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Explainer: Why does YouTube want to introduce a paid subscription service?

It’s not all about making more money (although that’s a major reason behind it).

Image: Shutterstock/Yeamake

DETAILS OF YOUTUBE all but confirming a subscription service that will remove all ads from videos emerged today.

It’s likely to arrive at the end of the year, but if such an idea sounds familiar, that’s because it is. This is one of a long line of attempts from YouTube to monetise the site so it doesn’t rely so heavily on advertising.

That’s the obvious reason, but there’s a more significant reason for wanting a paid tier and it’s to do with those creating videos, and the obstacles YouTube faces in attracting top talent.

So what’s the deal with this subscription model?

All that’s been revealed so far relates to a letter sent to video creators and it’s possible a paid tier would arrive before the end of the year.

By creating a new paid offering, we’ll generate a new source of revenue that will supplement your fast growing advertising revenue… it’s an exciting year for YouTube, as we push into uncharted territories.

VentureBeat did note an update in the terms of service which says that YouTube programme partners would share 55% of its revenue generated from subscriptions back to content creators. The only problem is it’s not giving content creators a choice in the matter, they either opt-in or see their videos set to private.

These measures will go into effect on 15th June although no date for when the subscription service will launch was provided.

But this sounds awfully familiar? 

Yes, and it’s likely because of two reasons. The first is it’s been talked about for a while, the other reason is YouTube has experimented with different paid services for a while now. Here are a few examples.

YouTube Music Key - a beta service which offers the same concept for music videos. By paying a fee for the service, it allows you to download music videos and watch them without ads.

As it’s in beta, the first six months are free –  after that it’s €9.99 per month – and it includes a subscription to Google Play Music as a sweetener.

music-feature-1-vfl4sSM3I Source: YouTube Music Key

Channel subscription service - Yep, it already had a subscription service, but that’s fallen by the wayside. When it launched in 2013, users could subscribe to 53 channels such as UFC or Sesame Street.

Each channel had a different cost for a monthly subscription and while it was seen as a way to help channels boost revenue and create more premium and original content, not enough people took YouTube up on its offer.

Fast forward to today and the service is still around, but the selection of channels available is pretty dire.

Donations - The ability to give channels tips to help support them was rolled out back in September, but few channels support it.

Purchase films - While it has Google Play Movies and TV in its roster, you may be surprised to know you can pay for movies on YouTube.

The inclusion of HD quality footage helped but the cost for one movie alone – ranging from €2.99 to €7.99 depending on the type of movie you’re purchasing – and the limited catalogue meant it wasn’t really going to catch on.

YouTube Rocky IV The only film on YouTube worth spending €3 on. Source: YouTube

So what type of subscription service will it likely go for?

Since it’s already tested out the methods above, giving users the choice to pay to remove ads is the best middle ground YouTube can offer.

Whether it likes it or not, its rivals include the likes of premium content holders like Netflix, and Hulu while video offerings from Facebook are also a threat. All have different revenue streams, but they all threaten certain parts of YouTube, either the views or the creators.

Either way, it needs to improve its efforts if it wants to avoid losing channels to these other services.

But why does it need subscriptions? It already makes enough through ads.

In YouTube’s case, shows are uploaded by individuals or small groups of people instead of major entertainment companies.

This means YouTube’s speciality is short-form video content, which is both a good and a bad thing.

The good part is it has videos that people can dip in and out of, but its content creators are very reliant on these views and time spent on their videos to make a living from it.

The more quality videos they produce, the more people that watch them and the more revenue they’re able to generate. That’s why the high-volume videos tend to be Let’s Plays and tutorials as they’re easier to put together than say an animation or show.

That’s not to say people haven’t been successful with animations or that successful Let’s Plays are low on quality, but the current format heavily favours those who can produce videos daily.

PewDiePie PewDiePie, one of the most popular YouTube channels, has just under 36 million subscribers and releases two videos daily. Source: YouTube

That’s problematic for those who make a living from it and create videos by themselves. If they get sick, or can’t keep up with their uploading schedule, that has an adverse effect on their earnings and adds to the pressure of maintaining a busy schedule.

Also, those who focus more on long-form content wouldn’t have much reason to produce videos for it since it’s too reliant on quantity instead of quality. And that’s before you address the investment you need to make (both time and money) if you want the videos to be of high quality.

In short, the advertising model isn’t really helping YouTube creators that much. Instead, it limits the type of content that will be successful on the site and hinders certain types of content.

Are there any examples of this going right?

Probably the best example of a joint ad and subscription model would be Twitch – the company that was bought by Amazon for $970 million dollars - which has both an ad and a subscription model.

All approved creators can active a subscription service that gives users special perks. Combine that with ad revenue and donations and it’s one of the reasons why some people are able to make a living from livestreaming games.

Twitch.tv Some gamers have been able to make a living out of livestreaming games on Twitch. Source: Twitch.tv

Other services like Patreon allow viewers to support creators directly and are useful if you have a small but dedicated audience.

The obvious problem with this is you’re asking people for money which is really only viable when (a) you have a dedicated following and (b) that following has disposable income.

One of YouTube’s most well-known content creator, Hank Green, wrote on the subject of advertising and creators just recently (and is worth reading if you have 11 minutes to spare) and describes the current model in blunt terms.

The content that has survived on YouTube is a direct result of crappy advertising revenue. It’s put a dramatic emphasis on getting the most views possible, not just per video but per day. The result: A kind of hyper-frequency, with some gaming channels uploading three to five videos PER DAY. Without volume, it’s hard to make it work.

What makes you think that YouTube is doing this for the creators alone? 

The answer is it’s not. This is a business decision first and foremost. The new terms mean it gets a significant slice of subscription money – that part was inevitable – and the overall goal is for YouTube to generate more revenue.

That said, it’s more practical to fund channels this way than asking you to pay for one channel alone. A company that isn’t dependent on one revenue stream – especially one as volatile as online ads – can take more risks, and since YouTube has been investing in studios for creators, a new, viable subscription model could help drive this.

YouTube has more than one billion users according to its site so while some may pay for the privilege of removing ads, it’s likely that additional incentives will be needed if it wants a sizable number taking up its offer.

It doesn’t require everyone to sign up to the service, but if it can tempt enough people to sign up and reduces the dependence on ads, then it could give those who focus on more time-intensive videos a little more breathing space. With the competition heating up, it needs these creators now more than ever.

Read: Siri has got a New Zealand upgrade so Kiwis can safely ask for ‘six’ >

Read: Samsung expects the S6 to do a lot more than break sales records >

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About the author:

Quinton O'Reilly

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