Like Spotify, the service will give users the option of watching music videos for free with ads, or paying around $10 a month to remove ads.

Both the free and paid versions will allow unlimited access to the music on YouTube, according to Billboard, but the premium service could also include the ability to stream full albums and cache music for offline listening.

The timing of the launch has not been determined, sources told Billboard, but the market for subscription music services is heating up, with the likes of Spotify, Deezer, and Last.fm already offering millions of music tracks via their online music libraries.

It is thought that YouTube’s service could come out ahead of Beats Music, which is expected to launch later this year. YouTube has already secured most of the licenses it needs to launch a music service, via its parent company Google’s All Access service, which launched in May.

Having a paid tier, with all the required licenses for a premium on-demand product, would give YouTube more flexibility in packaging and selling music, according to the sources. Such a service could also could be integrated with other Google products in the future, such as Google Glass.

YouTube declined to comment on its plans: “We’re always working on new and better ways for people to enjoy YouTube content across all screens, and on giving partners more opportunities to reach their fans. However, we have nothing to announce at this time,” the company said in a statement.

Earlier this month, YouTube announced a deal to become part of the BBC’s new Playlister service, which lets audiences save their favourite tracks heard on BBC radio stations to a personal online playlist. This playlist can then be exported to Spotify, YouTube or Deezer, where the tracks can be heard in full.

“We’re delighted that through BBC Playlister, YouTube’s community of passionate music fans can access and share the music content they love from their favourite BBC shows by easily exporting playlists directly to YouTube,” said Ben McOwen Wilson, director of content partnerships for YouTube in Europe, at the time.