After months of rumor and speculation, YouTube finally announced its subscription service, YouTube Red, in a presentation at YouTube Space LA on Wednesday. But after all the speeches, sizzle reels and supporting documents were delivered, many questions were left unanswered.
For the media, the most pressing issue was revenue share. During a Q&A session following the presentation, reporters repeatedly tried to pin down YouTube execs about what portion of the subscription money will go to creators. But they refused to go into specifics, saying only that creators will receive the “vast majority” of the money, based on their watch time.
The New York Times and numerous other publications reported that Red will give creators the same standard 55/45 revenue split it does for video ad revenue. But that doesn’t rule out the possibility that top creators such as PewDiePie will get a more favorable cut.
For YouTube, the bigger question is whether people will be willing to pay the $9.99 a month ($12.99 for iOS devices) price tag for the service, which launches in the U.S. on Oct. 28.
“You’re going to consumers and first trying to explain to them what this service is, which is difficult enough, then you’re asking them to pay 10 bucks a month for something they’ve always gotten at no cost,” said online video expert Dan Rayburn, EVP of StreamingMedia.com. “That’s a very hard proposition.”
Robert Kyncl, chief business officer of YouTube, boasted that Red will offer a wide selection of content for the price of a single SVOD service. But is that really a proper comparison?
Like a Netflix or an Amazon, YouTube Red will offer original series and movies beginning next year, but the titles announced yesterday are not “House of Cards”-style big budget projects. They’re all built around popular YouTube creators such as Lilly Singh, The Fine Bros., Joey Graceffa and the aforementioned PewDiePie. On one level, YouTube is playing to its strengths by using personalities popular on the platform, but, once again, they’ll be asking people to pay for something they’re used to seeing for free.
Or will they be?
Although YouTube execs referred to the originals as Red exclusives during Wednesday’s presentation, they are not characterized as such in the press release announcing the current slate of projects. A source with knowledge of the situation said that with such a wide range of content being produced under their originals banner — from six-minute shows to full-length movies — YouTube may choose to make some available for free ad-supported viewing.
Also, former MTV exec Susanne Daniels has been on the job as VP of YouTube Originals for only two weeks, so the production slate could take on a whole new look in the coming months.
There’s also the possibility that YouTube Red could include content from Hollywood studios and other traditional content producers and distributors.
But the main selling point with YouTube Red is not original content. It’s the ability to watch content ad-free.
Rayburn thinks it’s a solution in search of a problem.
“Many of the ads you can click through after five seconds… and most of the ads you can’t click through are 15 seconds,” he pointed out. “Consumers may hate ads, but I don’t see them saying, ‘I hate them so much that I’ll pay $10 a month to remove them.’”
Red will also enable users to save videos to watch offline on a phone or tablet, as well as play videos in the background. But its biggest value proposition is that it gives users free access to Google Play Music, which is currently priced at $9.99 a month all by itself, as are competitors Spotify and Rhapsody. In a way, it’s similar to how video streaming was tacked on to Amazon’s Prime free two-day delivery subscription.
It could be argued that YouTube’s parent company Google is going about this backwards from a brand messaging perspective by asking people to pay for something they get for free (YouTube), while giving away something they’re accustomed to paying for (Google Play Music) as a bonus.
“Anytime you have a multiple offering, it’s more challenging to market it effectively, because it’s not seen as a pure play against the other,” said Peter Csathy, CEO of Manatt Digital Media. “They are leading with the video, and the secondary bullet point is kind of lost amidst the shuffle of it all.”
It’s not the first time YouTube has offered a subscription service. In 2013, it launched a pilot program in which a small group of partners offered subscriptions with prices starting $.99 a month. This time around, YouTube has asked all users to allow their channels to be included in the subscription service. Those who refuse will no longer be able to monetize their channels after Red goes live in their country, and all their videos will be made private.
There’s a chance this could backfire on YouTube, like the controversial rule requiring people to sign up for Google+ in order to comment on videos, instituted in 2013 and dropped last summer. Or it could simply fade into the background, like YouTube’s tip jar.
But whether Google wins or loses with YouTube Red, Csathy won’t fault it for trying.
“In this world that we all live in, things move so fast that no matter much you are the behemoth in the space, you can’t feel like you’re safe,” Csathy said. “The worst thing is to do nothing, and you have the road kill over time that shows that. Blockbuster Video and Kodak are great examples. So rather than keep things at status quo, they’re looking to make significant changes. That’s what entrepreneurialism is all about.”