For companies like Google and Facebook, mobile is no more the future. Video is and 360 degree virtual reality videos will drive it. Google’s YouTube has been the grandfather of video social networks and it has been dominating until now. Facebook now reports 8 billion views per day and Snapchat reported that it reaches 6 billion daily video views.
In its latest earnings Google didn’t touch upon video revenues but during its Q2 earnings call the company had hinted that growth in YouTube revenues and strength in mobile search as factors behind the strong quarter.
For years YouTube had stuck to advertisement as the primary revenue source, but all got changed by the end of last month. The decade old company with a billion plus viewers launched YouTube Red – a new $9.99 ad-free video and on-demand music subscription service that will allow subscribers to enjoy videos across all of YouTube without ads, save videos to watch offline on your phone or tablet and play videos in the background.
The monthly fee also gives you access to Google Play Music and starting next year, YouTube Red members will get access to new, original series and movies from some of YouTube’s biggest creators which include YouTube’s top video game commentator Scare PewDiePie, Rooster Teeth and Fullscreen Films, Astronauts Wanted, Joey Graceffa, Wong Fu Productions, Alpine Labs, and Toby Turner. MatPat of The Game Theorists will produce a 360-degree VR-style series that explores the science behind things you see in video games.
The service that is right now available only in US will split subscription revenue with the rights holders of content people consume through the service. YouTube hasn’t shared the exact percentage it plans to take from Red, but says creators will still get the majority of subscription revenue. As the cut would be based on the watch time of creator’s videos each month, the check would depend on how devoted is your fan base.
Not everyone has been excited about YouTube’s latest move. Just two days later majority of ESPN’s video content was pulled off of YouTube in the US, as the sports network currently can’t participate in the YouTube Red service due to rights issues surrounding its content. Earlier Disney had similar problems but it came on board. YouTube now boasts majority of its partners, representing nearly 99% of the content watched on YouTube, have signed up for Red.
It won’t be too long before Google sets its focus on India for YouTube Red, right at a time when the growing consumption of videos pushed by mobile is one of the deciding factors. The recent We Are Social mobile growth report in India highlighted that social networking remains the topmost regular activity on smartphones followed by watching a video clip and uploading a picture.
In the month of September YouTube announced that it is opening up Spaces in India with one of Asia’s largest and most renowned film schools, Whistling Woods International.
But Satyen Poojary, brand manager at PowerDrift, an online production company showcasing Indian motoring primarily on YouTube thinks that Indian audience is a little stingy when it comes to paying for what has traditionally been free content. “Perhaps Google realizes this as well which is why the fan funding program never reached India. For mainstream genres like comedy, music etc. a subscription model might work better than for creators like us who focus on a specialty genre.”
While he is ready to give Red a try when it comes to India but thinks that subscription fee offering only content might not cut it. “Viewing offline, not viewing ads are features that people today work around with downloads and ad blockers too, so unsure if it’s a saleable USP. It might just work better here if we club it up with say merchandise where the price of the subscription is clubbed up with say a branded tee shirt or an accessory etc.”
Ad blocking has been a big concern for publishers this year. Bigger ones are meddling their ways, the smaller video channels on the platform are suffering due to rising rates of ad blocking. This is why Felix Kjellberg, who goes by the online moniker “PewDiePie,” asked fans to sign up for YouTube’s new monthly subscription service, YouTube Red, to better support online video creators.
“Personally, I’m ok with if you use adblock on my videos. Ads are annoying, I get it, I’m not here to complain about that,” Kjellberg wrote. “But for smaller channels, this number can be devastating.”
YouTube celeb Hank Green also highlighted in his blog post that subscription is a better model than ads. Green writes that a standard ad rate of $2 per thousand views, even power users who watch two hours of YouTube every day are only worth about $1.50 per month on the platform. “A YouTube Red subscriber paying $10 a month is clearly worth so much more.”
Beyond the ad blocking problem, Sameer Pitalwalla, CEO at Culture Machine, a YouTube certified multi-channel network shared that YouTube’s core proposition of user generated content (UGC) and premium UGC has increasing competition on both fronts, one from Facebook and the other from over-the-top (OTT) platforms that are picking up its top tier of talent. “It needs to address the premium UGC part, since that’s the honeypot for advertisers as well as for its users. YouTube red is meant to address the same.”
Some might argue that YouTube is putting pressure and bullying creators who were coerced into the deal with devastating repercussions if they refused. But at the same time it is a good deal for many creators and YouTube is also not cutting better deals for big media companies than small independent creators.
“This move definitely stems from the industry insight about the growth in OTT video space. With original content being made for digital audiences, clearly indicates that the viewing behaviour has and will keep evolving. It is only time that the service providers embrace this fact and act accordingly.
The OTT industry replies on three key factors: Technology, Content and Users. Hence, there is space for all players providing a wide range of content from various genres,” adds Uday Sodhi, Head – Digital Business at Multi Screen Media Pvt. Ltd.
Uday further informed that YouTube Red doesn’t affect the television channel (Sony Entertainment Television) which now has built a widely popular video destination beyond YouTube. Today the portal (Sony Liv) is not just sharing its TV content for its digital audience but has also launched a premium original exclusive web series called #LoveBytes, followed by the launch of Tanlines – a brand new web series for the digital audiences. “We understand the viewing behaviour is changing with millennials playing a very important factor in consumption of various content on the go, anywhere through their devices.”
The other growing concern for YouTube has been the growing dominance of Facebook in videos and its continuous aggressive push to launch exciting features and solve its problems. Satyen thinks that Facebook seems to be biting the video bullet big time but right now it is spammed with small format meme like videos. “Hopefully we will see more action from Facebook to accommodate long format videos.”
“In addition to YouTube, we see our clients getting big traction on platforms like Facebook, Instagram, Snapchat, and Vine,” Dan Porter, head of digital for one of Hollywood’s top talent agencies, WME-IMG told to Verge. “It’s clear that right now, talent is up for grabs.”
For most of the content creators, YouTube still remains the trusted platform even though the video network hasn’t always been the clearest communicator when it comes to announcing changes in its terms. Nonetheless, the subscription revenue will provide another enticement for creators to stay. Additionally, if this works for YouTube it will also help fund bigger scripts and compete with the likes of Netflix, Hulu, and HBO.
This isn’t for the first time that YouTube is entering the territories of subscription model, back in 2013 it rolled out paid channels, later Fan Funding — a tip jar where fans could donate as they please. All of them failed to find traction but with Red the company is not only solving problems of discovery and comprehension, it is also transforming itself into a media company than just a video network.
All looks good for now but we foresee Facebook following a similar path; what happens then – will creators still stick to YouTube Red or will they shift loyalties for bigger reach? The answer also lies in the forthcoming quarterly revenue reports. “As multiple video platforms emerge, content owners will take positions in the market based on rights and monetisation related issues. The entire video eco system is evolving very rapidly and content owners will have multiple ways of reaching consumers and to monetise the content,” sums up Uday.