Alphabet Inc Prepares to Launch YouTube Music
Alphabet Inc’s (NASDAQ:GOOGL) Google has a horse in the streaming music race, but it’s far from a contender. However, the company is determined to change that. Starting tomorrow, leaders Spotify Technology SA (NYSE:SPOT) and Apple Inc.’s (NASDAQ:AAPL) Apple Music will face new competition in the form of YouTube Music.
Google is launching a new streaming music service to take on the leaders armed with YouTube’s vast collection of live music and videos, Google Music Play’s existing music catalog, a new emphasis on local content and Google’s AI expertise thrown in the mix. But will YouTube Music have what it takes to catch the leaders?
The potential revenue in play is substantial, and a win for YouTube Music would also be a win for GOOGL stock. Although, the potential impact on Google ad revenue needs to be factored in…
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YouTube Music Launches on May 22 in the U.S.
Last Wednesday, Google took the wraps off its new music streaming service, YouTube Music.
Tomorrow is the big day. YouTube Music will launch in the U.S., as well as Australia, New Zealand, Mexico and South Korea. Other countries will follow, and if there was any confusion about why the delayed rollout in markets like Canada and the UK, Reuters helped to clarify the reasoning this morning. Google is apparently busily hiring music programming experts in other countries, hoping to ensure authentic local programming is a strong point of its new streaming music service.
What else will YouTube Music offer? After all, at an estimated 10 million subscribers, Google Play Music has remained far behind leaders Spotify and Apple Music with 71 million and 38 million paying subscribers, respectively.
The big feature being promoted is artificial intelligence — AI. If there’s one area where Google can boast technical leadership over Spotify and Apple, it’s in AI. and YouTube Music will take full advantage of the company’s AI investment. This will include advanced personalization and music discovery capabilities. Google says to also expect locational awareness, such as the app suggesting energetic music when the subscriber is at the gym, or a more relaxing playlist at the airport.
What about YouTube’s vast library of music videos? And what about pricing? These two questions are actually closely related.
YouTube Music will offer a free, ad-supported version — taking on Spotify’s popular free version. At $9.99 monthly, the full version of YouTube Music is priced identically to an Apple Music or Spotify subscription. But… while both of those versions give access to YouTube’s vast library of music videos, they will still include advertising. The $9.99 price tag will only get you ad-free music. It won’t remove ads from all videos. Avoiding all ads requires stepping up to YouTube Premium (which replaces the old YouTube Red). In this case $11.99 per month gets YouTube Music, plus ad-free YouTube videos and YouTube’s original content.
Given that ad revenue is so integral to GOOGL stock, it seems as though the company is being very cautious with any moves that could have an impact on advertising, even if that makes its new streaming music offering more than a little confusing compared to the competition.
What About Google Music?
More confusion. YouTube Music may eventually kill off Google Play Music — the company’s existing streaming music service with 10 million or so monthly subscribers. But not now. At the moment, the two services will continue operating side-by-side, with Google Play Music subscribers getting YouTube Music access included in their membership.
Potential Impact on GOOGL Stock
There’s more at stake in the streaming music race than bragging rights. Apple has said it believes the market for paid subscribers is as high as 2 billion users. At $9.99 per subscriber per month (or $11.99 if they opt for YouTube Premium) and nearly 1.9 billion users in play after accounting for Spotify and Apple Music subscribers, that’s a lot of potential revenue up for grabs.
Of course Google has to weigh the value of those subscribers against the potential loss of ad revenue. In fact some analysts predict that with the importance of ad revenue to GOOGL stock, the company would actually prefer users stick with the free ad-supported tier and will never really push to have YouTube Music overtake Apple Music and Spotify for paid subscribers.
Whatever Google’s end game might be, the streaming music industry will get a little more interesting starting May 22, with the YouTube Music launch.
As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.
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