Far from the world’s biggest repository of cat videos, YouTube has long since grown to include original content wildly popular with teens and TV content from major networks, similar to what is on Hulu.
The online video giant has offered few details about the new plan, but it is expected to allow viewers to screen videos without ads for a monthly fee. Reports said the plan will offer ad-free video and music streaming, and will be an alternative for customers who are willing to pay to avoid ads.
YouTube has experimented with subscriptions in the past, allowing some original content channels to sell them to their viewers – with limited success. Earlier this year, the company ended another experiment, a subscription based music service. An updated version of that service is rumored to be included in what the company will unveil on Wednesday.
YouTube’s main business comes from ads. Google reported that YouTube’s ad revenues are growing by 40 percent year to year, but the company won’t break out figures specific to the video site. There are doubts that YouTube is profitable.
Popular original content producers, who author channels with millions of subscribers, often include sponsorships, product placements, and other revenue generating schemes, and do not solely rely on income from YouTube ads. Many YouTube celebrities belong to multi-channel networks, or MCN’s, which help them monetize their content and sell ads.
“We’re usually getting from like 6 million to 10 million views a month,” said Brian Fisher, a producer on the original content channel “The Warp Zone.” “If we were just reliant on … ad revenue, we wouldn’t really be able to function as a channel.”
Fisher said most of their revenue comes from product placements and sponsorship deals.
One of the biggest obstacles, said digital media analyst Colin Dixon of nScreenMedia, is that much of YouTube’s audience is quick to press the skip button that appears on video ads, in order to bypass them.
“Given choices, consumers will skip the ads as quickly as they can,” Dixon said, “Consumers just really are resistant to ads.” It is a problem facing other video services, too, and YouTube’s attempts at a ‘freemium’ model — both free and paid tiers — may be a good solution to the problem, he said.