Google Inc.’s GOOGL video sharing platform YouTube is planning a paid service that will let viewers watch select videos ad-free.
According to a letter seen by IDG News Service, YouTube has already started laying out the terms of the service. On Wednesday, the letter was sent to members of YouTube’s Partner program. YouTube’s Partner program lets YouTube video makers make money through ads and merchandise.
It remains unclear as to when the new service will be rolled out and how will it be priced. A name also hasn’t been decided for this new service. However, if Bloomberg is to be believed, it might as well be launched within this year itself. According to the Verge, the price is expected to be around $10 a month.
According to changes to the terms of the Partner program, video creators using the service will be paid 55% of the total net revenues from subscription fees. This is also the percentage partners collect from advertising. The changes go into effect on Jun 15, 2015.
A YouTube spokeswoman refused to comment on how revenues would be divided.
However, it is not clear what category of content will be offered through the service. Some of it might be premium or exclusive content that is not found anywhere else. Just like Netflix, YouTube might also position it as a premium service with its own programming.
Conclusion
YouTube attracts more than a billion users every month, plays host to countless viral clips and creates sensations overnight. But they say that all that glitters is not gold—and for YouTube, this is clearly the case.
Despite being around since 2005, and enjoying strong viewership, the site has still not generated profits.
Hence, Google has been taking steps toward charging users for content.
In November, it introduced a subscription-style music service within YouTube, in beta. This service let subscribers use the YouTube phone app to watch music videos and listen to songs without any ad breaks. Launched at an introductory price of $7.99 a month, the music keeps playing regardless of what applications subscribers use. Subscribers can listen to music even if they lose their Internet connection. The music can also be saved on the subscribers’ phone. Music Key offers subscribers access to the entire Google Play catalog.
Google has also spent millions of dollars on talent and production facilities to boost original content on the video website.
With this ad-free subscription, Google is competing with streaming services like Netflix and HBO Now. People these days spend increasing amount of time watching videos on the web and on mobile devices.
The success of this new platform will depend on the number and diversity of video partners YouTube gets. It also depends on the willingness of YouTube’s audience to value ad-free video and offline watching at a price.
Google currently hold a Zacks Rank #4 (Sell). Better-ranked stocks in the technology space include Autobytel Inc. ABTL, PetMed Express, Inc. PETS and Groupon, Inc. GRPN. Autobytel sports a Zacks Rank #1 (Strong Buy) while Groupon and PetMed Express carry a Zacks Rank 2 (Buy).
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