At first glance, Alphabet's (NASDAQ:GOOG) (NASDAQ:GOOGL) latest offering, YouTube Red, appears to be an Internet video play. After all, YouTube has over a billion users, and they spend hundreds of millions of hours each day streaming videos. If enough of them decide to pay the $9.99-per-month fee for ad-free YouTube viewing, other video streaming services -- like Hulu and HBO Now -- could be crowded out of consumers' budgets.
Yet YouTube Red is a far more compelling offering when viewed through the lens of streaming music, and it could emerge as a powerful alternative to Spotify and Apple (NASDAQ:AAPL) Music in the quarters to come.
Pay for music, get ad-free YouTube
Is ad-free YouTube worth almost $10 per month? For many consumers, the answer may be no. But YouTube Red is much more than that -- it also gives its subscribers the ability to download YouTube videos to their mobile devices for offline playback, the ability to listen to YouTube videos in the background, and most crucially, access to Google Play Music.
I've used Google Play Music, Spotify, and Apple Music extensively, and while they do differ slightly, they largely present the same offering: on-demand streaming access to a library of tens of millions of songs. And all three services are priced identically -- $9.99 per month.
By tying Google Play Music to YouTube Red, Alphabet is giving consumers the best value for their money. Not only can they stream tens of millions of tracks using Google Play Music, but they can also watch videos on YouTube ad-free. This may seem like a nonsensical bundle -- streaming video is inherently different from music -- but many YouTube videos are musically focused. Indeed, YouTube Red was actually borne out of YouTube Music Key, a YouTube-based streaming music service Alphabet began testing last year. YouTube is home to millions of rare tracks, remixes, live recordings, and obscure songs you won't find on traditional streaming services.
Apple Music and Spotify do have some advantages
Still, there are some reasons why consumers may stick with Apple Music and Spotify.
Apple Music works exceptionally well within the confines of Apple's ecosystem. Owners of the new Apple TV can easily stream music to their home theater setup. They can ask Siri to play a particular track, and they can get playlist recommendations based on the songs they've bought on iTunes. Apple Music has had some timed exclusive songs and albums, and it offers human-curated playlists and radio stations.
Spotify has its own perks -- most notably, its free tier (non-subscribers can access Google Play Music's playlists, but they can't stream songs on-demand). Spotify is integrated with Uber (so you can pick the music you hear on your ride), and a wide variety of smart speakers and set-top boxes. Runners who subscribe to Spotify can access playlists that automatically adjust based on their pace.
And Spotify and Apple Music may have better momentum. Spotify has over 20 million subscribers and over 75 million active users. Apple Music has 6.5 million paying subscribers, and 8.3 million trial users. Google Play Music made its debut over two years ago -- predating Apple Music -- but to date, the search giant has not disclosed just how many subscribers it has.
Regardless, YouTube Red makes Google Play Music a far more compelling offering. Those who sign up for ad-free YouTube may find they no longer need their Apple Music or Spotify subscriptions; those debating which service to choose may go with Google Play Music for its YouTube integration. Rather than an assault on streaming video, YouTube Red may be Alphabet's attempt to conquer the market for streaming music.
Sam Mattera has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), and Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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