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What will Google's music subscription service look like? What will Google's music subscription service look like?
(5 months later)
Google is said to be pushing for an ad-free YouTube subscription service to be tied in with its planned Spotify-like audio service. According to an executive familiar with the issue, the tech giant already has deals in place with a multitude of record labels, including the majors, for the audio subscription service. However, there is said to be disagreements regarding how Google should remunerate the labels for the bundled YouTube part of the subscription.Google is said to be pushing for an ad-free YouTube subscription service to be tied in with its planned Spotify-like audio service. According to an executive familiar with the issue, the tech giant already has deals in place with a multitude of record labels, including the majors, for the audio subscription service. However, there is said to be disagreements regarding how Google should remunerate the labels for the bundled YouTube part of the subscription.
While Google is said to have agreed to pay a minimum per-stream rate for the audio service, just like Spotify does, it only wants to pay on a revenue share basis for the YouTube part. The record labels, however, want both parts of the service to have a minimum per-stream rate.While Google is said to have agreed to pay a minimum per-stream rate for the audio service, just like Spotify does, it only wants to pay on a revenue share basis for the YouTube part. The record labels, however, want both parts of the service to have a minimum per-stream rate.
Earlier in the week, the Financial Times reported that the video streaming giant is nearly ready to begin offering some YouTube channels the option of charging a subscription fee. It said the video streaming service is planning to charge $1.99 a month per channel for about 50 partner channels, and that a launch could be imminent.Earlier in the week, the Financial Times reported that the video streaming giant is nearly ready to begin offering some YouTube channels the option of charging a subscription fee. It said the video streaming service is planning to charge $1.99 a month per channel for about 50 partner channels, and that a launch could be imminent.
YouTube has confirmed it is planning to offer some content partners the option of operating subscription channels on its video sharing website, though it is thought such individual channel subscriptions will operate separately from the YouTube part of the proposed Google music service.YouTube has confirmed it is planning to offer some content partners the option of operating subscription channels on its video sharing website, though it is thought such individual channel subscriptions will operate separately from the YouTube part of the proposed Google music service.
"We're looking into creating a subscription platform that could bring even more great content to YouTube," the company said in a statement following media speculation."We're looking into creating a subscription platform that could bring even more great content to YouTube," the company said in a statement following media speculation.
Percentage sticking points
Percentage sticking points
Billboard reports that the revenue share offered by YouTube to its channel partners is likely to amount to less than 30%, and if this is an indication of what it is offering labels for the proposed subscription service, it is understandable that labels are resisting – music services such as Spotify and iTunes pay out around 70% of revenues to rights holders. The possibility of an agreement may hinge on how much Google is willing to pay in advances to the major labels.Billboard reports that the revenue share offered by YouTube to its channel partners is likely to amount to less than 30%, and if this is an indication of what it is offering labels for the proposed subscription service, it is understandable that labels are resisting – music services such as Spotify and iTunes pay out around 70% of revenues to rights holders. The possibility of an agreement may hinge on how much Google is willing to pay in advances to the major labels.
Both the negotiations and the deals are covered by non-disclosure agreements, but Universal Music Group is rumoured to have received as much as $200m (£129m) as an upfront advance for the Spotify-style audio service, with other labels receiving lower lump-sum advances on a sliding scale, according to their market share.Both the negotiations and the deals are covered by non-disclosure agreements, but Universal Music Group is rumoured to have received as much as $200m (£129m) as an upfront advance for the Spotify-style audio service, with other labels receiving lower lump-sum advances on a sliding scale, according to their market share.
Though it remains to be seen if Google's audio music service will be able to compete with established music services such as Spotify, bundling it with an ad-free YouTube service as a bonus clearly would give it an advantage. One way Google could possibly get the majors to agree to ditch their per-stream minima demands for the YouTube part of the subscription service would be to offer very large upfront advance payments.Though it remains to be seen if Google's audio music service will be able to compete with established music services such as Spotify, bundling it with an ad-free YouTube service as a bonus clearly would give it an advantage. One way Google could possibly get the majors to agree to ditch their per-stream minima demands for the YouTube part of the subscription service would be to offer very large upfront advance payments.
Upfront advance payments to the major labels (as well as a few of the biggest independents) are not uncommon in the digital music service market, and they have created much discontent among artists wondering how much of these advances, if anything, is actually filtering down to them.Upfront advance payments to the major labels (as well as a few of the biggest independents) are not uncommon in the digital music service market, and they have created much discontent among artists wondering how much of these advances, if anything, is actually filtering down to them.
The labels see the payments as a guarantee that the services won't simply monetise their repertoire and fold, or sell up, before the labels get paid. They also create a major incentive to make the service a success in order to recoup the advances. Once a service is up and running, and has proven its business model works, these advances are lowered in the next round of negotiations, and sometimes even ditched.The labels see the payments as a guarantee that the services won't simply monetise their repertoire and fold, or sell up, before the labels get paid. They also create a major incentive to make the service a success in order to recoup the advances. Once a service is up and running, and has proven its business model works, these advances are lowered in the next round of negotiations, and sometimes even ditched.
These advances count against usage, meaning that the labels don't see any more royalties until the royalties for usage during the deal period exceed the advance paid. It's understood the advances Spotify paid to major labels before launching exceeded usage for the deal period (the labels also own shares in the service), and artist managers have confirmed to me that at least one of the majors paid through the excess advance royalties to its artists, basing the amount on the artist's share of streams during that period.These advances count against usage, meaning that the labels don't see any more royalties until the royalties for usage during the deal period exceed the advance paid. It's understood the advances Spotify paid to major labels before launching exceeded usage for the deal period (the labels also own shares in the service), and artist managers have confirmed to me that at least one of the majors paid through the excess advance royalties to its artists, basing the amount on the artist's share of streams during that period.
It's unclear if Google has any deals in place with any collecting societies and publishers (who represent songwriters) for its upcoming music subscription service but, if history is anything to go by, these deals will be treated more as an afterthought by the company. Though YouTube's ad-supported service has licensing deals in place with labels in Sweden and Germany, for example, it has yet to come to an agreement with those countries' collecting societies.It's unclear if Google has any deals in place with any collecting societies and publishers (who represent songwriters) for its upcoming music subscription service but, if history is anything to go by, these deals will be treated more as an afterthought by the company. Though YouTube's ad-supported service has licensing deals in place with labels in Sweden and Germany, for example, it has yet to come to an agreement with those countries' collecting societies.
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