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Here's what's changing in YouTube's paid music and video services

  • Google is killing YouTube Red and introducing YouTube Premium, YouTube Music Premium and YouTube Music.
  • It's confusing, so here's what's actually changing.

Google announced YouTube Music, YouTube Music Premium and YouTube Premium on Thursday — a dramatic change to its current music and video offerings.

Here's basically what's happening: It's getting rid of YouTube Red and splitting that into new services. YouTube Red, if you're unfamiliar, was a $9.99 monthly plan that offered an ad-free YouTube experience that included music. Customers who currently pay for YouTube Red will get the new YouTube Premium service at the same price they currently pay.

The new plan still sounds confusing, so I'm going to break down what Google's doing here.

YouTube Premium

YouTube Premium is Google's new paid all-encompassing ad-free service. (The free version of YouTube, with ads, will live on.)

YouTube Premium costs $11.99 a month and includes ad-free video, the option to continue playing videos or music "in the background" (meaning the audio will continue if you minimize the app), music and video downloads, and access to YouTube original movies and TV shows. It also includes YouTube Music Premium, which alone costs $9.99 per month.

If you're looking to pay for one of these, YouTube Premium is the best bet since it offers the most bang for your buck.

YouTube Music Premium

YouTube Music Premium is included in YouTube Premium but can also be purchased as a stand-alone product for $9.99 a month.

It includes music playlists, music videos, remixes and live versions of songs. Subscribers to Google's Spotify competitor, Google Play Music, get this as part of that subscription. Google Play Music costs $9.99 a month, so your best bet is to just subscribe to that and then you get YouTube Music Premium included.

Again, unless you're focused purely on music, you might as well pay the extra $2 a month to get YouTube Premium.

How does this compare to its rivals?

Google is trying to make a move against Spotify and Apple Music. Those services are still compelling on their own, however. Both offer family plans for $15 a month, which YouTube Premium doesn't have. Apple Music and Spotify have music videos and live concerts, just like YouTube Music Premium. Also, Spotify recently tried to stand out by partnering to offer Hulu with limited commercials for $12.99 a month.

Taking customers away from their existing streaming music service is tough. Consumers have established playlists and music libraries, for example, which means they need to start fresh when they begin a new service. Since Spotify has been around for so long, it already has an established user base of 157 million monthly users and 71 million paying subscribers. To attract newcomers, Spotify also recently introduced a more compelling free service.

Market reaction

The market didn't react much to the news, maybe because the new products are a bit confusing.

My guess is Google is hoping folks will just sign up for its YouTube Premium since it includes YouTube Music Premium but also access to everything else YouTube has to offer for just $11.99 a month.

Google's YouTube Red product didn't slow Spotify or Apple Music's growth, so YouTube Premium might not either.

— CNBC's Michelle Castillo contributed to this report.

Disclosure: Comcast, which owns CNBC parent NBCUniversal, is a co-owner of Hulu.