YouTube is struggling to come to a licensing deal with indie music labels for its forthcoming subscription music service. Will a deal ever get done? Will competitors Pandora (NYSE: P ) and Spotify profit from the chaos?
Guest host Alison Southwick put these questions to Fool analysts Nathan Alderman and Tim Beyers in this week's episode of 1-Up on Wall Street, The Motley Fool's Web show in which we talk about the big-money names behind your favorite movies, toys, video games, comics, and more.
Right now, Google (NASDAQ: GOOGL ) (NASDAQ: GOOG ) arranges for labels to post tracks to YouTube freely and earn advertising revenue. They can also choose to allow "ripped" tracks to persist on the site, sharing in ad revenue they produce. YouTube told Billboard that it has paid more than $1 billion to rights holders "over the years."
Indies may not be able to count on that income much longer. According to Billboard, YouTube is threatening to pull indie tracks it can't secure the rights to for premium listening. Tim says that's a stark and draconian response, especially if listeners have already proved willing to accept ads. Meanwhile, both Pandora and Spotify have thriving ad-driven streaming options as of this writing and could fill the gap if YouTube makes good on its threat.
Nathan agrees, saying the move fails Google's stated strategy to not be evil. Instead, it looks like an effort to strong-arm the music industry's little guys into a deal they don't want on terms they can't accept -- a potentially troubling sign for investors who've been told they should expect better.
Now it's your turn to weigh in. Do you believe YouTube's premium music service represents a threat to Pandora and Spotify? Click the video to watch Alison put Nathan and Tim on the spot, and then leave your take in the comments box below, including whether you would buy, sell, or short Google stock now. You can also follow us on Twitter for more segments and regular geek news updates!
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