YouTube’s Music Subscription Service: Massive Move Toward Mobile Music Industry

By Carolyn Heneghan

YouTube is already lauded as a giant in the world of music and music videos, and with a new music subscription service on the horizon, it stands to throttle mobile music consumption as we know it.

Set to be launched by the end of this year, YouTube’s currently unnamed (or at least, name unreleased) music subscription service will offer users a way to access unlimited, on-demand music and music videos uninterrupted by ads. They’ll be able to stream full albums rather than the one or two singles the artist might have released videos for. Another premium feature, users can cache songs and videos for offline listening on their mobile devices.

Additionally, a free, ad-supported version of the streaming service will play music videos one after another, like the former model of MTV. Longer viewing means more commercial watching, so this may be a lucrative business move for YouTube as well.

The music subscription service should also coincide with a revamped YouTube app that will allow YouTube to run in the background of a mobile device.

YouTube’s parent company Google has had plans for the music subscription service for some time now, having already secured music licenses with Warner Music Group, Sony Music Entertainment and Universal Music Group when preparing to launch its current music streaming service, All Access, which launched in May.

Moving Toward Mobile Music

YouTube executives have reported that about 40 percent of its viewing takes place on mobile devices, which is a huge surge since being only 6 percent of viewing just two years ago. This is not restricted to YouTube by any means—mobile is the latest trend in media consumption, and the technology is being adopted at an astounding rate, including both smartphones and tablets.

Consumers want to be able to access their music easily, quickly, and from anywhere. In line with Walkmans and mp3 players before them, modern mobile devices offer the best and most convenient portable music experiences available. In turn, more music and media providers are turning toward capitalizing on this growing mobile market, and YouTube is simply adapting to the movements of its customer base.

Successful Business Model?

The big question is, will these features be enough of an improved user experience to encourage YouTube watchers to pay $10 for the subscription rather than simply continuing to watch the ad-supported version for free?

With the volume of YouTube users and video streams—1 billion users streaming 6 billion hours of video per month—even a slight adoption of the subscription service from its user base could mean big bucks for YouTube and parent company, Google.

For example, if one-tenth of YouTube’s current users switched to the subscription service, YouTube would generate around $1 billion per month from subscriptions alone, not counting how much they would make in advertising revenue as well. While one-tenth of the user base may be generous, particularly in the service’s infancy, the numbers do emulate just how financially viable such a service might be.

As revenue from monthly subscriptions would be much steadier and more reliable than pay per clicks—whose rates are dropping due to users’ switch to smartphones and tablets—the new music subscription service appears to be a sustainable business model, and one that could propel YouTube and Google forward in the realm of mobile music and media consumption.

As more music streaming services are now offering paid subscriptions, such as Spotify and Pandora, this move for YouTube appears to be in line with the wave of the future of music listening—one that is sustainable both for the media providers as well as the record companies and musicians themselves.

Keep an ear to the ground—or to your mobile device—around December when the YouTube music subscription service is slated to be released.