The video streaming services giant announced Wednesday that it had appointed Lyor Cohen as its global head of music.
Cohen joins YouTube from 300 Entertainment, an independent record label company he founded in 2013 following an eight-year stint as the CEO of Warner Music Group. The hip-hop industry veteran was also pivotal in leading Def Jam Recordings in the '90s when the urban music-focused label was undergoing changes in ownership.
YouTube is bringing aboard Cohen as it searches for ways to tap into the music streaming landscape in a meaningful way.
"Music is definitely a big part of the YouTube universe," said Michael Goodman, director of digital media at Strategy Analytics, by phone Thursday.
For instance, the San Mateo, Calif.-based company introduced a monthly-paid subscription service in 2014 called YouTube Red that offers advertising-free videos and music streaming for $10 per month.
Still, YouTube doesn't have as robust a music streaming service in terms of contentas its rivals, Goodman said, adding that it could be part of Cohen's mandate to move the video site in that direction.
"The music streaming space is becoming more and more crowded, so launching a paid music subscription service is not going to be easy," he said.
In addition to market leader Spotify, Apple (AAPL) - Get Apple Inc. (AAPL) Report has done a phenomenal job quickly becoming the number-two service provider, Goodman continued, adding that Pandora Media (P) is also finally inching toward introducing its own subscription service. Apple launched Apple Music in June 2015 and already had over 15 million paid subscribers as of June 2016.
"Is this a market that Google can launch into and be successful? How many big music subscription services can the market support?" Goodman added.
Still, he did acknowledge that Alphabet -- along with Apple -- may have an advantage when it comes to its music streaming efforts because of its large portfolio of services and networks. As a result, Alphabet does not need to depend solely on its music business itself to attract users, Goodman said.
As competition heats up in the music streaming industry, companies have been working to broaden their portfolios of services. Spotify, for example, has been following YouTube's playbook by tapping into video content such as by developing original series.
So far at YouTube, though, music streaming has come second after video and advertising efforts. And it remains to be seen how Cohen's appointment will affect YouTube and Google's overall music strategy, Goodman said.
YouTube has emerged as an engine of advertising revenue for Alphabet over the years, Tigress Financial Partners analyst Ivan Feinseth said by phone, adding that the tech behemoth's 2006 acquisition of YouTube for $1.65 billion has proven to be a successful one.
Alphabet doesn't break out revenue for YouTube, but the Wall Street Journal reported that YouTube posted about $4 billion in revenue in 2014, citing sources familiar with its financials.
YouTube has emerged as an influential platform for sharing video content and has also largely contributed to the creation of Internet stars.
"It could evolve into a [streaming] service, which I think is their plan," Feinseth further said of YouTube.
Shares of Alphabet were trading down 0.8% at $803.35 on Thursday afternoon, and are up about 3% year-to-date.