Why a YouTube subscription service is great news for the video ecosystem

In the advertising space, the ever-studious tech behemoth Google has a long history of calculated moves that make marked contributions to its bottom line.

In the advertising space, the ever-studious tech behemoth Google has a long history of calculated moves that make marked contributions to its bottom line. Each strategic tweak to its advertising products normally sees a groundswell of discussion followed by an almost immediate and widespread take-up by marketers.

Adwords has seen limited time offers, bulk uploads for multi-product sales, call-out extensions and call tracking all welcomed by media professionals. Elsewhere, Google has kept its DoubleClick product ticking over with the recent additions of viewability metrics, radius targets for location extensions, reporting for remarketing lists and support for Baidu accounts in DoubleClick Search.

While such features have been successful with marketers, the launch of YouTube’s subscription service has stirred up some scepticism. There are benefits to the consumer, for instance it is easy to see the adblock generation paying $10 a month to purge pre-roll advertisements from their viewing experience. For marketers, though, the devil is in the detail.

Publishers are being incentivised, or coerced depending on your views, into supplying their inventory for the YouTube subscription model whether they like it or not. In a letter to YouTube Partners, Google gave video creators a decision to make – either they allow their content on to the subscription service or they will no longer be able to make revenue from YouTube’s regular advertising model.

A bigger cut for publishers?

Google’s ultimatum might not sit well with creators who see little to be gained from the ruthless terms. Only a small slice of YouTube’s subscription fee is distributed to the publishers and even that is dependant on the amount of time people spend watching their channels. It is unlikely to be the catalyst for a mass YouTube exodus, yet it is possible that some aggrieved creators could abandon the video-sharing platform.

Publishers were already feeling the squeeze earlier this year when YouTube clamped down on sponsorship. In February the platform put a stop to “graphical title cards” by amending its ad policies. The only way a similar ad package might be permitted is if it is done through a full Google media buyout on the Partner content by the sponsor.

In addition, advertiser-created and supplied pre-rolls that are burned into a publisher’s content, or other commercial breaks where YouTube offers a comparable ad format, have been banned. YouTube has said that it will stop monetization of videos that feature this outlawed content.

Last year YouTube owned a 20% share of digital video ads in the US alone and attracted $1.13 billion of video ad revenue, according to eMarketer figures. The last thing Google needs is for a misstep that sees some of this revenue and ad share divvied up among competitor platforms, especially when the site is reportedly unable to turn a profit. Unless the search giant backtracks on the terms of the YouTube subscription service, it could face a publisher revolt.

The YouTube alternative

Aside from YouTube, there is a rich array of alternatives. One of the most popular is DailyMotion that boasts 128 million monthly uniques as of 2014 and counts Showtime, Buzzfeed and Mashable among its publishers. For the TV series content creator there is Blip, which was founded at a similar time to YouTube and on the other end of the spectrum business-centric Wistia assists brands in publishing video on their existing websites. All four are great options, but it is new platform Vessel that is making the most noise in 2015.

Vessel, launched in March by former Hulu execs Jason Kilar and Richard Tom, is taking aim at YouTube as it looks to capitalise on those exiting the video-sharing network. Dubbed The Fremont Project in its early days, Vessel features a $2.99 subscription option that offers ad-free video viewing and 72-hour exclusive access for viewers. There is an ad-supported tier for users who are unwilling to pay for a subscription.

Publishers are being drawn in with the promise of a 70/30 split on ad revenue for content that premieres as part of a 72-hour exclusivity window on Vessel. They will receive that deal for however long the content remains on the platform. Content owners will also receive 60% of the subscription fees that come from the early access period, which runs Tuesday to Thursday. Vessel puts publisher revenue earnings in the region of $50 per 1,000 views, a figure that is said to be 20 times higher than free web distribution.

Vessel is still in its embryonic stage and if it is to become a successful and viable alternative two things have to happen. Firstly, its user base needs to expand and this will come about through the site’s USP of pushing out exclusive content. The big question here is, will users want to pay for this? The answer is an obvious “yes”. You only have to look as far as television to see an example of consumers paying a premium to get access to their favorite series first.

When the number of users reaches critical mass, then Vessel will be an attractive proposition for more content creators and in turn advertisers. It is at this point we will be able to see if the platform can really take it to YouTube.

Posted by simonholliday