Google's YouTube Hits Another Roadblock For Its Long-Awaited Music Service

Google (NASDAQ: GOOG  ) (NASDAQ: GOOGL  ) is facing its second setback in a matter of weeks when it comes to the launch of its long-awaited YouTube Music service. Last week, Shiva Rajaraman left YouTube for the rockin' offices at Spotify. About a week earlier, Chris LaRosa left YouTube to work on an independent project.

These two were previously working closely together on a music subscription service for YouTube. LaRosa had been the liaison between YouTube and music publishers and was responsible for bringing official music videos to YouTube. He reported to Rajaraman.

YouTube, in short, has been in flux most of the year, and many observers had expected to see its music service by now. Meanwhile, Spotify is growing rapidly and now has 40 million active listeners and 10 million paid subscribers. At what point does it become too late for Google to compete with the Swedish streamers?

Source: YouTube.

YouTube: the most popular music streaming site
LaRosa did a lot of good for YouTube before he left, transforming the video streaming site into a music streaming paradise. Google has a joint venture with Sony and Universal to publish official music videos through Vevo, the most popular YouTube network.

Indeed, YouTube is great for streaming individual songs. The experience may be even better than on Spotify. YouTube's global reach also far exceeds Spotify's presence in just 56 countries. As a result, YouTube's most popular music videos far exceed the number of streams of the same song on Spotify. The most streamed song on Spotify, Avicii's "Wake Me Up," had 235 million plays as of May. The same song had about 500 million plays on YouTube around the same time. Of course, "Gangnam Style" takes the prize for most popular song on YouTube, with over 2 billion views.

The popularity of YouTube as a music streaming destination gives Google a wide window through which to launch a dedicated YouTube music service. With a built-in audience, Google just has to serve them what they want. It can easily place ads around music videos to entice users to sign up and try the service. The question is: What can YouTube do that Spotify can't?

Source: Spotify.

YouTube Music needs more than playlists
The obvious answer is that YouTube has a treasure trove of music videos it can integrate into its service. At the same time, a service that just produces auto-playlists of music videos probably won't produce significantly more engagement for YouTube. People put on playlists and go off to work on something else; they don't stare at their computer screen.

Nonetheless, Google has been taking steps to improve its playlist-making functionality. It recently purchased Songza, which specializes in curating context-appropriate playlists for its listeners. Google said it plans to integrate Songza's data into its current music service, Google Play Music. In addition, Apple has been collecting data from its own Google Play Music All Access subscribers to improve playlist technology.

YouTube recently redesigned its site to feature playlists more prominently. Source: YouTube

Playlists were integral to Spotify's initial popularity. Being able to easily share playlists and find new user-made and curated playlists from magazines and bloggers was something unique. The model has been copied since, most notably with Beats Music -- which hasn't exactly captured a huge audience.

YouTube's music streaming service will have to offer something more than another playlist maker. I expect Google will find a way to integrate YouTube's video library, as well as its All Access and Songza properties, into whatever it pushes out to music fans, but it probably needs to be more than that.

One property that Google could leverage is Android, as smartphones have become most people's primary music listening device. Just as Apple integrated iTunes radio with iOS, Google could do the same for its music streaming service and Android. Android's share of the market continues to climb, reaching 85% last quarter.

You've got their attention; now keep it
YouTube is in the excellent position of owning the most popular music streaming property. If Google wants to build a dedicated music streaming service on top of the video platform, it certainly will attract a large initial audience -- just as Apple was able to do with iTunes Radio. Keeping that audience, however, may prove quite difficult unless Google is able to offer something nobody else can. Certainly, video will be a part of that, but people sign up for music streaming services for the all-you-can-stream buffet of listening, not to watch videos for hours.

Google has a wide window into which it should be able to successfully launch a YouTube music service. But as more people sign up for Spotify, the more it has to differentiate its product from the competition to keep listeners around after the launch.

Read/Post Comments (1) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On August 12, 2014, at 2:08 PM, RobertEdsnMartin wrote:

    YouTube is a very generalized self service video repository, part of whose content is music videos, some of which are professionally produced high definition music videos. So YouTube could be described as having a music video service component, but it is very mixed in rather than distinct. What comes to mind as related is Palladia, but this is a programmed cable service rather than a mobile on-demand music video service.

    Google Play Music All Access is a streaming music service, with a huge library of music, licensed from the record labels. Similar services include: Rhapsody, Pandora, MOG, Beats Music, and Spotify. Note that none of the streaming music services are going to have complete libraries for popular music, because many artists do not see streaming services as a good source of revenue.

    YouTube and Palladia are great for popular music, where the video can be 50% of the experience. I use both on HDTVs, with Palladia from cable, and YouTube from my Android tablet via Chromecast.

    I use the streaming music services primarily for jazz and classical music, played through a car radio, through a phone or tablet, through a home stereo, or through an HDTV.

    For me, and I suspect for most people, the video music services and streaming music services have distinct separate uses. I don't think it makes sense try and provide a combined service.

    I have used all of the above except Spotify. I think Spotify originally came out with playlists, but without discovery, so I was not interested. Also, I tend to buy local, admittedly a bizarre notion in today's world.

    For me, discovery is very important. And for discovery, similarity matching is everything. I switched from Rhapsody to MOG because of the similarity slider. I tried Beats, but they had dropped the similarity slider, and in general tended towards playlists and curation rather than discovery. Pandora's similarity matching is the best, but it is not a full on demand service, and also has a smaller library than the others.

    I am currently using Google Play Music All Access, and very happy with it. I wish it had a similarity slider, but it does have two forms of artist radio, either a mix of an artist with other artists, or a mix of just one artist from the entire All Access library or my favorites for that artist (not sure which or if both).

    I would improve Google Play Music All Access by adding some of the MOG functionality and feel, but even as it is, it is the best I have found.

    So Google does appear to be in a very good position to dominate the streaming music and music video businesses, which again I believe are distinct. But that doesn't mean it will happen. The execution problems are immense, and relate not just to function and content, but just as much to appeal, simplicity, and I know not what.

    I think Google needs both a music video service and a streaming music service. But to position these offerings for success, they need not just innovation, but good market research and testing. They need to know in an unbiased fashion how people from all walks of life react to their products, to other products, and to prototypes.

    The other long term viability problems are licensing fees and artist compensation. Services have to be able to afford the licensing fees, and the artists have to be happy in the long term, neither of which is the case at present.

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 3059626, ~/Articles/ArticleHandler.aspx, 8/30/2015 4:01:25 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Adam Levy

Adam has been writing for The Motley Fool since 2012 covering consumer goods and technology companies. He spends about as much time thinking about Facebook and Twitter's businesses as he does using their products. For some lighthearted stock commentary and occasional St. Louis Cardinal mania

Today's Market

updated 1 day ago Sponsored by:
DOW 16,643.01 -11.76 -0.07%
S&P 500 1,988.87 1.21 0.06%
NASD 4,828.33 15.62 0.32%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

8/28/2015 4:00 PM
GOOG $630.38 Down -7.23 -1.13%
Google (C shares) CAPS Rating: ****
GOOGL $659.69 Down -8.27 -1.24%
Google (A shares) CAPS Rating: ****