Is YouTube Red a game changer?

By October 23, 2015News
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YouTube announced on the October 21 2015 that for a subscription price of  $9.99 per month, users will not be shown adverts. This comes 10 years after YouTube was launched. This is launched through YouTube Red

I watch a video of Ben Popper from The Verge stating that it “a monthly subscription service will fundamentally change the ways that users and creators can interact with YouTube”. Reading that statement word for word, it’s quite a declaration to make.

What is fundamental about that?

YouTube business model is that of advertising. Watch a video clip and you’ll most likely see an advert (if the video has been monitised).

With YouTube Red, for $9.99 per month you can / will;

  • Never see an advert (that doesn’t mean that you will not see any adverts that feature in advertising funded content
  • Watch videos off-line
  • Watch videos in the background

The most interesting thing about YouTube Red is that, according to Robert Kyncl (Chief Business Officer, YouTube) YouTube will “produce new, big, original content” for YouTube. Essentially, if you want to watch a video using the standard version of YouTube you’ll have to sit (or skip through) adverts. Watching YouTube with YouTube Red, you wont have any adverts and you’ll get some access to additional content.

Using subscriptions to fund content development (video production) is a great idea in principle but Google had a history of launching products only to axe them.

According to an article from the Wall Street Journal or read on Digital Trends, YouTube is still not making a profit, despite making a revenue of over R40,000,000,000.

Advertising and the internet have always gone hand-in-hand. The fist advert was launched in 1994 by AT&T (see below) started internet advertising that we know today. Advertising funds content development.

1st internet ad

1st internet advert was for AT&T in 1994

When offering “advertisement-free subscriptions” give the user something more – such as exclusive content or discounts to other products or offers.

Advertisement Overload and Advertising Avoidance

There have been multiple studies investigating the correlation between advertising overload and brand loyally (here and here are just 2 examples). If you aren’t one of those people who will divorce a brand because they communicate to you too often then you must be the ones who just , from experience and habit, flat-out ignore adverts (name me the past 5 adverts that you’ve seen on the internet). The Drum states that over 40% of UK consumers use advert blockers.

Apple is now allowing ad-blockers on its mobile devices (I can’t help but think it a dig at Google profits).

The problem with YouTube Red

You still going to see adverts everywhere else using Google – on your Google search results page, your Gmail account, your mobile devices, everywhere else. Not really too sure that people are prepared to add another debit order to their account to stop watching 4 seconds of adverts. Yes, adverts really irritate us. Yes, its infuriating seeing the same advert play over and over again when you are watching music videos. Yes, people will pay not to see adverts. How much effort does it really take to say “skip” after 4 seconds of the advert playing?

In the numbers needed to produce “big, original content” – only time will tell. Based on past Google experiences, I think they’ll be funding the content via other sources.

How will content production be funded or developed?

Public and private broadcasters use a combination of subscriptions and advertising to produce content. Pay a subscription and watch adverts and you can watch TV. The fist TV advert was broadcast by the BBC on 22 September at 21h01 on September 1955 for Gibbs SR Toothpaste. Not much has changed since then.

In the print arena, content is broadly funded by subscription, sales and advertising. We all know that digital is stealing market share from print but the business concept is the same – using advertising (or to a lesser degree subscriptions) to fund content.

Advertisements and advertising (whether print, out-of-home or digital) are here to stay. As long as companies have audiences there and need to fund content there will be adverts.

Back to the original statement from Ben Popper “a monthly subscription service will fundamentally change the ways that users and creators can interact with YouTube” I think not. Yes, it is a change, it is a choice to the viewer, but “fundamentally change the way” – I think not. People will still watch videos the same way. People will still skip or ignore adverts. Advertisers/brands and agencies are still going advertise products on the internet and YouTube and Google is still going to generate the bulk of its revenue through advertising (and not subscriptions) on YouTube. People will still produce content hoping to generate revenue from advertising.

Andrew
andrew@hypernovamedia.co.za

 

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