Wednesday, November 4, 2015

Will YouTube's New Subscription Platform Save The Music Industry?

Written by Hugh McIntyre — Last week, YouTube finally unveiled the details of its much-anticipated streaming subscription platform after years of rumors. Red is available to the public this week, and it is poised to make a big splash—one which could bring some much-needed revenues into a shrinking music industry.

According to the company, YouTube has over one billion users, which represents about one third of every person on the planet with internet access. One really couldn’t ask for a better starting point from which to launch a new product, and the potential for Red to become a game-changer for the industry is clear just from looking at the numbers.

If just one percent of YouTube’s users sign up for Red, that’s 10 million people right off the bat, which translates to just under $100 million dollars in revenue per month. Add it all up, and those 10 million streamers will end up paying a total of $1.2 billion per year. To put that figure into perspective, the entire recorded music industry was worth around $15 billion as of last year. So, if just a single percent of YouTube’s users subscribe to Red, the company could see its product bring in one fifteenth the annual net worth of the entire music industry.

So, what if instead of estimating just one percent, that figure was raised to five percent, or even ten? At just five percent, YouTube’s Red would bring in around $6 billion per year, and at ten percent that number grows to an incredible $12 billion annually.

Is it unreasonable to assume that ten perecent of all YouTubers on the planet would pay $10 a month to get rid of ads and to be able to save music offline to listen to later? Probably, but coming anywhere close to that would have amazing repercussions on the industry. The music business is hurting for cash, as it is essentially still locked in the idea that selling records and singles is where the money is at, meanwhile the number of sales drops every year, and that trend is only going to continue. Streaming platforms may be the way of the future for the consumer, but for the industry they have posed some issues.

These figures should be met with some cautious optimism, as there really is no telling how many people will subscribe to Red. When Apple launched its streaming platform, earlier this year, the company was candid in saying that it had aspirations of convincing 100 million people to sign up, which also would have changed the industry in a meaningful way. While the company hit 11 million users at the peak of its free trial period, that number has since subsided to a respectable 6.5 million, which still makes it larger than many other streaming services.

YouTube’s Red goes live this week, so it’s only a matter of time before we have an idea of what kind of an effect it will actually have on the industry, but hopefully it’s a a big one—the industry could use it.

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