YouTube announces paid music service; indie labels fear being edged out

Google Inc.'s YouTube said Tuesday that it plans to launch a paid music streaming service, amid worries that its existing free website might block music videos from indie music labels that don’t agree to the terms of the new service.

YouTube has partnered with "hundreds of major and independent" music labels for the new service, the company announced in a statement, confirming long-running rumors that the world's most popular online video website will offer a paid music service.

The news comes as some music trade groups have raised concerns that YouTube may block the content of certain labels from appearing on its free, ad-supported website unless they sign deals to participate in the subscription-based streaming service.

The deals that YouTube is offering are on "highly unfavorable, and non-negotiable terms," according to a news release issued last month by the Worldwide Independent Music Industry Network.

YouTube declined to comment on the terms of the deals, but issued a statement saying the streaming service would provide new revenue for the music industry.

"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," YouTube said.

YouTube has already signed deals for the paid service with 95 percent of the music labels that it previously had deals with for its existing, ad-supported music video website, a person familiar with the matter said. Blocking certain music labels' videos from appearing on the free site might be necessary to provide a consistent user experience for the paid service, the person said.

The new service is expected to be launched at the end of the summer and will allow users to listen to music without any ads, according to a person familiar with the situation. Among the other features expected are the ability to listen to music offline and the ability to listen to an artist's entire album instead of just individual songs, as is often currently the case on YouTube, the person said.

Streaming music services such as Spotify and Pandora are becoming increasingly popular among consumers, as digital music downloads decline.

Apple Inc. announced plans to acquire streaming music service and premium headphone maker Beats for $3 billion last month.

Google has also launched the $9.99-per-month Play All Access subscription music service in 2013. The forthcoming YouTube paid music service could potentially work in coordination with the Play service so that consumers are not forced to subscribe to two separate services, the person familiar with the matter said. 

Reuters