YouTube plans to launch paid subscription channels in April 2013, allowing users to choose between ad-supported or ad-free subscriptions for $1-5 per month. They have reached out to popular channels like Machinima to create premium content for these new subscription channels. This moves YouTube into competition with services like Netflix and Amazon Instant Video. The subscription model is aimed at attracting higher quality "premium" content to YouTube that will appeal more to brands and advertisers.

1. YouTube to Maxine 05/02/2013
Introduce Paid Hamilton &
Subscription Eridani Baker
Background
Founded in February 2005 and bought by Google in 2006, YouTube has become the go-to
site for video on the web. With approximately one hour of video uploaded every second
the site is rich in content. In recent years, much of YouTube’s focus was on categorizing
some of that content into “channels”; YouTube is now looking to leverage that effort via a
paid subscription model.
Details
YouTube paid subscription channels are planned to launch in April this year. Costs will be
tiered and will likely allow users to choose ad-supported or ad-free subscriptions. The first
step has been to reach out to a small group of channels that have already gained a large
audience, asking them to submit ideas to create channels that users would have to pay to
access. No partners have been officially named yet, but potential channels include
Machinima – the number one video entertainment network for gamers around the world.
Machinima’s existing YouTube network almost 190 million subscribers and has been
viewed over 40 billion times.
The initial subscription cost would be $1-$5 per month putting YouTube in direct
competition with other video streaming companies such as Netflix and Amazon Instant
Video. There is also talk of a pay-per-view model for live events such as concerts and
sporting events and content libraries.
Implications
YouTube’s current targeting has proven successful for advertisers, high-end brands have
been able to advertise to a high-end audience through clever audience targeting. That said
YouTube is still often associated with cat videos and squirrels on skateboards. The
introduction of a paid subscription model will set clear boundaries between premium and
standard content and allow for premium only targeting. For a marketer this assurance of
quality content should make YouTube ads more appealing.
Content creators are also likely to be attracted to the new paid YouTube channel, Salar
Kamangar the CEO of YouTube has hopes that the new offering will attract smaller ‘indie’
type channels that can’t afford to run in a standard paid TV environment.
Summary
YouTube is not charging for all their channels, and is instead only applying the model to
strong niche channels and new channels. A test-and-learn approach is a pragmatic means
of ensuring they balance subscription costs with audience reach.
Overall the new model should increase the amount of quality content available on YouTube
and so make the space more appealing to brands seeking association with premium
content. For brands there are multiple opportunities with the new model, including
subsidized consumer subscriptions, exclusive sponsorships, migration of more TVC
budget to online video, improved targeting, and of course development of their own
exclusive YouTube channel. However, YouTube is not the only option in town. Even Netflix
has expanding their subscription business model by developing new original content
(“House of Cards”).