Here’s how YouTube Red describes their new offering:
Enjoy ad-free and music videos whenever you sign in to YouTube or a YouTube app—on your mobile device, desktop, or enabled TV. Save videos and songs on your mobile device to watch offline. Connect with your favorite gamers without the ads. $9.99/month 1-month free trial.
While we have always expected YouTube to be free, the ads have always been a drag. The question is how to pay creators and YouTube itself for everything they give us. When YouTube creators (aka producers) learned that if they didn’t agree to offer their content on Red, their videos would be set to private, there was initial anger and sadness. Many of them rely entirely on ads to make money. But nearly all creators eventually signed up with the exception of some large media companies like ESPN. YouTube Red will split subscription monies with the rights holders of video paying out as they say “the vast, vast majority of revenue.”
All companies experiment with business models and this is a big experiment that could create a better YouTube for everyone. Creators would control their content, their packagers and media companies would make money, and viewers would love not having commercial interruptions. If YouTube Red succeeds, it could become a model for web businesses.
Also included in the YouTube Red subscription is YouTube Music which, when compared to Spotify and Apple Music, is a much better deal since it includes all of the videos as well. I probably listen to more music on YouTube than I do on Pandora since I can choose which performances to hear and when.
Creators would now be paid by YouTube’s “watch time” metric which counts actual watch time instead of views. Creators might not see an increase in revenue for months.
The best way to pay creators might be to pay them directly through their websites or other platforms. But the YouTube strategy, which could bring YouTube into the black, could also mean a revenue increase for creators. YouTube Red will, however, need to reach critical mass for this business model to work. According to the Wall St Journal, YouTube is still not making a profit.
Despite dramatic advances in video viewing made by Facebook, Twitter and others, YouTube leads the pack by a large margin. Billions of hours of YouTube video are served every day The average YouTube session is 40 minutes. YouTube has more 18 – 49-year-old viewers than any US cable network. Most of the creators, large and small, believe that they will do well when YouTube does well.
YouTube is introducing a number of original movies and TV shows with its biggest creator stars. They are even considering producing films of a much higher caliber as Netflix and HBO do. As Richard Greenfield, a media and tech analyst at BTIG says – even if one percent of YouTube viewers became subscribers at $10 a month, that’s a substantial business. YouTube Red Ad-Free could gradually change the web from an ad supported venue to a subscription model.