This week, YouTube announced that they want to further establish themselves as a premium video service company. YouTube is looking into possibly opening up an ad-free paid version of its service. The subscription effort is still in the very early phases, but the company plans to expand beyond its traditional user-generated content into more premium programming to better compete with companies like Netflix, Hulu, and Amazon and to attract TV ad dollars.
YouTube is currently ad-supported. This new direction for YouTube will allow it’s users to choose ads, or pay a fee. YouTube confirmed a few months ago that they were planning to launch an ad-free subscription-based music service. The future music service will not be a single app, but will be a paid tier within YouTube. Similar to Hulu or Spotify, people would visit YouTube and opt for a free ad-supported experience to watch music videos or listen to songs, or they can pay for the ad-free version that offers other perks like listening without a live internet connection.
YouTube doesn’t need the extra money though. They recorded $5.6 billion in gross revenue last year, but only netted $1.96 billion of that money – most of which went to costs for all the free video it allows its users to have.
An issue YouTube might face with this new subscription service is that Netflix and Hulu benefit from libraries of movies and TV shows that people are accustomed to paying for through rentals and cable subscriptions. YouTube’s library is more about music videos and beauty and makeup guides like Michelle Phan – and though they have become a leading entertainment format for younger viewers, they have also been free. This could be a big issue for YouTube…attempting to convert a free service to a “freemium” service.
In addition to these changes, YouTube is looking for an original series that would premier exclusively on YouTube and could be compressed into 22 minute episodes for YouTube to then take to TV.
Will people pay for something they could otherwise get for free? Are ads that much of an issue? Is the pay-for-no-ads route YouTube wants to take a profitable one? Can YouTube eventually pose a threat to services like Netflix and Hulu?
– Titi Fagade