This Is YouTube Stars’ Newest Plan to Make Big Money

Anna Akana has called YouTube home for a long time. The 25-year-old comedian has been posting sketches and web series on the world’s largest video site for five years, amassing a following of more than 1.2 million fans. She earns about $4,000 per month on the site thanks to her popular videos, like a recent sketch in which she was caught cheating on her boyfriend with her cell phone. The earnings have been enough to help her fund her often elaborate videos and short films, but certainly not enough to make her rich — or even well-paid.

“You can’t make that good of a living off YouTube anymore,” she says. “That also means you can’t reinvest a lot of that money into making more stuff.”

This year, though, Akana has a new, potentially lucrative revenue stream. She was one of the first online personalities to sign up for Vessel, a new video site attempting to straddle the line between the TV-like original video content on Netflix and the user-generated free-for-all on YouTube.

Officially launched in March following a splashy media push in December, Vessel is aiming to be a premium platform for online video creators. The site charges users a $2.99 monthly subscription fee to access creators’ videos a few days before they appear on YouTube or other free video sites. Videos on Vessel range from comedy sketches like Akana’s, to cooking shows like Epic Meal Time, to clips from Ellen Degeneres’ television talk show. The idea is to leverage the super-dedicated fan bases these stars have built up elsewhere and convince them to pay a small fee for earlier access to content (users can also access a free version of Vessel with no access to the timed exclusive windows). Right now there are 175 creators on the cloud-based platform.

Jason Kilar, Vessel’s CEO, believes his company can help the online video ecosystem monetize content in a more systematic way. He likens the process to the way movies are able to generate revenue across many different formats, such as theatrical releases, DVD sales, and television licensing.

“We think it’s inevitable that web video is going to evolve in a very sophisticated manner, just like television and movies before it,” he says.

Kilar has plenty of experience with the entertainment business. He was the founding CEO of the popular streaming service Hulu. While Hulu’s main calling card is shows from traditional TV, Kilar says Vessel is aimed at helping find the next generation MTV, CNN or Oprah Winfrey.

That will be a tall order for the fledgling company. YouTube has dominated online video for a decade now, boasting more than 1 billion users. Facebook, another billion-user platform, is now loudly elbowing into the space with an increased focus on video and attempts to poach YouTube’s stars.

Vessel is trying to take on these giants by offering creators more favorable terms. The company splits 70% of its ad revenue and 60% of its subscription revenue with creators. YouTube gives 55% of ad revenue to creators, while the company is planning an ad-free version of the site that will reportedly offer creators the same split. Thanks to a combination of subscription revenue and ad dollars from deep-pocketed brands like Chevrolet and McDonald’s, Kilar says creators on Vessel currently earn about $50 for every 1,000 views on the site. On YouTube, they earn just a fraction of that.

Vessel also offered several creators guarantees on their videos to entice them to try the site. Akana, for instance, said she was guaranteed the same $4,000 per month rate on Vessel whether her videos generated that much revenue on the site or not.

The company has yet to divulge any usage statistics, but the concept has struck a chord with investors. Vessel raised $75 million before it even launched last June and pulled in another $57 million in April from investors such as Greylock Partners and Amazon CEO Jeff Bezos.

Though it’s tempting to pit Vessel and YouTube as adversaries, Kilar argues that helping creators make more money will end improving the quality of content on other video sites. “The creators are going to create more content and higher-quality content, and that flows right to free ad-supported content on the heels of Vessel,” he says. The company doesn’t currently have plans to bankroll original content that will be exclusive to Vessel permanently.

It’s too early to judge whether Vessel will be a hit, says Dan Cryan, a streaming analyst at IHS. The startup will face challenges building up its brand, considering YouTube is so well-entrenched as the de facto option for online video. But the big online names and venture capital the service has attracted early on shows there’s an appetite for more options in the world of online video.

“It’s entirely possible that both Vessel and YouTube could start attracting traditional TV audiences,” says Cryan. “We’re still fundamentally at the relatively early stages of how the TV business changes and adapts to the Internet.”