YouTube is reportedly planning to launch its premium on-demand music service later this year, according to sources. The service, similar to Spotify, but including video, is designed for mobile music listeners. It is expected to offer a tiered approach, with an ad-supported free component and a premium option that includes unlimited access to a catalog of songs similar to the All Access subscription service available via Google, YouTube’s parent company.

The premium tier is expected to include the ability to bypass ads and cache music for offline listening.

“The free tier is likely to be unlimited, on-demand access to full tracks on all platforms, including mobile, said several people who have been briefed on the proposed service,” reports Billboard. “In that sense, the paid tier is more of a ‘soft sell’ as YouTube’s primary goal is to continue to amass ears and eyes to its mobile platform to sell ads.”

“But having a paid tier, with all the required licenses for a premium on-demand product, gives YouTube more flexibility in packaging and selling music with fewer restrictions on what it can do with the music,” notes the article. “In addition, there are strategic reasons for developing a premium music video service that could be paired up with other Google products in the future, including Google Glass.”

YouTube’s most recent Android app includes references to “Music Pass” and premium music features. The app teardown was first reported by Android Police.

According to GigaOM: “A file called music_upsell_dialog.xml contains text strings that promise offline playback to ‘take your music everywhere,’ background listening to ‘keep your music playing while listening to other apps’ and uninterrupted music with ‘no ads on millions of songs.'”

As we previously reported, if YouTube launches its service this year, it could be available ahead of Beats Music, which has reportedly been delayed until early next year.

“Using YouTube to sell music subscriptions could make sense for Google. YouTube is effectively already the most popular music service in the world, and the site’s charts of most-viewed videos routinely gets dominated by songs from major-label artists,” suggests GigaOM.

“YouTube, with a massive user base already in place, and with the added attraction of videos to run alongside music tracks, may have an easier time attracting paying punters and thereby giving competing services such as Spotify, Pandora, and iTunes Radio a run for their money,” adds Digital Trends.

UPDATE:
YouTube’s Music Subscription Service Won’t Show Up This Year, AllThingsD, 12/3/13