YouTube’s subscription service struggles to take off

YouTube is planning to launch a paid subscription video service later this year. But the Google-owned company is having a tough time getting some of its content partners to sign up, according to several sources at publishers and multichannel networks.

YouTube approached a number of video publishers and multichannel networks (MCNs) late last year, asking each to sign a “subscription offerings amendment” that would make all of their YouTube content available through a paid service, according to Digiday’s sources. A sleek, ad-free video subscription service could generate a pivotal revenue stream for YouTube, which has reportedly failed to turn a profit despite attracting over a billion monthly viewers. Yet several of YouTube’s current content partners have been reluctant to sign on the dotted line.

“The amendment was so general,” said an executive at one publisher with a major YouTube presence. “It’s basically saying, ‘Hey, sign up and your content will be behind a subscription wall.’ But there was no revenue share or any guarantee you wouldn’t just lose out on the ad revenue. It made us really nervous. We are reticent to sign something without knowing what it actually means for us financially.”

That publisher has yet to sign the amendment, waiting for more information and revisions from YouTube before agreeing to pipe its content into a YouTube subscription service. YouTube itself has yet to nail down the scope of its subscription plans, the executive told Digiday, even though YouTube’s content chief Robert Kyncl suggested at Recode’s “Code/Media” conference last week that YouTube is putting the “final tweaks” on the service.

One MCN executive said YouTube intended to launch the service in the first quarter of 2015, but will miss that launch window. A YouTube spokesperson declined to discuss that assertion or anything about the subscription service on the record.

Another MCN executive took issue with the language YouTube used in the amendment, which the person called “a full attack on Vessel,” a video startup competitive with YouTube. “One thing [YouTube] said was, if you upload a video, it will automatically go into the [subscription video] platform, and if it is not exclusive to YouTube in the [subscription video] platform, they can pull it down or refuse to monetize,” the source claimed.

If that becomes a standard part of YouTube’s terms, it would be a troubling development for multichannel networks and YouTube creators looking to diversify their revenue streams by posting content to other video platforms. But the three other video executives Digiday spoke to for this story weren’t familiar with that specific clause. A different MCN source said even if one amendment draft included such anticompetitive language, “it wouldn’t be viable” on a broad scale. Another publishing executive said, “YouTube is certainly concerned about losing creators to competing platforms,” but its subscription video plans “are not so rigid.”

One source shared portions of an unsigned amendment, which YouTube sent out in December. Beyond the obvious nods to ad-free YouTube content, the document notes that “subscription offerings include music subscription offerings,” suggesting that YouTube’s Music Key subscription service (currently in beta) could become part of a broader YouTube subscription service. It also mentions the ability to view YouTube content offline, an existing Music Key feature that would make sense to bring to a new subscription service.

The subscription service will feel like a different platform, with its own app and Web experience, even if much of the content is also available on the regular YouTube platform, according to a source.

Every source Digiday spoke to for this story assumed YouTube’s subscription platform would feature some exclusive content, though exactly what that content will be remains unclear. One publishing executive suggested YouTube’s recent investments in original content are tied to its subscription service ambitions. When that program was announced in September, Outrigger Media CEO Mike Henry suggested the initiative would help YouTube stars create series that more closely resemble TV programming — content that could help YouTube compete with subscription rivals Netflix and Hulu, among others.

But an MCN executive questioned whether that will be enough to prompt users to open their wallets and subscribe. “My understanding is they’ll create these genre-driven packages, but I just don’t know whether the difference in the offering is strong enough to drive demand for that,” the source said. “The challenge YouTube has is retrofitting a subscription offering for a platform built on being open and advertiser-supported.”

But one content partner, despite feeling frustration about YouTube’s current ambiguity and “half-baked” efforts so far, still expressed optimism about the potential of the platform.

“We’d love to have our content displayed without ads as a better user experience for the people on YouTube if the revenue share is equivalent to what we’d be getting normally,” said the source. “To be fair, I think that’s what YouTube is aiming for.”

Main image courtesy of YouTube

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