It’s no secret that Google has yet to fully realize YouTube’s potential as a profit-making machine. Now, some eight years after Google purchased the video-hosting and sharing service, it is finally contemplating offering an ad-free subscription service. Perhaps it took Netflix and Hulu to pave the way. Regardless, the multibillion dollar question remains—is it too late?
YouTube CEO Susan Wojcicki floated the idea of a subscription service at the recent Re/Code Conference, saying, “YouTube right now is ad-supported, which is great because it has enabled us to scale to a billion users; but there’s going to be a point where people don’t want to see the ads.”
Consumers, Wojcicki said in an onstage interview, generally “will either choose ads, or pay a fee, which is an interesting model. … We’re thinking about how to give users options.”
YouTube’s idea may excite some industry watchers and even a few consumers, but it’s unlikely to work out well for Google for several reasons.
First, in the average person’s mind, the YouTube brand means free content. For more than a year, YouTube has allowed individual creators to sell videos using an on-demand model, but the plan has yielded poor results. When the dollar signs pop up on a video, the experience is abrupt and unexpected. Google and YouTube have done a poor job in promoting the feature.
YouTube is also emerging from the shadow of a number of heavily publicized copyright lawsuits (such as one with Viacom) for allowing users to upload unauthorized content. While the company has announced new technology that helps eliminate such abuses, the weight of years of copyright abuse remains a PR nightmare.
In order for YouTube to offer a subscription service, it would need to create an entirely new brand that represented a clean, well-lit place where premium content could live. You will not find cat videos mixed in with Netflix, Hulu, or Vudu films and shows. A new paid service with a new name would require a fresh new branding effort.
Even if YouTube went that route, any sort of premium service it could offer would pale in comparison to what providers such as Vimeo offer in their VOD catalogs. Vimeo has more than 12,000 carefully curated films and devotes a lot of energy to Staff Picks and other editorial pointers that are meant to aid consumers in their VOD selections. In addition, Vimeo offers a 90-10 revenue split in favor of the content owners. While Vimeo currently does not offer a subscription plan, it is just a matter of time.
Even with those obstacles, YouTube will push hard to go the subscription route. Google already offers other major pieces of the emerging digital living room ecosystem, like its Android TV and Chromecast streaming devices. Having a subscription service to offer within that delivery system gives Google a chance to compete on a level playing field with Amazon (which launched the Kindle Fire Stick to compete with Chromecast) and Netflix (which is available on just about every streaming box).
It’s also possible that Wokcicki, a savvy veteran Google employee, could be floating a trial balloon, hoping to gauge the reaction to her proposal from consumers and content owners. It would be an easy and cost-free way to beta-test an idea.
H/T Re/Code | Illustration by Max Fleishman