Dive Brief:

• Google-owned YouTube announced in a blog post that it is launching a new music-streaming service YouTube Music on May 22 and rebranding its YouTube Red subscription service. 
• YouTube Music features a revamped mobile app and new desktop player designed for music, giving users access to thousands of playlists and millions of original songs, albums, artist radio and more, as well as music videos. Users can also find music by searching pieces of lyrics or descriptions, like “that hipster song with the whistling.” The personalized home screen will offer recommendations based on listening history, location and activity. An ad-supported version is available for free, and the company is launching YouTube Music Premium, a paid membership for $9.99 per month. 
• The company is also introducing YouTube Premium, the new name for YouTube Red, its premium streaming platform. Subscribers can access ad-free content, including original shows like “Cobra Kai,” “Step Up: High Water” and “Youth & Consequences.” YouTube Premium will be available for $11.99 per month for new subscribers and will include the new Music service. Existing YouTube Red and Google Play Music subscribers will continue to have access to the service at their current price. 

Dive Insight:

Google's YouTube is doubling down in two digital content areas — music and premium programming — that consumers demand. While YouTube faces significant competition in each area, such content is important as Google continues to expand into smart home hardware and as its competition with Amazon heats up. 

In announcing its new Premium subscription service, YouTube said it would begin offering “more, bigger original series and movies,” signaling it is stepping up competition with leading video-streaming services like Netflix, Amazon and Hulu. The news follows the recent release of YouTube Red’s Karate Kid-spinoff series “Cobra Kai,” which was just renewed for a second season and has been outperforming several Netflix and Hulu shows, according to a Fortune report citing Parrot Analytics. YouTube Premium will need more hits like this if it is to convince consumers to pony up $11.99 per month when many are already paying for subscriptions to Hulu, Netflix and Amazon. 

YouTube Premium will also need to offer popular licensed content.  While Netflix announced plans to beef up its investment in original content to $8 billion this year alone, findings from a 7Park Data study show that 80% of U.S. Netflix viewing comes from licensed content with 20% from original content. Among Hulu subscribers, 97% of streaming is on licensed content.

With YouTube Music, the company is positioning itself as a direct competitor with popular established platforms like Spotify at a time when growth is slowing in the space. Growing its paid subscriber base has been a challenge for Spotify. Among the platform’s 159 million worldwide users, about two-thirds use the free version of the app, which Spotify recently revamped to attract new ad-supported subscribers and give marketers the chance to deliver engaging and relevant messages.