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YouTube launches ad-free service; should content creators be worried?

27-October-2015
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YouTube launches ad-free service; should content creators be worried?

YouTube is currently in the process of rolling out a new subscription-based service called YouTube Red, which will allow users to watch video content in an ad-free environment. Red is currently available only in the US and will be introduced to other countries over the coming months.

The subscription, which costs $9.99/month, entails the user to access the service across platforms along with access to Google Music and other newly announced services for music and gaming. YouTube has also announced that members will get access to exclusive content created by popular YouTube celebrities especially for Red.
 

Google, in a blog post, says that the subscription model will provide support to content creators as well as an alternate to the ad-based model. However, not all content creators seem to be entirely convinced.

Though Google says that 99 per cent of YouTube content partnershave already signed on to YouTube Red, media reports suggest that there was hardly a choice as content creators who did not sign a deal to come onboard YouTube Red would see their content being removed from both versions of YouTube. It has also been reported that Google intends to pay 55 per cent of subscription revenue to the content creator, which is about the same deal a creator gets for ad revenues from the company.

Though YouTube Red is still to be available in India, digital agencies and content creators are excited about the possibilities, though they still feel that any subscription model will have to be supplemented by an ad-based model.

Zafar Rais, CEO of Mindshift Interactive feels the incentive of getting exclusive content will make Youtube Red seem worth the money being spent. “It's interesting how a lot of this (the features) makes it mobile friendly, hinting towards YouTube growing mobile user base. YouTube Advertising has worked really well for many brands and this does pose as a threat, reducing the audience size brands can reach out to, and eliminating an audience that is willing to pay that extra buck online for added value. On the upside however, it will allow brands to create more meaningful and strategic video content, including product placements, a route that has worked well for Instagram versus the hard sell. I believe YouTube Red can grow to be a potential threat to various other video streaming apps such as Netflix that are planning on entering the market soon,” he said.

Anirudh Pandita, Co-founder at Pocket Aces, a digital video content company, said it would be interesting to see how advertising revenues on the platform change as there is now a real possibility that the wealthy audiences might be disappearing by opting for an ad-free subscription model.

When asked about concerns being raised by YouTube Content Partners in the US about the service, Ashwin Suresh, Pandita’s partner and co-founder at Pocket Aces said, “As is usually the case, there is reluctance when any experimental change occurs and we’re sure there are creators who are a bit hesitant about this change. Of course, the revenue splits being offered currently are not at the same level as Apple or Spotify, but that is just a reflection of the vast amount of user generated content (vs label or media company owned content) that is on the platform. This could change over time,” he said.

Both agreed that as is the case in the US, creators in India may not have the option to stay in an ad-free only model.

In a similar vein, Sameer Pitalwalla, Co-founder and CEO of Culture Machine said a subscription model would help creators make more money from their programming. “Early tests we have seen with other subscription based platforms like Vessel show a marked improvement in monetisation. However, one has to realize that you have to supplement the business with ad-supported revenue for scale and subscription helps you earn more through the quality of the revenue by giving super passionate fans a differentiated experience,” he said.
 

He also said that in India most publishers are already signed to be on Red, since a substantial chunk of  viewership comes from international markets, though he would not tell when the service would be seen in the country. Suresh and Pandita told us that no conversation with Google has taken place as of now.

A hybrid model is definitely interesting for content creators though advertisers might feel a bit threatened. However, Google has assured that both ad-free and ad-supported services will work concurrently. Also, subscription services are yet to take off in the country though a number of digital companies consider them to be successful in the long run.

“Paid subscription does and will make sense for the Indian market, as long as the content offering is compelling. That said, one must realise that Red isn't just banking on "premium" content has a differentiator, but is bundling other services such as YouTube music and access to an ad free experience in addition to premium content. They are doing a lot more than a differentiated content offering to compel the user to pay. In India, currently anyone who wants music + content + multi platform access is willing to pay, however, the cost for data is prohibitive. As data costs get lowered, that disposable income has the chance to be re-directed towards services,” said Pitalwalla.

“Can Google/YouTube successfully provide excellent customer service to both set of consumers? That is the $120/year question that we’ll soon find out the answer to,” said Pandita.

Tags YouTube Digital Video YouTube red digital advertising Culture Machine Sameer Pitalwall Anirudh Pandita Ashwin Suresh Pocket Aces Dice Media

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