Why YouTube Could Hold the ‘Music Key’ to the 21st Century Record Industry
At first glance, the news that Google is rolling out YouTube Music Key, a paid, ad-free subscription tier for music videos on YouTube, might seem a little ridiculous; after all, even with ads, listening to music on YouTube is already fairly painless, which is why it's the discovery mechanism of choice for teens -- and anyway, there's absolutely no shortage of streaming services already jockeying for the same consumer base. As Paul Verna, a senior analyst for eMarket, tells Variety, "The more these subscription services are out there, the more they push up against people’s budget limits."
Then again, rollouts have never exactly been Google's strong suit, and the company's first forays into digital entertainment sales are no exception. Google's own Google Play service already acts as a streaming and downloading storefront for a lot of the same content offered on YouTube, but despite the company's deep pockets and a handful of genuinely innovative features, it isn't really on the same playing field as Apple or Amazon -- or even Spotify, Rdio, or Pandora, at least in terms of brand recognition.
Google's move could be the start of something much, much bigger.
YouTube, on the other hand, has roughly a billion monthly visitors, and although many of them are monetized through ad revenue, that's still a vast audience waiting to be exploited. Given that a Music Key subscription gives you automatic access to Google Play (and Google Play subscribers have already been signed up automatically Music Key), Google's move looks more like the beginning of a conjoining of overlapping assets than the start of a new standalone service -- but it could also be the start of something much, much bigger.
What really sets YouTube apart -- aside from its age, which makes it a streaming senior citizen -- is its democratic social structure. Rather than trying to license copyrighted content from the beginning, the site's founders invited users to upload their own videos, and they've never stopped doing it; these days, the line between "YouTube celebrity" and "Hollywood celebrity" is blurring, and the site has served as a launchpad for a growing list of mainstream careers.
It's to that last point that Music Key could speak strongest. Up until now, YouTube has proven a fertile (albeit far from reliable) breeding ground for entertainment careers -- but one that served as more of an incubator or a way station than a home. A&R execs have openly admitted to using YouTube view counts as a barometer for signing new acts, and there's a growing number of artists who have used the site as a launchpad to indie success -- so why not take the next step and make YouTube a label in its own right?
The site has already seeded video content, albeit at a rather low level, and it'll probably always be a video-oriented company -- in fact, some are already pitching Music Key as essentially Spotify plus music videos. But there's a huge amount of potential here for YouTube to assume the role of active music distributor.
Consider the way Netflix waded into the content-creation business -- by drilling into their user data to determine what their users were searching for, what they were watching, and how long they were watching it. This is kind of a scary method if you have any kind of attachment to the idea of the classic A&R man with an instinct for talent, but it works; just ask anyone who's binged through seasons of 'Arrested Development,' 'House of Cards,' or 'Orange Is the New Black.'
YouTube, if it so chooses (and has savvy enough engineers, which of course it does, because Google), has access to all that data on an even greater scale -- this is a company that's been hosting viral videos since 2005, and should be able to pinpoint exactly what people are grooving to at any given moment. That unsigned ukulele player in Des Moines who just hit a million views? The veteran artist whose self-released stuff rocks under the corporate radar while luring thousands of subscribers? The company brain trust could reach out and sign them to YouTube Records rather than letting them fly the coop.
As the Atlantic points out, a vaguely similar route has already been taken by Shazam, the service that uses "acoustic fingerprinting" to identify songs for users curious about whatever tune they're hearing on the radio, at the bar, et cetera. With access to reams of data about which songs are receiving the most hits through Shazam, labels have been able to pinpoint tipping points for hit singles with increasing accuracy -- and the service itself has set up a label imprint at Warner Brothers.
But why settle for a subsidiary of someone else's multinational corporation when you've got Google's deep pockets -- and an already-built digital storefront that could easily be used to promote in-house acts alongside new releases from the biggest artists? These days, the only things an artist really needs a label for are marketing muscle and tour support, and with Google Play and Music Key, the former is already built into the equation. It wouldn't be free, or even necessarily cheap, but for the company whose subsidiary just dropped $1.16 billion on a 60-year lease for some old NASA hangars, it seems eminently doable.
In fact, it frankly seems almost necessary. The major labels got where they are by controlling the distribution and manufacturing gateways, but those gateways were mangled during the broadband era, and although the industry has definitely changed since the brief heyday of mp3.com, we haven't really seen a new paradigm rise up to take the old guard's place. But as we've seen with Netflix -- and Amazon, through its forays into original video content as well as in-house book publishing -- our heaviest digital hitters have shown a willingness to assume roles once thought the exclusive domain of "old media" powerhouses. Their access to in-house deep data and ownership of highly trafficked storefronts are sharp, and barely used, weapons.
It is, of course, well worth noting that not everyone is happy with YouTube's move; entertainment mogul Irving Azoff, for one, has threatened to take down roughly 20,000 songs whose rights he controls, citing licensing concerns. And streaming royalties remain a major problem, one that seems unlikely to be mitigated by Music Key's industry-standard $10/month subscription rate.
If Music Key lives up to even a portion of its immense potential, it could signal a major shift in the way the music industry anticipates and delivers what customers want to hear.
On the other hand, according to recent RIAA data, streaming revenues are up by nearly 30 percent since the middle of last year; at the close of 2014's second quarter, they were measured at $859 million. YouTube was surely responsible for a chunk of that, but they could deliver so much more -- and if Music Key lives up to even a portion of its immense potential, it could signal a major shift in the way the music industry anticipates and delivers what customers want to hear.