<p>For nearly a decade, YouTube has offered a smorgasbord of free music, making just about every song imaginable – from Top 40 to ukulele covers – available at a click. But soon the site, whose more than one billion monthly visitors make it the world’s most popular music platform, will start charging for additional perks.<br /><br /></p>.<p>On November 12, YouTube unveiled YouTube Music Key, a long-awaited upgrade of its music offerings that will include higher-quality audio for most songs and give users the option of paying $8 a month for extra features, chief among them removing YouTube’s ubiquitous ads.<br /><br />With its new service, YouTube hopes to reform its reputation in the music industry as a phenomenal free site to promote songs, but one that pays a pittance in royalties. “We want to give fans more ways to enjoy music on YouTube, but also give artistes more opportunities to connect with fans and earn more revenues,” said Christophe Muller, its music partnerships director.<br /><br />As YouTube pushes into paid content, other online music outlets – under considerable pressure from the recording industry – are being forced to defend or change their business models to better compensate artistes.<br /><br />Taylor Swift drew wide support among fellow musicians – and a rebuke from Spotify’s chief executive – after she removed her entire catalogue from the streaming service, apparently because Spotify refused a request to keep her music only on its paid level. And SoundCloud, which has never paid royalties, signed its first deal with a major record company, the Warner Music Group, last week, and will begin to pay artistes for the first time.<br /><br />With the music industry suffering a steep decline in sales, it is ever more dependent on payouts from streaming outlets like Spotify, Pandora and Apple’s Beats Music. For a while, free music has been crucial to the marketing of these services, but now music executives and analysts increasingly say that their growing popularity is a deterrent to getting customers to pay. “As recently as five years ago, free was entirely about piracy; now free is widespread and completely within the legitimate sphere,” Mark Mulligan, an analyst, said. “But we still have the exact same challenge we had in the golden age of piracy, which is, how do you compete with free?”<br /><br />Online subscription services like Spotify have grown quickly, with 28 million subscribers around the world last year, according to the International Federation of the Phonographic Industry. In some countries, like Sweden, a majority of sales revenue now comes from streaming music. But so far this growth has not been fast enough to make up for a rapid decline in sales of CDs and downloads. In the first half of 2014, for example, album sales were down 13 per cent compared with the same period the year before, and digital track downloads were down 10.6 per cent, according to the Recording Industry Association of America.<br /><br />YouTube Music Key will be available to users in the United States, Britain and a handful of other European countries. Following Google’s preferred pattern of introducing new products through “beta” testing, it will first be available by invitation only, and is expected to be offered to all users by next year. <br /><br />For those invitees, it will be free for six months and then cost $8 a month; the cost to the public starting next year will be $10, the same as Spotify and other services. Subscribers will also get Google Play Music, the on-demand audio service that has been Google’s main competitor to Spotify.<br /><br />To build the service, YouTube has been negotiating with music companies for well over a year; a deal signed recently with Merlin, an organisation that represents thousands of independent labels, lifted one of the last roadblocks. Among the artistes signed to labels affiliated with Merlin are major indie acts like Arcade Fire, Adele and Vampire Weekend.<br /><br />Subscription fees from YouTube could lead to greater royalties for artistes and record companies. But some music executives are skeptical about the number of paying customers YouTube will be able to sign up, given the abundance that it offers free, and point to Spotify, which despite its success has largely not penetrated the cultural mainstream.<br /><br />“What we need is the average music consumer to sign up for Spotify,” said Robb McDaniels, the chief executive of INgrooves, a digital distributor that represents millions of independent songs and also works with the Universal Music Group. “We’ve got the high-volume users, the uber users. But we need the soccer moms.”<br /><br />Spotify’s lament<br />Free music has been critical to Spotify’s marketing plan since it was introduced in 2008, as a way to attract customers who could then be lured into paying for subscriptions. The service now has 50 million users around the world, 12.5 million of whom pay. But analysts say that the free music online, particularly on YouTube, has stunted the growth of subscriptions. <br /><br />In a report last month in anticipation of YouTube Music Key, Midia Research estimated that the service could attract 5.7 million customers in its first month. But the report said that YouTube would also effectively cost the music industry $2.3 billion in lost revenue, as its free tier satisfied many listeners who might otherwise be prospective subscribers.<br /><br />YouTube does pay artistes and record companies a share of advertising revenue from free streams, but it is minimal. Record companies in the United States collected just $220 million last year from all ad-supported, on-demand services, which include YouTube, according to the recording industry association.<br /><br />For a music industry still recovering from the digital disruption that began in the 1990s, the latest changes at YouTube, SoundCloud and elsewhere, and the continuing debates over the value of online music, are often seen as positive developments, even as hands are wringing over sales numbers. (One recent bright spot: Taylor Swift scored the fastest-selling album in 12 years, with nearly 1.3 million sales of “1989” in its first week.)<br /><br />Sam Valenti IV, the founder of Ghostly, an independent label, and a founder of Drip.fm, a subscription service that focuses on small labels, said he welcomed the YouTube offering. “The music industry has spent a lot of time chastising fans for whatever services they are using,” he said. “YouTube has allowed a lot of people to discover music, and if that is where people feel good about listening, then it’s the music industry’s job to figure out how to make that work.”<br /><br /></p>
