Google's YouTube is said to be planning a streaming music service. But, is it time to tune out Google?
Streaming music is a competitive business, with the likes of Pandora, Spotify, and Apple's iTunes Radio among the many in the mix. Now it's being reported that Google's YouTube plans to jump in with its own twist – streaming music video on demand.
According to music bible Billboard Magazine, YouTube plans on launching an on-demand streaming music service. But, unlike some of the other companies in this space, the YouTube service is said to be geared towards streaming music videos. Currently, users can watch and listen to playlists of music videos but with commercials. Music video website Vevo – a joint venture between several major labels and Google – offers ad-supported videos on YouTube. The speculated new YouTube streaming service is expected to be subscription-based.
As discussed recently on Talking Numbers, streaming music may be having an effect on digital downloads. Nielsen SoundScan reports that total music downloads are down 1% over last year in the face of growing streaming services like Pandora, Spotify, and Rdio. Revenues for all subscription-based music services were estimated to be $570.8 million in 2012, close to 59% more than the year before and still growing.
While this is yet another attempt by Google to get into the streaming music business, Google's competitors have more to worry about. So says Andrew Busch, editor and publisher of The Busch Report, as he looks at the fundamentals.
"In value investing, everything becomes a toaster eventually," says Busch paraphrasing Warren Buffett on the long-term commoditization of products.
"I would be more concerned if I were Spotify and Rdio because Google is the 800 lbs. gorilla in the tech room," says Busch. "When they come after you, you really have to be careful."
Nonetheless, Busch isn't so sure a streaming service will add all that much to the company's earnings which are nearly $12 billion in the last twelve months reported.
Talking Numbers contributor Richard Ross, Global Technical Strategist at Auerbach Grayson, also believes a potential music streaming service from YouTube will have little effect on Google as a whole.
"Technical analysis is a lot radio," says Ross, looking at Google's charts. "The role is to separate the signal from the noise. And right now, online radio is just the noise telling us to buy the stock. But, the technical signals are telling you to take your profits if you're fortunate enough to have them up here."
Is the potential for a YouTube streaming service another good reason to buy Google's stock or is it time to take your profits and let the music play out?
Watch the video above to see more analysis by Busch and Ross on what's next for Google.
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