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"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."
—-YouTube

TUBE ABOUT TO DIP
TOE INTO STREAM

Look for YouTube to Challenge iTunes with New Streaming Service
Now it starts to get interesting. YouTube is preparing to launch a subscription music service later this year, according to a report in Fortune magazine.

Well, dunh.  The Google-owned site is already the world's largest digital repository of streaming media. The service looks like it will be part of Google's Android music platform, Google Play.

Google Play for Android is a digital locker for music, while reportedly anyone can listen to tracks for free on YouTube's coming service. Both services are said to be adding a subscription fee that will unlock additional features.

The magazine said it was briefed on the new service by record label and Google officials, with YouTube issuing the following statement: "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."

As an ad-based service, YouTube has yet to charge users, with a cut of the revenue paid to the record companies. Up until now, spending on subscription-based streaming has been a fraction of what spending on digital purchases on iTunes.

Sources say that Warner Music Group, which has already partnered with YouTube and Google on the new venture, received about 25% of its digital revenue from streaming last year. There is concern that under a "freemium" model, listeners might get used to not paying for music and that revenue would be tied to the ad sales that subsidize the free content.

The power and size of YouTube's music audience makes it a worthy candidate to see how far they can push the pay model, an opportunity Fortune calls “too good for the record companies to pass up.”

Most of the website's top viewed videos are music, and the viewers of those videos represent a teen demographic that the record industry has always coveted. A Nielsen “Music 360” report last year revealed 64% of teens prefer YouTube over any other music listening and/or discovery engine. YouTube has been given credit for exploding songs like “Call Me Maybe,” “Gangnam Style,” “Somebody That I Used to Know” and the recent “Harlem Shake.”

YouTube and the major labels are also partners on VEVO and the backend software Content ID which matches videos with their "audio fingerprints," then tags uploaded videos and ensures royalties go to the copyright holders. The software allows owners of media to profit from what was, previously, copyright infringement. Psy will earn about $2 million from sales paired to fingerprints.

YouTube has already begun embedding click-to-buy links on user-uploaded songs that direct to Google Play (along with Amazon MP3 and iTunes).

Google’s streaming competitors include Pandora, Rdio, Soundcloud, Muve Music and Beats by Dre’s just-announced Daisy service, with Apple rumored to be building a “radio” feature in its iTunes program that would deliver free music based on user’s tastes, that further matches the experience of being in a "store" to purchase music, and then listening to it in a "player."

The biggest, Muve Music, has 1.4 million customers, which bundles its price into a cellphone bill. Cricket, the mobile carrier that owns Muve, can sell subscriptions at less than $5 a month.

Soundcloud has recently begun partnering with major artists and large companies, such as Snoop Lion and Red Bull. Its users upload about 10 hours of content a minute. In 2010, YouTube users uploaded 35 hours of content per minute; in 2011, they posted 48 hours per minute; as of last May, it was up to 72 hours a minute.

 

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