YouTube is poised to be the next major content provider to join the great subscription VOD land grab for consumers' video spending. Per a Bloomberg report yesterday, YouTube has sent a letter to its content creators sharing its intention to launch an ad-free subscription service, though neither the price nor launch date was specified. Content creators would keep 55% of subscription revenue based on their pro rata viewership.
Plans for a YouTube subscription service were initially mentioned by its CEO Susan Wojcicki last October at the Code Mobile conference.
YouTube joins a long list of major content providers that have announced plans or launches for direct-to-consumer paid services. This list includes HBO Now, Sling TV, Sony PlayStation Vue, Noggin TV, Vessel, CuriosityStream and NBCU's un-named comedy service, among others, while others like Verizon, Apple TV, Showtime, etc. are in the wings. I recently shared a framework to help evaluate the potential of all these new services.
Some of these services include ads and some don't, creating a chaotic landscape for viewers to understand what they'll be getting. In YouTube's case, the SVOD offer is a bet that enough people are willing to pay for an ad-free experience that the underlying content creators will receive more revenue vs. the traditional ad-based model. Clearly if they don't, they'll prefer to stay with the free, ad-based approach instead.
YouTube is no doubt responding to the recent launch of Vessel, which charges $2.99 per month for early window access to content, which also includes a light ad load. However, YouTube didn't reveal any plans for early window access or incremental payments to creators for providing this, so it's unclear how competitive with Vessel YouTube's subscription service will actually be.
The other interesting twist on an ad-free YouTube service is that YouTube's TrueView skippable ads already provide arguably the most viewer-friendly experience in the industry. I'm guessing everyone reading this has clicked to skip a YouTube ad in "3, 2,1 seconds" multiple times, as I have. Skippable ads raise the bar for an ad-free YouTube service to succeed.
Nonetheless, in the year of SVOD service launches, YouTube obviously felt compelled to have an entry. When it launches and we all have more details, we'll be better able to evaluate its potential. But in the meantime, the more of these paid services that come to market with viewers being bombarded by offers, the harder it will become for any one of them to succeed.