By now you’ve heard the reports that YouTube is preparing its own music streaming service, and although the company hasn’t officially confirmed it, accounts of numerous recent private showings of the service have seemingly appeared everywhere. On the surface you can look at the prospect of a YouTube music streaming service and ask why it’s necessary, since parent company Google GOOG +1.41% already has one of its own in Google Play Music All Access (this name has to be at least four syllables too long). Then you might wonder what YouTube has to offer that’s not being offered by numerous other services already. I’m glad you asked.
Let me say up front that I have very little insider information on the subject and haven’t seen the service myself, but you can figure a number of things out by just looking at the current landscape of the streaming music business and Google and YouTube’s place in it already.
The first thing is that terribly long name for Google’s existing music service (Google Play Music All Access). I don’t care how big a company Google is, that’s not a brand that a user can get behind. Imagine a kid trying to explain this cool new service she just found and then tries to spit out that tongue twister of a brand name. About the only thing you can count on her getting right is “Google.”
YouTube, on the other hand, is a brand that everyone knows, and most kids already use it to discover their music. It has a built-in hard-core audience that contains precisely the prime demographic for consuming music (14 to 24 years old), plus another billion (with a “b”) or so active users. Adding a streaming music function becomes only just a new YouTube feature, not a new service.
As others have pointed out, it would be difficult for Google to charge a user twice for the similar services of Google Play Music All Access and YouTube Music (or whatever they decide to call it), plus the duplication of effort makes no sense from a distribution, marketing or sales standpoint. Big corporations have done stupider things than this before, but the new YouTube streaming function does seem like there’s been some real thought behind it. This starts from the fact that Google did its record label license deals over a year ago and made sure then that they encompassed both Google Play and YouTube. By introducing YouTube Music, what it’s doing now is just a simple rebranding of their music services.
But perhaps a bigger point is, just like Apple AAPL -1.49%’s iTunes Radio (see my recent post), a streaming music service is not at the core of Google’s business model. In other words, the company doesn’t need music to be successful or survive, since all YouTube Music will be is another way to sell more advertising. If it fails, it’s hardly a blip on Google’s bottom line.
Advertising really doesn’t even have to be the main objective though, since the premium tier is likely to be one that’s advertiser free (I’d pay for that myself). Any cash generated from this is purely gravy. And keep in mind that all YouTube has to do is convert an extremely small percentage of its user base to premium, less than 1 percent, to enormously kick the butts of the current music streaming services that we love to discuss ad infinitum.
So look at the features of YouTube Music all you want when they’re released, but remember that’s not where the real story lies. It’s all really about Google’s music brand and how YouTube’s revenue is affected as a result.
