The service will compete with Netflix and Hulu
YouTube on Wednesday finally unveiled its long-discussed paid subscription service.
Dubbed YouTube Red, the new service will offer ad-free versions of all current YouTube videos, as well as access to music streaming and additional exclusive content from some of the site’s top creators. It will cost $9.99 per month and launch on Oct. 28.
“Consumers are embracing paid subscriptions for ad-free content at an incredible pace,” Robert Kyncl, YouTube’s chief business officer, said at a press event in Los Angeles Wednesday. “[This] marks an evolution in our desire to give fans more choice and features that they love.”
With YouTube Red, subscribers will be able to save YouTube videos for offline play, listen to videos in the background while browsing other mobile apps and watch all YouTube videos without ads. The service will also have exclusive videos from YouTube stars like PewDiePie, Lilly Singh and the Fine Brothers that aren’t available on the free version of YouTube.
YouTube Red will have a big emphasis on music as well, providing access to streaming service Google Play Music and a new app called YouTube Music, which offers a Pandora-like personalized playlist based on a starting song or artist. Both music apps also have ad-supported versions that non-Red users can access.
The Google-owned YouTube has been the go-to online repository for free videos for more than a decade, serving as a launching pad for stars like Justin Bieber and Michelle Phan. Along the way, the site has grown into an advertising behemoth, pulling in a reported $4 billion in revenue in 2014. However, YouTube isn’t profitable, according to the Wall Street Journal, so a subscription play could make sense as a way of improving Google’s bottom line. The company says the new service is also a play at boosting engagement by enticing new users who don’t want to watch ads.
At its current price, the subscription service will compete with premium video services such as Netflix, Amazon Prime Instant Video and Hulu, which charge similar rates. Kyncl emphasized that thanks to Red’s pairing with Google Play Music, users are essentially getting a music subscription and a video subscription for the typical price of one such service (Amazon’s offerings come with a $99/year subscription to Amazon Prime that includes other benefits as well).
At the same time, the free version of YouTube is trying to fend off an ascendant Facebook, which has managed to build out an extremely popular video product over the last year — Facebook users now view 4 billion views per day. YouTube is quick to point out that its growth hasn’t slowed under Facebook’s threat. Video watch-time is up 60% year-over-year, Kyncl said. More than 1 billion people watch videos on the site each month; the company claims it reaches more 18-to-34-year-olds than any cable network in the U.S.
For creators, the subscription service could offer a new revenue stream. YouTube says the “vast majority” of subscription payments will go creators, with revenue shares doled out based on total watch time. Creators that choose not to have their content included in the subscription service will have their videos made private when Red launches in the U.S.
YouTube has tried charging for content before. The site allowed creators to begin charging subscription fees for individual channels starting at $0.99 per month back in 2013, and many movies and TV shows are available for purchase on the site. YouTube also launched a music subscription service last year, called YouTube Music Key, that competes with the likes of Spotify and Apple Music. However, YouTube Red is by far the most ambitious attempt yet to get people to pay for YouTube content. “It’s a major, major evolution of our business,” Kyncl said.
By moving more aggressively into original content and charging for access to some of it, YouTube is taking another step further away from its cat video roots. “Long term the company is trying to move upstream, but that doesn’t mean that it is trying to become like Netflix,” says Dan Cryan, an analyst at IHS. “YouTube [is] trying to build the next big change in the TV industry, as we move from the hundreds of channels offered by your pay TV company today to a world where you have thousands of channels to access.”