• YouTube Considers New Ad-Free Subscription Service

    YouTube, the 800-pound gorilla of free, ad-supported online video, is considering launching a new ad-free subscription-based service, according to YouTube's CEO, Susan Wojcicki. The disclosure came during an interview at Re/code's Code/Mobile event.

    While short on details, Wojcicki emphasized flexibility in providing different viewing options to different viewers. She said, "We've been thinking about other ways it might make sense for us. We're early in that process, but if you look at media over time, most of them have both ads and subscription services."

    An ad-free, subscription-only service would be a big move for a company that generated $5.6 billion in global gross ad revenues in 2013, according to eMarketer, by far the most of any individual online property. eMarketer estimated that YouTube kept almost $2 billion of that amount after payouts to partners and creators. eMarketer also projected YouTube's U.S. net ad revenue at $1.13 billion, nearly 20% of the total market.

    YouTube actually began allowing certain creators to offer subscription services last year, starting at $.99 per month, though those include ads. While that approach is akin to Hulu Plus or CBS All-Access, an ad-free, subscription service is more like Netflix, Amazon Prime and premium cable channels like HBO, Showtime and Starz.

    While there are no doubt some people will want an ad-free experience, YouTube's TrueView in-stream video ads are already arguably the most viewer and advertiser friendly format around. TrueView ads allow viewers to skip the video ad after 5 seconds with advertisers only paying for completed ads, a much different model than typical non-skippable CPM-based video ads. There are still those pesky pop-up ads that appear frequently, though they can be closed out with a click.

    For now, it's a complete guess as to how many people would be willing to pay for an ad-free YouTube experience. However, there are certainly some very large channels on YouTube, which, even if they only converted a small percentage of their viewers to be subscribers, could quickly add up.

    There's another interesting angle to consider here as well, which is the idea that YouTube subscription services could be offered by pay-TV providers as apps via their hybrid set-top boxes. Colin and I discussed this as a general concept on last Friday's podcast. Pay-TV operators could market these services much like they do premium channels today, and offer a living room experience to their subscribers. It would be a potentially compelling differentiator, especially for younger audiences (for example, someone who might prefer watching VICE News ad-free on their TV, instead of CNN, Fox News, etc.).

    We'll need to know a lot more about YouTube's potential subscription service to gauge its potential impact, but it certainly does feel like it opens up a bunch of options for the company to grow even further.

     
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