YouTube has reached a licensing agreement with thousands of independent record labels to gain rights to stream music for its long-awaited subscription service.
The deal was struck with Merlin, the rights agency that represents a host of smaller music labels, and comes on the heels of heated negotiations, according to the Financial Times. At one point, YouTube threatened to pull music videos for musicians such as Adele and the Arctic Monkeys if the agency didn’t work with them.
YouTube, which is owned by Google (GOOG), has been working on a subscription music service to compete with Spotify, and this deal gets the paid service closer to a launch date. Anyone who signs up for the monthly subscription will be able to listen to music and watch videos without advertising, as well as save playlists for offline listening.
The move would generate huge revenues for the online video service — as much as $500 million in a year, according to Midia Research estimates.
The company has already struck deals with major record labels Universal, Sony and Warner, and is expected to start rolling out the service within weeks. YouTube needed to bring on the independent record labels in order to provide a full catalog of popular music. Merlin is often called the “major fourth” and represents 20,000 independent labels.