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Editor’s Notebook: Spotify and YouTube cross into overlapping territory

editors notebook logo 300wWhen Spotify announced last week that it was adding video to its content catalog, it signaled a directional shift and a competitive thrust. Mark Mulligan noted “YouTube has been competing (on uneven terms) with Spotify for years as a music service.  Now Spotify is fighting back by going after YouTube’s heartland.”

Spotify’s effort to diversify its offering might be more about the power or video generally, than an attempt to eat YouTube’s lunch. After all, YouTube’s billion-plus audience puts Spotify’s 60-million-user footprint far back in the rear-view mirror. The content acquisition model is different, too. YouTube allows user uploads, which widens and deepens its catalog to unfathomable dimensions. Spotify is partnering with institutional content owners to curate short-form videos that can fit into an entertainment playlist. From what we’ve seen so far, the video shorts will be mostly non-musical, derived from Comedy Central and other partners.

Music is still the headline act in Spotify, for now. Still, there is no question that Spotify is seeking to expand its core competency into YouTube’s expertise, and revising its brand image. Spotify is no longer a music service by definition. It is a streaming content service. (We have not yet found updated Spotify apps in the iOS or Android stores.)

Conversely, YouTube is slowly inching into a more straightforward identity as a music service, elevating a gorilla-in-the-room role it has played for several years as the world’s largest online environment for discovering and listening to music. Google’s Music Key service, over a year in development and currently in beta distribution, organizes music videos into a separated content category, removes ads and enables offline listening — the typical subscription value of a music service. The organization part of that has already rolled out to all YouTube users, via a Music tab within YouTube.

YouTube had not charged for access before Music Key. Now, the plan is bundled with Google’s on-demand music platform, All Access. YouTube’s main contribution to that tie-up is a vast, user-uploaded content library. (SoundCloud, also user-powered, and fashioning itself as “the YouTube of audio,” poses an explicit alternative to Google’s platform, but lags far behind in relationship building with music labels.)

Video by itself, as a distinct content category regardless of whether it’s music, comedy, information, or something else, is attracting enviable advertising rates. A new study from SMI indicates that U.S. video advertising grew 44% in April, over the previous year. As television advertisers shift dollars to digital, the demand for online video is rising. In the cases of both YouTube and Spotify, ad-supported listening is a monetized mainstream funnel of users to their more elite subscription offerings.

As YouTube becomes more explicitly musical, and Spotify redefines beyond music, a broader trend is in motion. Spotify isn’t the only music platform widening its appeal and broadening its business. Deezer, Spotify’s most direct competitor in the global, non-U.S. on-demand music business, acquired and integrated podcasts and other spoken-word content, putting 20,000 such programs side-by-side with its 30-million song library. This month SoundCloud released its podcast hosting platform from beta, addressing the creator side of the podcast industry while ramping up that content for listeners. (SoundCloud currently makes nearly all its money from hosting services sold to musicians and, now, podcasters).

As music and talk merge together in people’s playlists, video and audio are also getting tangled in the online listening lifestyle. Radio and pureplay are also blurring a once-clear line, as on-air programs are re-purposed for the Internet. It all amounts to un-platforming consumer choices, even as brands like Spotify, YouTube, Deezer, and SoundCloud foster audience growth, loyalty, and the commitment of subscription.

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Brad Hill

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