Disclaimer: Obviously I worked at Google for 6.5 years so take this with the appropriate grain of salt.
"I wish Google would just let me pay them money to remove ads from this service. WTF GOOGLE IS SO DUMB AND EVIL WHY WON'T THEY DO THIS."
How many times, in various corners of the Internet, have you read some variation of the preceding sentiment?
Now, it turns out, Google is trying to do this with a subset of music videos on YouTube. But when you do this, you need a contract with the rights holder. This is complicated. The rights holder might not agree to your contract terms. For example, they might want more money. So you end up in negotiations. While those negotiations are ongoing, or if they break down, you can't include that music in your paid service.
The Internet's collective reaction has been: "WTF GOOGLE IS SO DUMB AND EVIL WHY ARE THEY DOING THIS?"
Now, YouTube will still host music videos that are not opted into its monetization program, i.e., if you are a band and want to put music videos on the Internet for free, YouTube will host those videos for you. Let's be clear what this means: if you want to distribute a video to a hundred million strangers on the Internet, YouTube will pay for the software and servers and a petabyte of network bandwidth and a small army of SREs holding pagers who will wake up at 3am if too many people in Kuala Lumpur click on your video and get an HTTP 50x error, and it will do so without you paying YouTube a dime. None of that's changing. But if you opt into YouTube's monetization program, you will have to opt into its full, updated monetization program: ads for non-subscribers, and no ads for subscribers.
Note that there is no sensible way to let users pay to remove ads from music videos while also still showing ads to those same users for some music videos. If YouTube did this, you can bet the Internet would collectively scream, once again, "WTF GOOGLE IS SO DUMB AND EVIL WHY DON'T THEY REMOVE ADS ON MUSIC VIDEOS WHEN I PAID TO HAVE ADS REMOVED? I'm unsubscribing from this bullshit service!" The subscription service would fail and YouTube would have to revert to its old model of monetizing via ads only.
In short, "blocking" — i.e., excluding unlicensed music from the monetization program — is an inevitable consequence of having a paid subscription service.
The press has done an abysmal job covering this. It seems that every year my contempt for (most) journalists finds reasons to grow greater and greater. I'm pretty disappointed that the Financial Times, reputedly pretty reliable, appears to be Ground Zero for this particular blast of misinformation.
p.s. As for claims that YouTube has anything approaching a monopoly on online video sharing, I'm honestly puzzled by the claim. Just to take one example competitor, Vimeo is pretty reliable and seems to have rough feature parity, including embedding in external sites. Vimeo's content is included in Google's video search corpus (example) and therefore shows up as a thumbnail image in Google web search, just like YouTube videos. If you need to make money, Vimeo has a few built-in monetization options; if those are insufficient, there's a lot of innovation occurring in the world of funding, and in my opinion the Patreon/Subbable model seems much more promising for creators with a small-to-medium-sized audience than Spotify-style monetization, which currently amounts to "we'll give you 0.0001 pennies per stream play so that both the company and the artists can lose money hand over fist!" Is it really true that Adele fans will face substantial (or even non-substantial) barriers to watching her music videos if they're on Vimeo? And that's just one competitor. The upshot is that indie labels are probably wrangling with YouTube over licensing terms not because it has anything like a monopoly, but because they think wrangling with YouTube will make them more money than all the other alternatives. Which is perfectly fine — more power to them, negotiating the best deal is essential in business, etc. — but we should not misread the situation.
 On the other hand, one benefit of no longer working there is that I can write stuff like this post, just like I used to before I worked there. Arguably, working at Google made me less predisposed to harshly criticizing misinformed critics of Google.
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