YouTube Launching Google’s streaming music service To Compete with Spotify

Move over, Spotify. It sounds like Google’s coming out with its own streaming music service—and it’s powered by YouTube.

YouTube will be launching a subscription streaming music service later this year, according to Fortune.

Currently, YouTube does stream all sorts of content, music and otherwise, and does so using only ads as a source of revenue. But now YouTube will be offering a subscription-based music service for those who want an ad-free music listening experience among other features, sources from Google and the record industry told Fortune.

Though sources from YouTube’s parent company Google spoke to Fortune about the upcoming music service, YouTube was still unwilling to confirm the news directly, but did say the following in a statement:

“While we don’t comment on rumor or speculation, there are some content creators that think they would benefit from a subscription revenue stream in addition to ads, so we’re looking at that.”

Surprisingly, Spotify is not the most popular subscription streaming music service: mobile carrier Cricket’s “Muve Music” is the most popular with 1.4 million customers.

It’s possible that with YouTube’s vast audience, its subscription service could knock Spotify out of the No. 2 spot (approximately 1 million customers) with competitive pricing, if they can offer prices closer to Muve’s less-than-$5-a-month subscription.

    “If ever there was a company that could experiment with subscription versus ad-based models, it is Google. The power and size of YouTube’s music audience is vast, and growing, and likely presents an opportunity too good for the record companies to pass up. Most of the website’s top viewed videos are music, and the viewers of those videos represent a demographic that the record industry has always coveted: teens.”

Spotify isn’t the only player in the streaming music space. The new Google powered music service will also have to compete with Pandora, Rdio, Soundcloud, Muve Music, possibly Apple, and the new MySpace. YouTube’s position, especially when it comes to teens, gives it an advantage. 64% of teenagers prefer YouTube as their way to get music.

Google’s streaming music service.

As streaming music grows in popularity, its only a matter of time before Google jumps in the ring with their own service. With YouTube as a content source, a streaming service woven into Google Play would likely prove incredibly popular.

If you’ve ever used YouTube for more than a couple of minutes, you’re pretty familiar with the playlists feature. It’s a great way of organizing related content, and works well for all kinds of users. One group in particular takes advantage of this service in a fairly unique way — as an unlimited free music streaming service. YouTube is home to just about every popular music video that has been made in the last decade, as well as a great source for indy recording sessions and new artists.

For music lovers on a budget, YouTube is already a pretty sweet streaming music service. Its popularity guarantees that it is available on almost everything, and the service is already designed to offer you higher or lower quality audio based on your Internet connection. The only thing that would make the service better would be if you could just remove the video altogether and listen to the audio in the background like any other Internet radio or streaming audio service.

It’s no secret that Google has been seriously considering subscription models that can be injected into YouTube. The idea works well, especially when you consider the volume of high quality content already being streamed on the service. Why shouldn’t the teams behind Battlestar Galactica: Blood and Chrome, H+ The Digital Series, or even full on television shows be able to charge for content on YouTube?

When you think about how many times the first episode of The Newsroom was watched on YouTube as part of an HBO hook to watch the show, and then consider how many people would have gladly paid to watch the rest of the show through YouTube, it starts to make more sense. If you apply that same concept to music streaming, Google could quickly turn a pretty popular social concept into a moneymaker overnight by allowing their content producers the ability to stream just audio. With what on the surface seems like pretty small changes"Google would have a streaming audio service overnight, and have it possibly filled with more content than most of the competing services."

The benefit that YouTube has over the other streaming audio services is what it can offer on top of just streaming the song. You could be listening to a song, tap the screen to see the music video, or be sent to Google Play to purchase the track or album. Google could use their partnership with ContentID so that you can add a song to your streaming playlist just by asking Google Now what song is playing on the radio.

There’s a lot of flexibility here, and the end result is all good for Google. The added information from the streaming service would give them more data to better target ads to you when you are using YouTube to watch other content. If a song is playing in the background of a video you are watching, YouTube could prompt you to add it to your playlist after the video has ended. There’s more than a few opportunities here.

Since Google isn’t usually willing to comment on whether or not they are going to do something in the future, most of what we are seeing here are just rumors. It’s not hard to see how Google could be planning something like this, and if they do release a streaming music service it would have the potential to be pretty disruptive.