Would You Pay For an Ad-free YouTube?

29 Oct 2014 | Author: | No comments yet »

Google planning ad-free version of YouTube.

The move would represent a significant change for the world’s No 1 online video website, whose free videos, often accompanied by short commercials, attract more than 1 billion users a month. “There are going to be cases where people are going to say ‘I don’t want to see the ads or I want to have a different kind of experience’,” Susan Wojcicki, a Google senior vice-president who heads the YouTube business, said at the Code/Mobile technology conference in Half Moon Bay, California late on Monday.YouTube is by far the leading destination for internet video, delivering more than 6 billion hours’ worth of content every month to eyeballs worldwide.

Digital companies such as Spotify and Soundcloud already use this sort of model, but it would mark a radical shift for YouTube, which has been ad-funded and free-to-view ever since it was founded. Wojcicki, who became the head of YouTube in February after several years overseeing Google’s multibillion-dollar advertising business, said a paid video service was “near-term” but provided few details, including how much a subscription would cost.

The online streaming world is getting more crowded, with HBO planning its own streaming service and cable giants Shaw and Rogers teaming up to launch Shomi. In May 2013, YouTube launched a pilot program that allowed individual content creators to charge consumers a subscription fee to access a particular “channel” of videos. We’re thinking about how to give users options.” It is not known how much Google would charge for an ad-free subscription to YouTube or exactly when it would launch. Wojcicki on Monday described a broader subscription service in which consumers would pay to access an ad-free version of YouTube’s vast collection of videos. So it was probably just a matter of time before YouTube – the Google-owned video site full of music and video games and cat videos – started to envy a paid subscription model that has worked so well for competitors like Netflix.

By offering subscriptions, YouTube would add not just another conduit of revenue, but new complexity as it gets into the competitive space previously dominated by TV subscription services like Netflix, Hulu, Amazon Prime, and most recently, HBO Go. Ms Wojcick has been tasked with driving profits and revenues at the online video streaming site, which was acquired by Google in 2006 for $1.65bn and is now thought to be worth more than $40bn. She took over YouTube earlier this year and has been looking for ways to generate more revenue and profit from the video site, which Google acquired for $1.65 billion in 2006.

But compared to the high production-value Hollywood content favored by those services, the question is whether audiences would also pay to eliminate annoying ads from makeup tutorials and comedy vlogging. The initiative follows an earlier scheme to launch a slew of subscription “channels” on YouTube, featuring programmes made by some of the UK’s most respected production companies, including BBC Worldwide and Endemol, the creator of Big Brother. “We rolled out the ability for an individual channel to do a subscription,” Ms Wojcicki said. “We’ve also been thinking about other ways that it might make sense for us. The news was part of her response to a question about “over the top” subscriptions, services that end-run the traditional cable model by offering direct subscriptions. If you look at media over time most of them have both ads and subscriptions.” Meanwhile, Google has also started talking to production companies about supplying content for a number of its own, subscription YouTube channels, according to reports. An example is the service recently announced by HBO, which said that next year it will start a stand-alone streaming service aimed at “cord cutters,” people who want cable quality shows but refuse to pay several hundred dollars a month for the jumbled mess of cable channels.

There’s an argument to be made that YouTube has an edge here with a depth and breadth of user-created content that no one else can ever hope to match. In essence, the company is making phone calls to potential partners, including anyone from big media companies like Disney to popular individuals with millions of subscribers, to see if they might be interested.

Wojcicki said would be introduced “soon.” Rather than an entirely new paid YouTube, there would be several subscription services based on certain topics – for instance, a subscription service with nothing but video games. Currently, YouTube stars earn money by through a revenue share with Google on the ads tacked onto their videos, though many have said that these rates are too low. The back story to all of this is that while online video sites like YouTube are gobbling up more of people’s time, people still spend vastly less time watching online video than TV.

American adults are on pace to spend an average of four and a half hours of their days watching broadcast and cable television this year, compared to about an hour of online video, according to eMarketer. The first is technology and algorithmic improvements, like reducing buffering times and doing a better job of recommending videos for people so they keep clicking on new things. Meanwhile, two smaller video services—IAC’s Vimeo, as well as Vessel, a startup from from former Hulu CEO Jason Kilar—are also planning to offer subscriptions.

The first has been to help their “creators” produce higher-quality content by, for example, building studios in cities including Los Angeles, New York and São Paulo. YouTube also hasn’t spelled out how the new subscription service would compensate its talent, though it has historically shown a commitment to seeking to generate revenue for its creators, from “tip jar” fan funding to its recently announced original programming unit, through which the company would reportedly invest millions in its homegrown stars.

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