YouTube’s Only Chance of Survival: Become Google Music

I always get a glimpse of what’s hot by watching what my teenage nieces consume online. They like to play a lot of online games (they started with Club Penguin, but have since moved on to more ‘grownup’ games), use AIM as their primary communications tool and use YouTube as their music source. Even though they have iPods (and thus, iTunes) they spend hours cataloging and searching for music on YouTube. And a side note for those who say radio is dead — they always prefer to hear Z-100 than listening to their iPods in the car.

YouTube’s focus is not music, but they have always been a replacement for what MTV.com should have been. There are thousands of music videos on the site, where users, acting as cyber DJs, make their custom collections, from Disco to Salsa.

YouTube has had a lot of problems with licensing lately, pulling down music videos in the UK after failing to reach a deal with The Performing Rights Society (PRS).

Now they’re trying to become Hulu, opening channels for ABC and ESPN and  even in talks to put Sony’s films on the site. They are looking to be more centered on long-form content.

I say to them: you’re going on the wrong direction.

Ultimately, the only people who can really benefit from long form content are the 4 or 5 studios that produce it. They’ll eventually figure out they don’t need YouTube to stream for them. That’s just a commodity offering that doesn’t add any value. YouTube’s streaming bill will be higher on a per-user ratio, and it will be hard for them to monetize that content.

Music, however, is more aligned to what YouTube does. These are some of the benefits:

• Short form content (music videos are about 5 minutes each)
• Possibility to strike deals with major labels
• Reach out to the thousands of independent music labels or producers
• Highly monetizable (A recent study found that half of all adults who watched a YouTube music video went on to buy music released by that artist)
• Social aspect of music which could leverage their existing community

I was excited when I saw that Universal Music and YouTube were striking a deal. However, the deal involves a separate site which seems to me it’s not good for YouTube.

At the end of the day, Google can’t afford to lose $500 million per year much longer. I say this is the time to step it up, update your application to be more music centered and stop trying to be Hulu.

What do you think? Is music really YouTube’s salvation? Or should they go Hulu?

Tagged as: music, youtube