The Long, Checkered History Of YouTube’s Attempt To Launch A Music Service

By 05/22/2018
The Long, Checkered History Of YouTube’s Attempt To Launch A Music Service

On May 22, YouTube launched the new version of its YouTube Music service, which features improved recommendations and context-based searches. Since veteran music industry executive Lyor Cohen joined YouTube in September 2016, he has been working to revamp YouTube’s offerings in the musical world, where the video site hopes to compete with the likes of Spotify and Apple Music.

We’ve been down this path before. Multiple times in its history, YouTube has made big plans in the world of music, but many of those designs have failed to significantly impact the habits of the video site’s viewers. The history of music on YouTube is a checkered tale filled with rights disputes, clashes with major labels, multiple attempts to launch subscription-based services, and tens of billions of views.

As we look toward the future Cohen envisions for YouTube’s musical library, it’s worthwhile to look back at what’s come before, to see what sorts of mistakes Cohen and co. must avoid repeating.


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Pre-Acquisition and Early Days Of YouTube At Google

YouTube launched in 2005, and it didn’t take long before music became the video site’s most-viewed category. A New York Times article published less than a year after YouTube’s launch said that “the most-viewed videos [on YouTube] include some professional work, including lackluster music videos.”

The early days of online video are often referred to as the “wild west,” and that atmosphere was evident in the world of music videos. This was before the partner program, so revenue opportunities were limited for professional uploaders. YouTube’s Content ID program was also a year away from its launch, so rights holders found it more difficult to punish those who uploaded unlicensed music videos.

The result was rather lawless consumption. In a 2010 article, Adweek noted that early YouTube users would rip music videos from TV broadcasts on MTV and Canada’s MuchMusic. “People were consuming these videos en masse, with no revenue being shared to the artist or MTV who had originally broadcast it,” the article states.

Naturally, the Big Three labels (Universal Music Group, Sony Music Entertainment, and Warner Music Group) objected to the viewership that was occurring on YouTube, and as the video site neared its sale to Google, the quasi-legality of its music videos became a bigger part of the conversation.

Just 12 days before the Google deal was announced, Mark Cuban roundly criticized YouTube, saying the video site built itself into a multi-billion-dollar company “because they had no problem with copyright laws…The minute YouTube gets sold,” Cuban claimed, “there’s going to be a deep pocket that gets sued.”

YouTube preempted that legal action by striking deals with both Universal Music and Sony Music just before announcing the Google deal. In doing so, it ceded some power (and, reportedly, minority stakes) to the world’s biggest labels. “UMG and its artists will be compensated not just for UMG produced videos but also for the unique, user created content that incorporates UMG music,” Universal Music reported at the time in a press release.

That agreement shored up the legality of YouTube’s music community (which was already fostering big stars like kidrauhl, who you may know by his actual name, Justin Bieber), but labels quickly found the terms of the original deals to be untenable in the long run. In 2008, Warner Music pulled its library from YouTube after its talks to renegotiate its deal with YouTube fell apart. “We simply cannot accept terms that fail to appropriately and fairly compensate recording artists, songwriters, labels and publishers for the value they provide,” Warner stated at the time.

It was clear that YouTube and the Big Three labels needed to work together to create a more substantial solution for the distribution of music videos online. And that’s exactly what they did.

Enter VEVO

In April 2009, Wired reported that Universal Music and YouTube were working together to launch a product called VEVO, which would be owned by the former company and utilized by the latter. The general idea was simple: By establishing a marketplace for music videos outside of YouTube, labels like Universal could charge premium rates for ads. YouTube and the labels would then split the resulting revenue, much of which would be generated on the video site’s massive platform.

“This traffic represents the most sought-after demographic for advertisers, especially as advertising dollars continue their shift from old media to new,” said Universal Music chief Doug Morris at the time. “Vevo will be uniquely positioned to monetize this opportunity and a host of others as we grow it to become ‘the’ destination for premium music video content online.”

In April, Universal was the only major label involved in the development in VEVO, but by the time it launched in December 2009, both Sony and Warner were on board as well.

It didn’t take long for Vevo to gain “more traffic than any other music video site in the United States and in the world,” as Morris predicted it would.

VEVO paid immediate dividends. In 2010, it generated “tens of millions of dollars,” and it eventually reached nine-digit yearly revenues a few years later. Meanwhile, music videos boomed on YouTube. In 2012, Psy’s “Gangnam Style” became the first video of any kind to crack one billion total views. Meanwhile, new videos from popular artists reeled in tens of millions of views within hours of their arrival on VEVO.

This growth occurred thanks in large part to the habits of teenagers, who began to see YouTube as the best way to discover music. A telling 2012 study by Nielsen revealed that while only 7% of respondents discovered music most often through YouTube, that percentage rose to 64%. As with the teens of the MTV Generation 30 years before them, modern youngsters took a particular interest in music videos, leading to the revival of the format.

“We are in a true video revolution,” Atlantic Records GM David Saslow told The New York Times in 2013. He said the music video has “almost never been as important as it is now, because if YouTube is the stereo of the day, when you go there, there needs to be a compelling and artful reason to stay there.”

Thanks to this shift in user behavior, YouTube had an opportunity to build a more comprehensive product in the music category. And that’s exactly what it tried to do.

