Today, YouTube revealed its new product, YouTube Red, which is a membership model that provides ad-free videos, off-line viewing and the ability to play YouTube videos in the background while using a mobile device. YouTube also shared plans to begin offering original shows and movies made with YouTube creators.
The membership model is $9.99 for Android users and $12.99 for iOS, is consistent across any device to which the user is logged in and it starts Oct. 28, with a free one-month trial for users starting then. It also includes access to Google Play. The original content includes reality TV, scripted shows and movies, and will be available starting in January.
In sharing the news, YouTube chief business officer Robert Kyncl said this would also provide a new revenue stream for YouTube creators. “This is an evolution in our desire to give fans more choice on features they love, and an experience that they have been asking for.”
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According to eMarkter senior analyst Paul Verna, YouTube is on track to become a hybrid service that combines ad-based and subscription monetization, much like Pandora or Spotify. “I’d be surprised if they expect more than 2 percent or 3 percent of their user base to buy in,” he said. “But given the scale of YouTube’s audience, even the low end of that range would generate meaningful revenue, as well as other opportunities for marketing to consumers whose credit card info is in the system.”
Also new today, YouTube Music, an app that was created to make it easier for users to discover and listen to music, and watch music videos. While sharing the news from YouTube’s Los Angeles office, Kyncl emphasized YouTube’s history of rejuvenating the business of music videos. The YouTube Music app creates a customized channel for users, in addition to trending music and a favorites tab.
With this move, Google-owned YouTube is in direct competition with those like Hulu and Netflix, which has seen success with original shows and is now creating movies. It also competes with Apple Music and Apple TV, which also recently announced original programming.
“All video services are competing for the same consumer eyeballs and subscription dollars, but there are more differences than similarities in their approaches, their content strategies, and their audiences,” Verna said. “If there’s a common theme, it’s the importance of quality original content and exclusivity. The better the content a platform offers, the better poised it will be to succeed at a time when the competitive stakes keep getting higher.”
This news will not affect the existing, free YouTube experience. YouTube vice president of product management Matt Glotzbach said that in the past year, some of the most-watched videos were ads. Last month, YouTube began testing and rolling out shopping ads, which open up a new revenue stream for content creators — and more opportunities for advertisers. Verna said that rather than eat into the potential number of people viewing ads, this could mean more opportunities for brand marketers behind the pay wall — “things like influencer marketing, native advertising or taking a brand affiliation that may have started in an ad-supported context and extending into the subscription environment.”