SAN FRANCISCO, March 5 (Reuters) - Alphabet's

YouTube on Wednesday rolled out a $7.99 monthly subscription

service that is ad-free for most videos, except music, to create

a plan to compete more directly with offerings from Netflix ( NFLX )

and Disney ( DIS ).

The "Premium Lite" plan is aimed at customers who rarely

watch music videos or listen to music. YouTube is a major player

in the streaming music world, but the online video company has a

substantial number of watchers who rarely use that function and

may gravitate to the new service.

YouTube's existing $13.99 Premium plan has no ads, including

for music, while a separate $10.99 plan offers ad-free music

videos and other videos with ads, essentially the reverse of the

new plan.

The new option fills a demand YouTube has been noticing for

several years among users who already pay for other music

streaming subscriptions. That dynamic is particularly apparent

in the United States, where the market is led by Spotify ( SPOT )

and streaming offerings from Apple ( AAPL ) and Amazon ( AMZN )

.

John Harding, a vice president of engineering, said the main

focus of the new plan is to tap into a "much larger set of

people" who otherwise might not consider paying for YouTube.

"We didn't feel that we really got it matching the tier for

users that don't need the music content, and so that's where

this revision comes in," said Jack Greenberg, the product

director for YouTube Premium.

The company began testing Premium Lite last year in

Australia, Germany and Thailand. The preliminary data showed a

new user base of first-time subscribers paying for Premium Lite,

Harding said, with some later upgrading to Premium. More people

upgraded than the amount downgrading to the cheaper plan.

YouTube announced Wednesday that it had eclipsed 125 million

paying subscribers, up from 100 million in January 2024, though

those figures include users who are signed up for temporary free

trials.

Ads comprise the majority of YouTube's revenue, accounting

for $36 billion of Alphabet's $350 billion in overall 2024

revenue. But subscriptions are increasingly contributing to

sales.

Alphabet is secretive about sharing YouTube's

subscription-based revenue, but CEO Sundar Pichai stated during

an October call about the company's third-quarter results that

YouTube's combined ad and subscription revenue surpassed $50

billion over the previous four quarters.

Chief business officer Philipp Schindler also stated last

year that subscriptions were boosting the bottom line for both

YouTube and its content creators.

Some details regarding the U.S. launch of Premium Lite were

first reported by Bloomberg in February.

YouTube in 2023 hiked the price of Premium and Music Premium

by $2 and $1, respectively.