Will YouTube Subscription Service Compete With Netflix, Spotify?

Google has decided its web-based video provider YouTube has finally grown up enough to get some big-boy pants. It’s a bit step, but Google appears to be taking its cue from streaming video and music content providers like Netflix and Spotify.

Yes, in the next few months, users can make the decision whether or not they’d like to buy-up to a premium level of YouTube. The new ad-free subscription service offering will start at $7.99 and will allow subscribers to watch videos offline.

Percolating in Beta . . .

The beta version of the new service called, “YouTube Music Key” is currently being tested according to Robert Kyncl, head of content and business operations, who made the announcement at the recent Code/Media conference.

Netflix

Video on demand, and paid online video streaming is a lucrative business model. Netflix alone was able to amass more than 50 million plus subscribers in just one year since 2014.

However there are some salient differences between the two services. The YouTube library is primarily short videos uploaded by users and monetized through ads, while Netflix has produced full-length dramatic productions licensed from distributors and monetized through paid subscriptions.

Yet the two are in competition with each other for digital video viewership, as both want what the other has. While YouTube is exploring subscription services with YouTube Music Key and investing in longer content from its creators, Netflix is experimenting with shorter content to cater to mobile users.

“Netflix has not played effectively in the mobile world, but it’s a smart company and recognizes a growth opportunity when it sees one,” said Peter Csathy, CEO of Manatt Digital Media, a venture capital and advisory firm focused on digital media companies. “It’s inevitable that Netflix will start getting into shorter-form, mobile-friendly content, because it needs to get there — and that’s going to encroach on YouTube.”

Spotify

YouTube Music Key will also allow users to listen to music in the background as other apps are working.

In light of Taylor Swift recently pulling her catalogue of music from Spotify, the timing couldn’t be better for YouTube. Dissimilar to that service, new artists and bands can build a fan base on YouTube with subscribers and don’t have to have a large budget for an expensive music video production. Lyric videos and even just placeholder images can still get millions of views.

"Thanks to your music videos, remixes, covers, and more, you’ve made YouTube the biggest music service on the planet," announced Google. "To turn YouTube into your perfect music service, we’re launching YouTube Music Key as a beta with our biggest music fans first, and then we’ll bring YouTube Music Key to the whole world together."

Monetization at the end of the day . . .

It’s likely that this move by Google will pay off in the long run. While, there is an ongoing debate whether streaming services will ever earn a musical artist as much money as selling a CD, the jury is still out.  But when you project the lifetime earnings from subscription fans listening to one’s music, versus the “one-time” income earned from selling CDs, the smart money is on “streaming income” adding exponentially to one’s coffers over the long term.