Marketplace’s Entrepreneurship Desk and also covers employment.
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