Google set to unveil subscriptions for specialist YouTube videos

May 5, 2013 2:52 pm

Google set to unveil subscriptions for specialist YouTube videos

By Matthew Garrahan in Los Angeles and Andrew Edgecliffe-Johnson in New York

Google is on the verge of unveiling an à la carte subscription service for some of YouTube’s specialist video channels, to finance a broader range of content and add a second revenue stream to the digital video market leader.

The move, which has been in the works for months, could be announced as early as this week. It will apply to as many as 50 YouTube channels, people familiar with the plan say. Viewers will be able to subscribe to each channel for as little as $1.99 a month.The subscription service will enable channel operators to produce different content, such as TV shows and films, a person familiar with the plan said.

Advertising on YouTube and rival video sites has risen fast, but remains a fraction of television budgets. Digital video advertising will jump from $2.93bn to $4.14bn in 2013, eMarketer estimates, but will account for just 2.4 per cent of all ad spending.

YouTube claims the lion’s share of that revenue. Brian Wieser at Pivotal Research estimates that YouTube’s ad revenues will rise from $1.3bn in 2012 to $2bn this year and Bernstein Research said on Friday that its revenues could exceed $15bn “in the next several years”, roughly matching CBS or Viacom.

YouTube told the Financial Times that it had “nothing to announce” regarding channel subscriptions but was “looking into creating a subscription platform that could bring even more great content to YouTube for our users to enjoy and provide our creators with another vehicle to generate revenue from their content, beyond the rental and ad-supported models we offer”.

YouTube’s channel partners include Howcast, World Wrestling Entertainment, The Onion and Machinima – a network for gamers. It is unclear which channels have signed on to the new service.

Cable and satellite channels, which traditionally rely on a dual revenue stream model, are eyeing YouTube’s subscription service to generate revenue from older shows and new programming, according to another person familiar with the project.

YouTube has moved away from its early days as a destination for user-generated content to professionally produced video that would not look out of place on television. In the past 18 months it has spent more than $200m on advances to dozens of start-up channels.

The new channels have helped expand YouTube’s audience to 1bn users who watch 6bn hours of video each month. Every one of Ad Age’s 100 largest brands has advertised on the site.

“We’re seeing a myriad of brands increasing their media spend,” said Robert Kyncl, global head of content partnerships for YouTube.

Time Warner, The Chernin Group, BertelsmannDiscovery Communications andComcast have all invested in companies that create or aggregate YouTube content.

Traditional media companies are also eyeing audiences flocking to individual YouTube channels: DreamWorks Animation, the company behind the Shrek movies, this week acquired Awesomeness TV, a “teen-focused” YouTube network in a deal that could be worth $117m if earnings targets are met.

Subscription YouTube channels will compete with the likes of Netflix, the streaming service with more than 30m subscribers, and Hulu, owned by Walt DisneyNews Corp and Comcast, which said last week it had surpassed 4m.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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