<p>For nearly a decade, YouTube has offered a smorgasbord of free music, making just about every song imaginable – from Top 40 to ukulele covers – available at a click. But soon the site, whose more than one billion monthly visitors make it the world’s most popular music platform, will start charging for additional perks.<br /><br /></p>.<p>On November 12, YouTube unveiled YouTube Music Key, a long-awaited upgrade of its music offerings that will include higher-quality audio for most songs and give users the option of paying $8 a month for extra features, chief among them removing YouTube’s ubiquitous ads.<br /><br />With its new service, YouTube hopes to reform its reputation in the music industry as a phenomenal free site to promote songs, but one that pays a pittance in royalties. “We want to give fans more ways to enjoy music on YouTube, but also give artistes more opportunities to connect with fans and earn more revenues,” said Christophe Muller, its music partnerships director.<br /><br />As YouTube pushes into paid content, other online music outlets – under considerable pressure from the recording industry – are being forced to defend or change their business models to better compensate artistes.<br /><br />Taylor Swift drew wide support among fellow musicians – and a rebuke from Spotify’s chief executive – after she removed her entire catalogue from the streaming service, apparently because Spotify refused a request to keep her music only on its paid level. And SoundCloud, which has never paid royalties, signed its first deal with a major record company, the Warner Music Group, last week, and will begin to pay artistes for the first time.<br /><br />With the music industry suffering a steep decline in sales, it is ever more dependent on payouts from streaming outlets like Spotify, Pandora and Apple’s Beats Music. For a while, free music has been crucial to the marketing of these services, but now music executives and analysts increasingly say that their growing popularity is a deterrent to getting customers to pay. “As recently as five years ago, free was entirely about piracy; now free is widespread and completely within the legitimate sphere,” Mark Mulligan, an analyst, said. “But we still have the exact same challenge we had in the golden age of piracy, which is, how do you compete with free?”<br /><br />Online subscription services like Spotify have grown quickly, with 28 million subscribers around the world last year, according to the International Federation of the Phonographic Industry. In some countries, like Sweden, a majority of sales revenue now comes from streaming music. But so far this growth has not been fast enough to make up for a rapid decline in sales of CDs and downloads. In the first half of 2014, for example, album sales were down 13 per cent compared with the same period the year before, and digital track downloads were down 10.6 per cent, according to the Recording Industry Association of America.<br /><br />YouTube Music Key will be available to users in the United States, Britain and a handful of other European countries. Following Google’s preferred pattern of introducing new products through “beta” testing, it will first be available by invitation only, and is expected to be offered to all users by next year. <br /><br />For those invitees, it will be free for six months and then cost $8 a month; the cost to the public starting next year will be $10, the same as Spotify and other services. Subscribers will also get Google Play Music, the on-demand audio service that has been Google’s main competitor to Spotify.<br /><br />To build the service, YouTube has been negotiating with music companies for well over a year; a deal signed recently with Merlin, an organisation that represents thousands of independent labels, lifted one of the last roadblocks. Among the artistes signed to labels affiliated with Merlin are major indie acts like Arcade Fire, Adele and Vampire Weekend.<br /><br />Subscription fees from YouTube could lead to greater royalties for artistes and record companies. But some music executives are skeptical about the number of paying customers YouTube will be able to sign up, given the abundance that it offers free, and point to Spotify, which despite its success has largely not penetrated the cultural mainstream.<br /><br />“What we need is the average music consumer to sign up for Spotify,” said Robb McDaniels, the chief executive of INgrooves, a digital distributor that represents millions of independent songs and also works with the Universal Music Group. “We’ve got the high-volume users, the uber users. But we need the soccer moms.”<br /><br />Spotify’s lament<br />Free music has been critical to Spotify’s marketing plan since it was introduced in 2008, as a way to attract customers who could then be lured into paying for subscriptions. The service now has 50 million users around the world, 12.5 million of whom pay. But analysts say that the free music online, particularly on YouTube, has stunted the growth of subscriptions. <br /><br />In a report last month in anticipation of YouTube Music Key, Midia Research estimated that the service could attract 5.7 million customers in its first month. But the report said that YouTube would also effectively cost the music industry $2.3 billion in lost revenue, as its free tier satisfied many listeners who might otherwise be prospective subscribers.<br /><br />YouTube does pay artistes and record companies a share of advertising revenue from free streams, but it is minimal. Record companies in the United States collected just $220 million last year from all ad-supported, on-demand services, which include YouTube, according to the recording industry association.<br /><br />For a music industry still recovering from the digital disruption that began in the 1990s, the latest changes at YouTube, SoundCloud and elsewhere, and the continuing debates over the value of online music, are often seen as positive developments, even as hands are wringing over sales numbers. (One recent bright spot: Taylor Swift scored the fastest-selling album in 12 years, with nearly 1.3 million sales of “1989” in its first week.)<br /><br />Sam Valenti IV, the founder of Ghostly, an independent label, and a founder of Drip.fm, a subscription service that focuses on small labels, said he welcomed the YouTube offering. “The music industry has spent a lot of time chastising fans for whatever services they are using,” he said. “YouTube has allowed a lot of people to discover music, and if that is where people feel good about listening, then it’s the music industry’s job to figure out how to make that work.”<br /><br /></p>