YouTube launches ad-free subscription service

Sarbottam Bhagat

Robert Kyncl, YouTube’s chief business officer, unveiled YouTube’s new paid subscription service at the YouTube Space in Playa Del Rey, Los Angeles, Cali. on Oct. 21. YouTube also launched the new YouTube Music app that is free to watch with ads, but subscribers to YouTube Red can watch YouTube Music content without the ads.

The new YouTube Red will cost $9.99 per month and will be available for purchase starting Oct. 28 in the US, then rolling out worldwide. Users who sign up for YouTube Red through Apple Inc’s app store, will pay $13 a month instead of $9.99.

“I think the iOS pricing is really a very poor pricing decision. Asking such a large portion of the market to pay 30% more seems like a very bold move for YouTube, and I don’t think that any value proposition is there,” said Romeel Chaudhari, a freshman in Computer Science. “After all, a $13 per month subscription gets existing content with the promise of exclusive content coming at some point and with ad blocking apps, I don’t think that’s cutting it in today’s environment.”

Google said, “The free, ad-supported version of YouTube we all know and love isn’t going anywhere. You’ll still be able to enjoy YouTube, along with the YouTube Kids, Gaming and Music apps free of charge. But with YouTube Red, you’ll be able to support the people who make your favorite videos while watching what you want, when you want, on any device you want, uninterrupted.”

Kyncl said, “YouTube Red is targeted at the same audiences that make up the bulk of YouTube’s audience now, including gamers and young women.”

Apart from ad free service, subscribers will be able to save videos for offline viewing – perfect during a flight or when someone is away from Wi-Fi networks. Videos can also be played in the background of a mobile device, putting down the need to keep a YouTube app’s window open as a video plays. The monthly fee also includes YouTube’s new gaming app and access to Google Play Music, the company’s music streaming service designed to compete with Apple Music and Spotify.

“Consumers are embracing paid subscriptions of ad-free content at an incredible pace,” Kyncl said at the unveiling event in Los Angeles.

With the new Red, YouTube is signaling a definitive swing from “an ad-funded video-hosting service” to a “media company” that will eventually go into an open and direct competition with Hulu and Netflix. YouTube has the potential to dominate the industry: if just 5% of its US viewers were to sign up for the service, it would add more than a billion dollars in annual revenue to the company’s bottom line.

If everything plays out as Kyncl hopes, there will be more money, more content, and more viewership overall. He said, “To us what is important is we are not doing what everyone else is doing, competing for the same sources of material, the same creative elements. We are looking for people who are proven to work really well on our platform. In order to scale up, it takes a different kind of enterprise, a different kind of skill set. We have to look at what we are strong at. And that’s scale.”

“YouTube Red might benefit the content creators who develop contents on a larger scale, but how does it benefit the smaller channels? I mean there’s no way that YouTube would know how long it took someone to create something,” said Regan Ghimire, a graduate in Business Administration. “If you want to make more money for the quality content that took more work to create, you’ll make the efforts to get investors and brands to sponsor you, you don’t expect YouTube to know how long it took you to prepare your content and pay you according to what you think you deserve.”

“Creators of 99 percent of the content watched on YouTube have agreed to make their videos available on YouTube Red,” Kyncl said. But any partnered creator who doesn’t sign the deal for YouTube Red will have their videos on the ad-free old-school YouTube hidden from view.

With its current advertising model, YouTube takes 45 percent of the revenue, and the remaining 55 percent goes to creators. With Red, creators will be paid a percentage of the total subscription revenue, minus YouTube’s cut, based on the “watch time” of their videos each month. The more devoted their fan base, the bigger that check could become. YouTube has not shared the exact percentage it plans to take from Red, but says creators will still get the majority of subscription revenue.

Kyncl argues that Red could boost creator earnings without cannibalizing the ad business. “We believe in the advertising business. Ninety-nine point nine percent of the content on YouTube will be free, as it always has been,” he explained. “So the world that all of our advertising partners are used to, remains alive and well, and watch time continues to grow at an astonishing 60 percent year over year. There is nothing we are taking away from there, merely adding onto it.”

Google also plans to offer a bunch of original content just for YouTube Red subscribers beginning in 2016. Scare PewDiePie, Sing It!, Lazer Team, A Trip to Unicorn Island, Untitled Joey Graceffa project, 360 Project from MatPat of Game Theory, Single by 30, Untitled CollegeHumor project, Fight of the Living Dead and I Am Tobuscus are some of the projects that google is currently working on to offer to its subscribers.

Matthew Glotzbach, the company’s vice president of product management, said, “By no means would we expect to jump to tens or hundreds of millions of paying users overnight.”

“What’s happening is that the internet is doing to cable what cable did to broadcast. It’s just broadening the set of choices,” says Kyncl. “You have to really learn how to function in a fragmented world. I think that YouTube is incredibly well positioned for that world.”

Unfortunately the service is not available outside U.S. for now. Google said “If you leave the U.S., you won’t be able to save videos offline, videos won’t play in the background, and you will see ads. Any videos that you’ve saved offline before leaving the U.S., will continue to be available offline for 30 days.” The company aims to expand it to major markets around the world over the next year.