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Straight Talk Media & Entertainment

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YouTube’s many sceptics are targeting YouTube Red, the Google-owned platform’s subscription service. Red offers ad-free access to existing YouTube videos, plus exclusive original content from PewDiePie, Rooster Teeth, and other major YouTube creators. It costs $9.99 per month and is only available in the US. For sure, Red faces challenges. Its core audience is children and young adults, who are used to watching YouTube for free. Few probably have the money to justify paying the subscription fee (if they’re not using ad-blocking software to enjoy YouTube ad-free already). But what’s really interesting about Red is that it could change how subscription TV and video content is measured, made, and sold.

Red will drive new approaches to subscription video content

YouTube has so far taken a fairly conventional approach to populating the service with the content it feels will attract paying customers. Like premium TV channels and SVOD providers, it has commissioned several movies and TV series – albeit from YouTubers and multichannel networks (MCNs) – to be made exclusive to subscribers.

Verizon’s Go90, Comcast’s Watchable, Vessel, and various other emerging premium digital video services have a similar strategy. But these challengers lack YouTube’s anarchic ecosystem of creators, MCNs, and other contributors. Whereas Go90, Watchable, and Vessel are almost entirely dependent on commissioning or acquiring content to populate their platforms, all video posted to YouTube will appear on Red.

Why does this matter, given that the content won’t be exclusive? It matters because creators get paid if any of their content – exclusive or otherwise – gets viewed by Red subscribers. Viewing on Red is also rewarded differently. YouTube’s advertising model centers on paying creators a share of ad revenue based on the number of views their videos generate. Viewing via Red is rewarded with a share of subscription revenue based on “watch time” (i.e. how long subscribers spend watching videos).

Although various creators say Red accounts for only a small percentage of their overall YouTube earnings, they are generally getting paid more per video view via Red than per ad-supported view. In other words, creators have a strong incentive to create programming that will play well with Red subscribers, even if they’re not getting paid by YouTube for exclusivity.

YouTube’s open platform and viewing data mean that creators, MCNs, and big media firms alike will be able to experiment and discover new approaches to subscription video content. As with the YouTube universe’s take on ad-funded TV, the results will likely be surprising – baffling even – but not to be taken lightly.

Straight Talk is a weekly briefing from the desk of the chief research officer. To receive this newsletter by email, please contact us.

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