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Wall Street Journal / Tech

YouTube to Launch New Music-Streaming Service

The move comes amid increasing competition from Spotify and pressure from music companies.

YouTube Music will include “thousands of playlists, the official versions of millions of songs, albums, artist radio and more,” the company said.

YouTube has long been the world’s most popular music service—and one of the music industry’s biggest headaches.

Now amid increasing competition from Spotify Technology SA and pressure from music companies, the Alphabet Inc. unit will try to persuade people to pay a monthly fee for an unlimited supply of music.

But the service will be primarily audio-driven, a departure for the company that has always been synonymous with online video.

On Tuesday YouTube will relaunch YouTube Music as a music-streaming service much like Spotify or Apple Music.

“When you ask our users how they consume music we’re always mentioned but it’s often another streaming service and YouTube,” said Lyor Cohen, a former music industry executive who has been head of music for YouTube and Google since 2016. “They have several apps.”

The new YouTube Music aims to become a one-stop shop. Similar to how Google Maps offers users directions to work in the morning without being asked, the music app will serve up playlists, albums and stations based on time of day and location.

Like Spotify, there will be both a free, ad-supported option and one that comes with a price. A YouTube Music Premium subscription, at $9.99 a month, won’t have ads and will allow offline music listening.

Spotify declined to comment.

YouTube has long had a contentious relationship with the music industry. Its video-streaming platform alone accounts for twice as much time spent listening to music as all paid audio streaming services combined, according to the International Federation of the Phonographic Industry. Luis Fonsi and Daddy Yankee’s reggaeton smash hit “Despacito” hit 5 billion views in April on YouTube.

But the payout from those streams is much smaller than what subscription services generate. Artists and labels receive an estimated $1 annually in revenue per YouTube user, compared with $20 a year per Spotify subscriber, according to IFPI.

Spotify has never reported a profit in its 10 years in existence. Google doesn’t disclose YouTube’s financial results. Analysts are unclear whether the video site is profitable but estimate it will generate 10% to 18% of Alphabet’s estimated revenue of $134 billion this year.

Music videos have helped YouTube increase the amount of time users spend watching videos on the site, which in turn lets the company show them more ads. YouTube has said users watch more than one billion hours of video on the site every day.

Google also sees music streaming as a way to attract more users to its mobile devices and smart-home speakers, such as the ones on which Apple Inc. and Amazon.com Inc. offer their own paid streaming services. Google had sold 14 million of its Google Home speakers as of last December, compared with Amazon’s 31 million Echo devices, according to Consumer Intelligence Research Partners LLC.

Music labels have been urging Alphabet’s various units to do more to get users to pay for their music services, a hodgepodge of offerings that compete with each other but have gained little traction against rivals.

It expanded its Google Play Music in 2013 to include an “All Access” on-demand music-streaming service for $9.99 a month. In 2014, it introduced Music Key, with ad-free streaming of music videos from certain labels on YouTube and music from Google Play; that service was relaunched in 2015 as YouTube Red, expanding ad-free and offline access to all YouTube videos for $9.99 a month. A Red subscription also includes access to original YouTube video series and movies.

YouTube Music was launched in 2015 as an app for watching (or just listening to) music videos. The ad-supported version is free; a Red subscription offers additional features such as letting the music continue playing even if a user clicks over to another app or puts her smartphone to sleep.

Among the changes starting to roll out Tuesday, YouTube Red will be rebranded as YouTube Premium and cost $11.99 a month. (YouTube Music Premium offers no ads on music video content only; YouTube Premium offers no ads across all of YouTube.)

Google doesn’t disclose subscriber figures for either streaming service, but people familiar with the numbers say that YouTube Red and Google Play subscribers combined rank Google a distant third in subscriptions, behind Spotify and Apple Music.

Mr. Cohen is a record-industry veteran who managed rappers and led Def Jam Recordings before a stint running Warner Music Group’s recorded-music operations. Last summer, he said Google should combine Google Play Music with YouTube Red to make the those services less confusing to consumers.

For now, the Google Play streaming service, which also includes a download store and media player, will remain available until those features can be added to YouTube Music

Many in the record business have their doubts, noting that even with a massive free-user base, YouTube has failed to win over paying users in significant numbers.

Spotify, too, has been making attempts at emulating the competition. It has been trying to expand its video offerings, most recently introducing videos made by artists specially for the streaming platform. This week, Taylor Swift, who released a video exclusively on Spotify at the end of March, made the music video available on YouTube.

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