It could change everything.
YouTube last night (October 21) launched its new entertainment subscription product, branded YouTube Red, in Los Angeles.
The basic gist: for $9.99 a month, subscribers get ad-free video, the ability to cache media and watch it offline and can put the YouTube app in the ‘background’ of their device while still playing music.
Here’s a short video so you can get your head around it.
But YouTube Red’s impact on the music business could be much greater than this initial pitch indicates.
Here’s what you need to know:
- YouTube Music Key is dead… Yes, it seems that YouTube’s long-awaited subscription music service is no more. It has instead been folded into YouTube Red. “The most common and most frequent point of confusion [of the Music Key beta] was why this set of features didn’t work across YouTube,” the service’s business boss Robert Kyncl told The Verge. He said his own daughter found she couldn’t find music videos from the Disney film Frozen. “To her it’s music, but it won’t be in the [Music Key] service, and that seems odd.”
- … but there is a dedicated music app coming: As part of the Red launch, YouTube announced that a dedicated YouTube Music app will be released in the near future. This will essentially make it easier for customers who only want to use the service as a music player to do so. The benefits of paying for YouTube Red will apply to this app, just as they do to existing apps such as YouTube Kids and YouTube Gaming.
- The YouTube Red subscription includes Google Play Music: This is probably the single biggest piece of news for the music business. Google Play Music currently offers users a streaming service for a $9.99 per month subscription (in addition to a download store and cloud storage). YouTube Red subscribers will get access to all of its benefits. Have that, Spotify. But also, Google Play Music subscribers will get a free sub to YouTube Red. That’s quite the added value vs. the likes of Apple Music, no? Quite how it affects the Google Play per-stream rates is another matter…
- YouTube Red launches next Wednesday (October 28): Put it in your diary.
- Its $9.99/£9.99 per month subscription fee seems mighty familiar: It’s the same price point as Spotify, Apple Music and Deezer. It’s also the same price point as a new Disney subscription service. It’s lower than HBO Now ($15.99 month) but more than Netflix and Amazon’s talking book service Audible ($7.99 per month each). Robert Kyncl has also indicated that an Apple Music-style ‘family plan’ is on the way. The wider question: when are people going to get sick of paying separate amounts for subscriptions in all these entertainment ‘verticals’?
- YouTube Red will surely be bundled into Google/Android phone tariffs soon enough: Just wait.
- If 10% of YouTube users sign up, it will be much bigger than Spotify: YouTube has over a billion unique users a month. 10% of that audience would mean a 100m paying subscriber base. That’s five times Spotify’s 20m equivalent.
- Is this an attempt from YouTube to turn a profit? Despite generating annual revenues of $4bn, YouTube is believed to break even each year. YouTube Red opens up an important new revenue stream for Google.
- Its payout structure isn’t as generous as Spotify or Apple Music: YouTube’s new Partner Agreement (read it in full through here) says that it will pay content owners 55% of total net revenues from YouTube Red subscription fees ‘attributable to the monthly views or watch time of your Content as a percentage of the monthly views or watch time of all or a subset of participating content in the relevant subscription offering (as determined by YouTube)’.
- And that’s why some indies aren’t interested… yet: MBW is told that not all labels have agreed to YouTube Red’s terms and conditions.
- The deadline for agreeing a deal is today (October 22): A flashpoint is on the cards. YouTube has warned content owners that their videos will be pulled from its paid and free service (or, more accurately, ‘hidden’) if they don’t agree to YouTube Red’s Ts & Cs – with today cited as their last chance.
- There will be original programming: Taking a leaf out of Netflix’s book, YouTube has commissioned shows from some of its biggest stars. These include a survival horror series from video-gaming Swede PewDiePie, recently named as YouTube’s top-earning star with more than $12m pre-tax revenue per year.
- It will cost more on iOS: Taking a leaf out of Spotify’s book, Google is playing hardball with Apple’s demand to take 30% of all subscription prices of apps on its App Store. So a YouTube Red subscription will cost $9.99 per month on desktop and Android, and $12.99 per month on the iOS App Store.
And despite all of this potential, some people can’t get their minds out of the gutter.
YouTube Red sounds unnervingly similar to another site on the web: RedTube, one of the most notorious porn destinations in the world.
Google doesn’t anticipate a branding clash: Robert Kyncl said yesterday to reporters: “We did a lot of consumer testing, so we were comfortable with it… We’re not too worried about that other site.”Music Business Worldwide