How Would a Subscription-Based Model Affect YouTube?

YouTube may move toward a subscription-based model in the future, chief executive (CEO) Susan Wojcicki said Tuesday at the US Code/Mobile Conference in Half Moon Bay, California. Would marketers benefit from the potential move?

“YouTube right now is ad-supported, which is great because it has enabled us to scale to a billion users. But there’s going to be a point where people don’t want to see the ads,” Wojcicki said, adding that half of all video views now come from mobile devices.

Wojcicki also confirmed the long-standing rumor of YouTube Music Key, Google’s streaming service that will offer ad-free and offline playback for more than 20 million songs and videos, similar to Pandora, which has been served well by giving consumers the choice between a free, ad-supported service or an ad-free service for a fee, and is currently the third highest-grossing app in the iOS App Store.

However, Paul Bremer, chief revenue officer at Rhythm NewMedia, thinks comparing the two platforms is like comparing apples and oranges. Ads punctuate the Pandora experience in a way that’s atypical for YouTube, given how much longer people tend to spend using the former.

“YouTube, from their heritage, has gone from having a lot of backyard video to being a major player in content production,” Bremer says. “YouTube definitely has the breadth to test something like this, but what it comes down to is, do they have content unique enough to make someone take out a credit card?”

Greg Jarboe, CEO of SEO-PR, says he can see YouTube possibly earning double digits in revenue percentage, though he doesn’t consider paid subscriptions to be “a magic bullet.” In fact, fee-based services are nothing new for YouTube, he adds, since the platform launched a pilot program last spring for some of its million partners to monetize their channels.

“It just didn’t set the world on fire,” Jarboe says, echoing Bremer’s sentiments. “You need a certain kind of content people pay for. So much of the Internet is free; why would I pay for it? You need a monopoly on something.”

For example, the marketers who can benefit most from YouTube subscriptions are those with live events people are willing to pay to watch, such as sporting events and concerts, Jarboe says, adding that ahead of the final game of the World Series that Major League Baseball events were “conspicuously absent” from YouTube. “If MLB sold YouTube subscriptions, they might [have been] able to sell subscriptions to watch the game livestream.”

Bremer – who wholeheartedly believes in the free ad-subscription model – is interested to see what will come of YouTube’s change, though he doesn’t expect it to have a significant effect on marketers.

“Marketers have plenty of opportunity and will continue to have plenty of opportunity, whether they’re inside YouTube or outside, to reach consumers,” he says. “The digital world is becoming a fairly efficient ecosystem.”

Related reading