Would You Pay $10 a Month for Ad-Free YouTube?
If you love YouTube but hate the ads, you may soon be able to buy your way out of them. Google's (GOOG) (GOOGL) popular video-sharing site is gearing up to roll out a premium subscription model in the coming weeks, with sources telling tech blog The Verge that YouTube will charge $10 a month for a plan that eliminates the ads that play before, after, and sometimes during video clips. Premium subscribers will also supposedly receive access to exclusive content and be able to save videos that can be played offline.
%VIRTUAL-WSSCourseInline-840%YouTube has tried to get folks to pay up in the past with minimal success. It began offering premium movies and documentaries five years ago, but there weren't a lot of people willing to pay $3 or $4 to stream a flick.
It then went on to allow some of its more popular content creators the ability to create premium channels, in essence creating a paywall where fans could pay to see uploads that wouldn't be available to free users. That also met with a great deal of resistance.
Folks think of YouTube as a free site and mobile app. There are certainly perks of being a haven for freeloaders, and that means that YouTube now has more than a billion users worldwide. It serves up hundreds of millions of hours of content a day, generating billions of daily views.
The masses have scoffed at YouTube's plan to install tollbooths before, but it could be different this time.
A Primetime Move
The one thing we know for sure is that a premium subscription plan is in the works. YouTube has been notifying content creators that are part of the YouTube Partner program to check out the new terms of the revenue-sharing program. Channel owners that are part of the YouTube Partner program are being told that new terms including revenue-sharing plans for subscriptions will go into effect by mid-June.
The terms will be the same as the revenue-sharing deal that is currently in place with channel owners receiving 55 percent of the revenue. The difference here, of course, is that now they will be receiving that 55 percent out of the money collected in subscription revenue. It will be pooled together with each channel owner receiving a cut based on how much of their content was consumed.
The new plan will generate an additional revenue stream for the content creator, and it may inspire some of the more enterprising publishers to ramp up their uploads that are available only to premium subscribers. Unlike earlier efforts where the onus was on them to get folks to pay up for just their channel, now it's a group effort that should resonate with the potential premium subscriber.
The Marketplace Is Buffering
YouTube doesn't need most of its users to pay to make this a success. In fact, if less than 1 percent of its users decide to pay up we would be looking at 10 million premium subscribers. If YouTube can convince 6 percent of its user base to pay up it would rival Netflix (NFLX) as the world's largest premium streaming video platform.
Content consumers can get spoiled after enjoying a service for free, and if they've put up with the ads for years they may not be open to paying to remove the marketing missives. However, the success of premium streaming TV with the recent launches of HBO Now and Sling TV -- and the global success of Netflix -- is forcing consumers to accept the value proposition of paying for video.
You won't like paying for YouTube this summer, and you certainly won't have to if you don't feel that the premium benefits are worth it. However, it looks like this time YouTube will finally get video buffs to pay up, and you may be surprised to find that one of those premium users will be you.
Motley Fool contributor Rick Munarriz owns shares of Netflix. The Motley Fool recommends Google (C shares) and Netflix. The Motley Fool owns shares of Google (C shares) and Netflix. Try any of our Foolish newsletter services free for 30 days. Check out our free report on one great stock to buy for 2015 and beyond.