The Saga of YouTube Music Key

In March 2013, news arrived on YouTube’s plan to launch a subscription-based music service that could challenge industry leaders like Spotify. The service, which would eventually come to be known as YouTube Music Key, would collect YouTube’s library of music videos on a platform that would also include full, streamable albums. While many of Music Key’s features were expected to be available for free, the service also included a subscription-based tier.

By the end of 2013, Music Key looked like it was ready to launch. But then it got delayed. And delayed again. By October 2014, it still had not arrived. What was taking so long?

According to reports released during this time, the development of YouTube Music Key was a fraught process, and modern-day YouTube Music execs like Cohen would be wise to look back to that period and learn from it. One specific issue that plagued Music Key’s development was the question of how to integrate a paid service with the free, ad-supported offering YouTube has long utilized.

“YouTube’s [difficulty] lies in figuring out a business model for an audience that has come to think of YouTube as a free source of content,” Billboard wrote in March 2014. “YouTube doesn’t want to interfere with the current way its 1 billion active monthly viewers use its free platform, but it does want to carve out a premium music service that offers enhanced features and access to a more complete catalog.”

That question of how to balance free vs. paid tiers was still relevant in July 2014 when Chris LaRosa, a top YouTube Music exec, departed the company. The Wall Street Journal, in its coverage of that news item, noted that Music Key delays “have resulted from internal arguments about how the service should be designed, including what features YouTube should charge users for and how the service should be integrated with the rest of YouTube.” Such strife was reported to be a key reason for LaRosa’s departure.

Finally, in November 2014, YouTube officially announced Music Key, which arrived in beta shortly thereafter. Key features included the neat organization of full albums and the availability of a premium tier that stripped away adds, enabled offline listening, and included a subscription to Google Play Music.

“If a song exists in this world, you can probably find it on YouTube,” read an introductory blog post. “But until today you couldn’t easily find and play full albums. In the coming days, you’ll be able to see an artist’s discography on YouTube, and play a full album with both their official music videos and high-quality songs our music partners added to YouTube.”

Though Music Key’s beta lasted longer than initially expected, it seemed like YouTube would finally launch the music service it had developed for so long. The platform was due out in late 2015, around the same time when what would become YouTube Red was expected to launch.

And then, Music Key went away. The service’s beta closed up and the video site that launch it stopped using the Music Key name. Instead, it launched YouTube Music, a similar product that was tied into the launch of YouTube Red.

This decision did finally bring a music subscription service to YouTube users, and early reviews were positive. Why, then, is the video site getting set to launch another subscription-based music service, fewer than three years later? The answer to that question concerns another Google-owned music service: Google Play Music.

Bridging the gaps

Though a YouTube Music subscription, which costs $9.99 per month, includes a Google Play Music subscription (and vice versa), the two services operated separately for a long time. In 2017, Computer World opined that YouTube Music, despite its strong features, was “a barely-connected footnote.” Google Play Music and YouTube Music were housed on separate platform, and users who wanted to take advantage of one service’s features while browsing the other had to switch to an entirely different app.

Recognizing that issue, Google announced in February 2017 that it would consolidate the Google Play Music and YouTube Music teams under one banner. The product that will result from that merger appears to be the new version of YouTube Music, which according to Cohen will combine “the best of Google Play Music’s context server” with YouTube’s “breadth and depth of catalogue.”

As his plan moves forward, Cohen has offered some hints about how he will address the issues that have plagued YouTube’s music business in the past. New deals are in place with all of the the Big Three labels, and Cohen has promised that the new music service will provide ways for “the artists, managers, publishers, songwriters, and labels to engage with their fans with no hoops to jump through.”

In doing so, Cohen will recognize recording industry gripes that have persisted since those early-YouTube, pre-VEVO squabbles. For years, music execs have complained of a “value gap” on YouTube, which results in artists making less revenue from the video site than what they are due. Cohen, however, has been careful to pay lip service to the industry he has worked in for 30 years, especially as he looks to build up a new product. “In my mind, the missing piece on building these businesses is collaborating with the [music] industry, and not just making deals and going away and seeing how it works,” Cohen told The Verge in July 2017.

As for the issue of how to create a compelling paid offering on a platform where users expect tremendous value for free, Cohen has a plan. YouTube will likely show ads for YouTube Music to certain users, who Cohen believes the video site “can frustrate and seduce to become subscribers.” He told Bloomberg in March 2018 that he wants to “smoke out” viewers who are willing to pay a premium. “For a specific subset of users who use YouTube like a paid music service today — and would benefit most from additional features — we may show more ads or promotional prompts to upsell to our paid service,” a YouTube spokesperson said at the time.

It’s a bold strategy, and it’s one that suggest Cohen is aware of the “paid vs. free” issues that plagued the development of YouTube Music Key. It remains to be seen whether this bet will pay off, and whether YouTube will finally come away with a service that can truly challenge the likes of Spotify while also staying true to its music video roots. It’s clear, however, that Cohen is confident he has found the answer. “The industry is going to return and grow by ads and subscriptions,” he said at SXSW. “There are plenty of leaned-in listeners that are willing to pay. We are going to convert them to paid subscribers…We’re making an enormous investment to launch a product that you will be proud of.”

Photo via FilmMagic for YouTube

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