There is a lot of buzz regarding YouTube’s new “paid subscription” model that will be launched in the spring. Google and YouTube are facing mixed reviews; many people believe the service will do amazing things for YouTube, and many think that the service will tank. Many are wondering, if this model will prove to be successful for YouTube. Here are some reasons, why I think it will succeed in the end.
The key for the success for this campaign is the quality of the premium content. YouTube and the channels need to ensure that they are providing exclusive, high quality content. Viewers will need to feel that they are receiving premium content.
YouTube already has original YouTube Content available to them. In the past two years, YouTube has spent 350 million dollars on In the last two years Google has invested $350 million dollars into developing 100 original channels for exclusive content. The majority of this content is not just some guys talking into a webcam for thirty seconds. YouTube has funded channels with major industry names such as Warner Brothers, Jay-Z, and big YouTube giants such as Machinima. These channels draw large amounts of viewers and subscribers. With this new subscription model, these channels can continue to offer their programs, and create even better content with the funding they receive from their subscribers.
Furthermore, with $1.50 billion dollars in Ad revenue alone in 2011, YouTube further has the means to fund these channels, and give them the backing they need to produce exclusive content.
Paid subscription channels will appeal to both content producers and viewers. With this new subscription model, these channels will be able to bring in a steady stream of income every month. They will be able to produce and release content that they could not create before In return, the viewers will be able to have access to this exclusive content that they were not getting before. Out of the million subscribers that these channels have, if at least 20% of the subscribers paid $1 dollar a month to receive higher quality content, YouTube and respective channel would walk away with a profit. Not only do both entities benefit, but these subscription models will give YouTube a chance to compete with Netflix and Hulu who are trying to create their own original content. Although YouTube is relying on the fact that content creators will create even higher quality content, their main competitive advantage is that they do not have to pay large sums of money to get this content on their webpages.
I think that YouTube can benefit from marketing their “paid subscriptions” as a supplement for Cable TV, NetFlix, and Hulu. In these services, you have to pay a flat rate to obtain a bundle of channels and shows that you don’t necessarily want to watch. Netflix can cost up to $8 dollars a month, and you are getting a large portion of channels. On YouTube, you pay a much smaller portion ($1 – $5 dollars), and you can get only the content you will watch. This creates a much personalized experience, that can go hand in hand with Netflix or other similar services.
and no, YouTube will not be getting rid of its free model. It would be crazy to do so.
What do you think about YouTube’s new subscription service? Leave a comment below.