YouTube unveiled a new music service this week that lets users listen to (and watch) full albums and music videos for free online and offline called YouTube Music Key. The offering, which has a subscription fee of $9.99 a month, is a an opportunity for the Google-owned video site to compete with popular music-streaming services like Spotify, Pandora and Apple’s Beats Music, and generate a new form of revenue.
But the new service also speaks volumes to how businesses can—and must—innovate and design new products and pricing models in a world where more stuff is offered free or very cheap online. Small businesses can take some cues from YouTube’s new service:
“Free” is smart business—when done right. Consumers increasingly expect companies to give them free things—but will pay for additional value. Think of it as the Costco model: Shoppers get lots of free food samples when they roam around the store, but when they find something they really like, they’ll buy it. YouTube is letting anyone check out its new service for free online, but charging for the convenience of being able to use it offline. The challenge will be convincing consumers that are used to getting something for free that the $9.99 monthly fee is worth the price.
Consumers are tired of being bombarded with ads. YouTube’s monthly subscription service promises customers no ads—and that’s becoming an increasingly coveted perk. As people get inundated with pop-up ads while browsing online, some will actually pay money for a more carefree online experience. However, a recent survey by MIDiA Research found that only 7 percent of YouTube users would pay for an ad-free service—likely because there are already other apps like AdBlock that let users hide YouTube ads.)
It’s important to know your competitive advantage. One advantage YouTube has over Spotify, Beats Music and other music-streaming services is that it already offers official videos by music artists and cover artists as well as allowing anyone to upload their own videos. These will all be available to users and provide something that users can’t find elsewhere.
User customization is key. YouTube will track users’ music playing preferences and suggest other music based on that data. This will essentially allow customers to create their own YouTube music library and listening experience—totally different from anyone else. Allowing customers to customize their experience and custom-design their own products is becoming more expected and commonplace.
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