Streaming service competes with Beats, Spotify, and others -- analysts say it could rank in a half billion dollars next year

Google Inc.'s (GOOG) YouTube is about to shake up the world of music, today announcing a subscription streaming video subscription service.
In recent weeks its YouTube unit signed deals with Vivendi SA's (EPA:VIV) Universal Music Group (UMG), Sony Corp.'s (TYO:6758) Sony BMG, and Access Industries' Warner Music Group.  And in recent months YouTube also struck an even bigger deal, according to The Financial Times, coming to terms with indie music industry's Merlin Network, which manages licensing for 20,000+ independent music labels with music on YouTube, including XL Recordings.
The labels -- both indie and big media -- were hesitant to play ball with Google, largely because they're already relatively content with their deals with Apple, Inc.'s (AAPLBeatsFrance's Deezer, and Sweden's Spotify AB.  But Google reportedly threatened to yank the videos of those who didn't cooperate off YouTube, and that brought the labels back to the bargaining table pretty quickly.

Today the results of the deal that was struck were finally announced -- YouTube Music Key.  Music Key will be rolled out to the YouTube site and to official YouTube mobile apps.  Priced at $7.99 USD/month, it adds the ability to play song in background mode -- similar to Beats or Spotify.  It also adds offline play, something that Spotify only allows with its pricier ($9.99 USD/month) premium subscription (Beats offers offline access for $9.99 USD month).

YouTube Music Key

So Google's major advantages over Beats and Spotify are that it's $2 USD/month cheaper and it has many more music videos (Spotify does have some music videos, but nowhere near as many available as YouTube).  Google's YouTube subscription service also gives you access to Google Play All Access subscription service (and the perks that come with it).

One more time the basics of the plan and its perks are:
  • YouTube Music Key (beta)
  • Price: $7.99 USD/month
  • Features:
    • 30 million songs (Beats, for example claims 20 million)
    • No-ads in music videos
    • Offline access
    • Background mode for music tracks in YouTube app
    • Music discovery
    • Google Play All Access subscription
The biggest threat to Music Key is probably Spotify's entry level basic subscription which is "only" $4.99 USD/month.  But for a more full featured music subscription service, Google has the competition beat on paper for now.
YouTube Mobile
YouTube Music Key also comes with a subscription to Google Play All Access.

The global music market is currently $15B USD annually, for both corporate and independent music. Apple has already had a major impact on annual industry revenue with the advent of iTunes and paid digital downloads.  Analysts say YouTube's long-awaited service could have a similar impact.

Midia Research, a music industry-focused analyst house, estimates that Music Key could rake in $500M USD in its first year, or roughly 1/30th of the entire industry's current annual revenue.

Sources: YouTube [official blog], Midia Research, via The Financial Times

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