After years of bickering over rights, YouTube has finally signed all three of the major music record labels into long-term deals. This week, Universal and Sony both reached rights agreements with the Alphabet platform, joining Warner Music Group. Though YouTube still needs to make deals with companies like the Merlin consortium of smaller labels to be fully comprehensive, the way is now paved for it to launch its hotly-tipped streaming service next year.
Last year, the music industry grew by 5.9%, the most since 1997. The driver? Streaming.
With streaming revenues surging by 60%, it now accounts for 50% of total recorded music revenues. YouTube has long been the thorn in the side of the industry, which has accused it of offering below market rates to creators and artists, despite the site racking up eye-wateringly massive viewing figures for music content.
YouTube’s anticipated streaming service, dubbed YouTube Remix by Bloomberg, could seem a little late to the party. With Spotify readying for an IPO and swapping stakes with Tencent, Apple music firmly established and Tidal, well, just being Tidal, streaming is already a crowded space.
Alphabet has tried to crack the streaming market before, launching its own premium Google play music service in 2011, but it's not exactly been a smash hit with a market share even smaller than Amazon, Deezer and Tidal’s. It launched YouTube Music Key in 2014 to offer ad-free music videos, and this morphed into YouTube Red in 2016. Hopes that this would change the music scene were dashed, however, as YouTube Red gravitated towards entertainment videos instead.
The chances are, Alphabet will look to combine its Google Play service with a premium YouTube service for music fans.
Unlike Play music and pretty much all the streaming services out there, a YouTube-oriented music service would be video first. By locking some content behind a premium service (like it has done for entertainment with YouTube Red) and building it into the Google play system, it would be a totally different beast to Spotify and Apple music, which have gone about things the other way around. Apple Music’s video offering is still in its infancy, and Spotify reportedly had to cancel their original video shows in October in a ‘video strategy refresh’.
A point of comparison might be Tidal, the Jay-Z backed Norwegian service that has experimented with exclusive video and related content. But YouTube doesn’t need to get there first. The advantage it has over Tidal – and indeed all platforms – is the sheer scale of its existing user base. It wouldn’t need to convert a large percentage of its 1.3 billion users in order to become a market leader. And if it can make them pay, it could earn the company a lot of money.
YouTube hasn’t confirmed the launch of a streaming service yet, and the contents of its deals with the music industry are still under wraps. It almost certainly will involve safeguards over flexibility for its artists and better pay by establishing royalty fees and streaming rights, in line with the arrangements the other streamers have. In any case, for the time being, it looks like a win win.
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