Rumor mills have been churning out stories calling for a Google-branded subscription music service for some time now and today an exclusive report by Fortune sheds more light on the matter as the Internet giant is allegedly looking to tap its popular YouTube video sharing service to take on the likes of Spotify, Rdio and Pandora.
In capitalizing on the power of YouTube, Google presumably is hoping to draw its younger audience that typically streams high-quality music videos from YouTube’s VEVO channel for free. The YouTube-branded product is said to be ad-driven and therefore free. It is also separate of Google’s another music subscription service rumored to be coming to Android devices via the Google Play content store…
Ryan Bradley and Jessi Hempel, writing for Fortune:
The two new services are defined by their respective places in the Google empire: Google Play for Android is a digital locker for music – users buy, store, and sort a collection of tracks; but on YouTube’s coming service, anyone can listen to tracks for free.
Both services are said to be adding a subscription fee that will unlock additional features. For the YouTube-based service, this will likely mean ad-free access.
Sources claim the Warner Music Group has partnered with YouTube and Google on the new ventures. Music streaming is slowly but surely gaining traction as Warner last year earned  about 25 percent of its digital revenue from streaming.
Record companies aren’t in perfect agreement as to how much of their content to give away and are still hashing out what aspects of the user experience will be free on YouTube’s new service, particularly when accessed from mobile devices.
There is concern that under a “freemium” model, listeners might get used to not paying for music (again) and that revenue would be tied to the ad-sales that subsidize the free content.
Still, sources in the record industry told Fortune that “it is not yet clear if a subscription-based model is more lucrative (and therefore preferable) to an ad-subsidized approach.”
The YouTube-branded service reportedly has its own negotiating team and operating unit though it’s likely that some features will overlap with another Google Play-branded streaming service, the story has it. Fortune was briefed on the service by sources in the record industry and at Google.
If true, the development could pose some challenge to a rumored iTunes music subscription service that Bloomberg believes is up for a global launch in the third quarter of this year.
Even though Apple occasionally streams full iTunes albums for free ahead of their official release, these promotions are an exception to the rule.
Apple is not an ad-driven free play like its rival Google is. That being said, a free music service that capitalizes on the popularity of the YouTube brand could go a long way toward challenging iTunes’ choke hold of the music industry and give record labels some long-sought leverage against the iPhone maker.
And as more and more folks get unlimited music from the likes of Pandora, Rdio and Spotify – for a monthly fee typically equalling the price of a new iTunes album – Eddy Cue & Co. better rethink Apple’s approach to digital music.
Also, Google’s two-pronged approach to music streaming could kill Pandora, which was forced to impose a 40-hour monthly limit on mobile listening due to rising royalty costs.