See, that makes sense; but in that case, YouTube would simply not include the indie music on the subscription channel. But that doesn't explain the bit in the article which says, "the company [YouTube] has signed lucrative licensing deals with major labels Universal, Warner and Sony, while demanding that independent labels sign up to inferior terms or face having their videos blocked from YouTube's free service."
So it sounds like they're trying to put all music behind a paywall, to the extent of deleting free indie music from the free side.
I'd tend to read between the lines. putting free stuff behind a paywall isn't google's style. The whole thing looks to me like they're trying not to piss in any content owners wheaties by crossing IP lines with the paywall service. This is about people paying google to remove ads and the legal ramifications thereof. People who don't pay the ads will still see the ads. And the content.
However, legally, youtube can't show IP without ads which (in the case of IP owners) are ads to buy that content on itunes. This is how google got around the whole banhammer that the RIAA and others started slapping them with a couple of years back. So now they're trying to launch a paywall service but if that paywall service offers a lot less content, who's going to want to pay for it?