YouTube Ready to Challenge Spotify After Indie Deal

Marc Hogan

By Marc Hogan

Lead News Writer
on 11.12.14 in News

Update: YouTube will launch a pilot version of YouTube Music Key, a monthly $10 subscription streaming service, on Monday, as CNet reports. More information is available at

The elephant in the music-streaming room could soon make some noise. In the past week, debate over recorded audio’s online future has centered around Spotify, with Taylor Swift pulling her music from the digital service and the company vigorously defending itself. But now Google, the third-largest technology company in the world after Apple and Microsoft, may soon launch its long-awaited paid YouTube music streaming service, which would compete with the likes of Spotify, Apple’s Beats Music and Rhapsody.

YouTube has reached a licensing agreement with Merlin, a rights agency that represents more than 20,000 independent record labels, according to the Financial Times, which cites “people familiar with the matter.” The deal would remove one of the last remaining roadblocks for Google’s music streaming service. YouTube hopes to launch its paid level in a matter of weeks, the FT‘s sources said; users will pay a certain amount each month to listen to music and watch videos with no advertisements, and they’ll also be able to save music and listen to it offline.

Merlin didn’t immediately respond to a request for comment, and Google told Wondering Sound it doesn’t comment on individual partners. But The New York Times, citing “a person with knowledge of the situation,” also reports that YouTube and Merlin struck a deal.

“Our goal is to continue making YouTube an amazing music experience, both as a global platform for fans and artists to connect, and as a revenue source for the music industry,” Google told WS in an emailed statement. “We’re adding subscription-based features for music on YouTube with this in mind — to bring our music partners new revenue streams in addition to the hundreds of millions of dollars YouTube already generates for them each year. We are excited that hundreds of major and independent labels are already partnering with us.”

Negotiations between YouTube and a group of indie labels including XL, home to Adele and the xx, and Domino, whose roster includes Arctic Monkeys, came to a head this summer. In June, a YouTube exec told the FT the service would start blocking videos from those labels. A month later, the same newspaper reported that YouTube had backtracked and would allow more time for deal talks.

Indie labels positioned themselves as defending the rights of artists. In mid-July, more than 750 labels signed a “Fair Digital Deals Declaration” put forth by the Worldwide Independent Network (WIN), the global indie trade group that created Merlin.

Alison Wenham, chair of WIN and the U.K. Association of Independent Music, said in a statement: “We are pleased that Google has recognised the importance of the independent music sector. As we have said all along during this dispute YouTube is a fantastic platform, which is hugely important to our members. Having a fair agreement in place, which acknowledges the value of independent music companies both creatively and commercially, is good for all involved.”

She continued: “We also continue to take a keen interest in the EU Competition Commission’s ongoing investigation into Google’s wider activities and will always challenge any company when we believe there is abuse of a dominant market position.”

Google already offers a Spotify-like music service, the audio-only Google Play Music All Access. But YouTube, with 1 billion monthly users, could have a bigger impact: The FT cites Midia Research projections the service could earn $500 million in subscription payments in its first year (the global recorded music industry as a whole reported $15 billion in revenue last year). YouTube already reportedly had deals with the three remaining major labels, so the Merlin agreement represents a final piece of the puzzle.

YouTube CEO Susan Wojcicki told a tech panel last month the company was still “working” on its streaming music service. “I think there’s a lot of of opportunity,” Wojcicki said, as quoted by CNet. “I remain optimistic that you can see it soon.”