The record labels are completely right to be demanding better terms here, just like they would get from Apple, Spotify, Pandora, etc.
http://www.androidpolice.com/2013/11/27/apk-teardown-youtube...
i.e. By enabling the Android/iOS Youtube app to background (which they've gone out of their way to disable up until this point), it essentially becomes an audio streaming service with the same interface.
Plus according to the FT, the problem the indie labels have isn't with the subscription rate per se, its how the new ad tier is set up:
"One label boss said the big problem with YouTube’s new licensing agreement was not to do with the paid tier, but rather that it allowed YouTube to make substantial enhancements to its free tier. His fear is that YouTube’s free tier will become so attractive that it will reduce the number of people willing to pay for subscription services such as Spotify or Deezer."
I suspect Google is right today (at least for the many people who care about mobile music, since the data and/or storage costs would be prohibitive now), but I can also see how a label might not want to set too generous a precedent for tomorrow (on the assumption that bandwidth and storage might become abundant enough sooner than they're comfortable with).
It sets a very dangerous precedent for the value of music, which can be incredibly damaging for already struggling indie artists (not so much for the three majors who have received _massive_ advances)