By Kenrick Cai

SAN FRANCISCO, March 5 (Reuters) - Alphabet's GOOGL.O 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.O and Disney DIS.N.

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.N and streaming offerings from Apple AAPL.O and Amazon AMZN.O.

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.

(Reporting by Kenrick Cai in San Francisco; editing by Peter Henderson and Stephen Coates)

((Kenrick.Cai@thomsonreuters.com))