Putting a price on YouTube

You’ve got your Netflix subscription and maybe you also pay for music services like Pandora or Spotify. Well, YouTube might end up on your monthly bill to pay too.

The world’s largest video site is expected to release a subscription model for some of the content on YouTube. The details are sketchy but before you panic, let’s be clear: The vast majority of YouTube videos are expected to remain free.

And you know how that works, right? If I go on YouTube and want to watch a video, then I have to sit through an ad. It’s an advertising model that’s ripped from traditional TV.

The only problem is that while sales of online video ads are growing, they’re still just a $4 billion market, said Clark Fredricksen, a researcher at eMarketer. “The television market is a $65 billion market,” Fredricksen said.

So how does YouTube catch up? Last year, the online video giant shelled out $200 million to launch a handful of channels. Some like The Onion and Jamie Oliver’s Food Tube are popular. But the word is, many of the shows are expensive to produce and they’re having a hard time making money off of ads.

The subscription model might help, said Colin Gillis, an analyst at BGC partners. “By moving, or at least trying to see if there’s subscription revenue base out there that can help drive more quality content, that’s something they’re willing to try,” Gillis said.

Google, which owns YouTube, says subscription fees aren’t a matter of “if” but “when.” And the word is that they’re only expected to apply to about 50 channels.

Sameet Sinha, an analyst at B. Riley and Company, doesn’t expect subscriptions to turn-off users. “More and more people are getting used to it that if we want higher quality then we have to somehow pay for it,” Sinha said.

He adds that Netflix and Hulu have taught users to pay. So now, YouTube’s challenge is to make sure that the price is right.  

About the author

Queena Kim covers technology for Marketplace. She lives in the Bay Area.

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