Does the world really need another streaming music service? Well, Alphabet Inc (NASDAQ:GOOGL)(NASDAQ:GOOG) thinks so. The company has recently launched its own platform called YouTube Music. It is initially available in the U.S., Mexico, Australia, New Zealand and South Korea.
Note that this will not be a replacement for Google Play Music. Rather, YouTube Music is about providing a visual experience. According to a Google blog post: “YouTube was made for watching, which meant fans have had to jump back and forth between multiple music apps and YouTube. Those days will soon be over … YouTube Music is … a new music streaming service made for music on top of the magic of YouTube: making the world of music easier to explore and more personalized than ever. Whether you want to listen, watch or discover, it’s all here.”
It’s certainly a compelling vision. And yes, YouTube is an amazing service — it’s still hard to believe that Google only had to shell out $1.65 billion for it in 2006 — and many people go to it for music. Keep in mind that the app attracts over 1 billion users every month.
Oh, and of course, Google has the huge advantage of enormous amounts of data from its search platform. With this, YouTube Music can create interesting playlists, especially for songs that are trending.
Yet there are still many things that need to be worked out — then again, that is normal with any new service. Just look at the Your Mixtape. It automates the process of creating playlists, which are based on your viewing behavior on YouTube. While this is interesting, the problem is that the music selections can be off-base (at least this is based on my own experience). After all, YouTube is much more than music. So when leveraging Artificial Intelligence (AI) and machine learning, there will be issues.
In the tech world, there is something called the 10x rule. This means that a new service or product must be 10 times better than the alternatives. It’s definitely a high hurdle and explains why many new offerings ultimately fail to catch on. It’s also why companies like Facebook, Inc. (NASDAQ:FB) and Twitter Inc (NYSE:TWTR) have lots of staying power. The fact is that people get invested in a platform.
In the case of music streaming, millions have people have done the same with services from Apple Inc. (NASDAQ:AAPL), Pandora Media Inc (NYSE:P) and Spotify Technology SA (NYSE:SPOT) that allow for building rich playlists. Getting a piece of this will be extremely tough for YouTube Music. Unfortunately, there are simply not enough compelling features right now. There’s not much to differentiate YouTube Music except for the video.
Bottom Line on YouTube Music
Over the years, Google has made multiple attempts at gunning for the music streaming market. Some of the efforts included All Access, YouTube Red and YouTube Music Key. Unfortunately, these all fell flat.
Now it’s important to note that the market is fiercely competitive. Even top-notch companies like Amazon.com, Inc. (NASDAQ:AMZN) have had challenges getting traction.
As for Google, it is smart for it to target streaming music. The market is just too important to ignore. For those with smartphones, music streaming is a must-have feature. And the market is still in the early phases. According to the Spotify S-1: “We believe the universality of music gives us the opportunity to reach many of the over 3.6 billion internet users globally,” according to the International Telecom Union ICT Facts and Figures 2017 Report.
But for now, YouTube Music will probably not be enough, especially to get people to open their wallets for monthly subscriptions that range from $9.99 or $11.99, depending on the plan. In other words, Google needs to go back to the drawing board on this one.
Tom Taulli is the author of High-Profit IPO Strategies, All About Commodities and All About Short Selling. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.
