YouTube Advertises Ad-Free Service – Report

There's no business like the subscription video business.

After a decade of making a living from ad revenue, YouTube is ready to try its hand at the subscription-fee business model. According to a report by Recode's Peter Kafka, the online video company has reached out to content partners to tell them that it's readying the launch of an ads-free version of the site that will be available by paid subscription. Kafka further notes that sources are telling him that the new video service will be bundled with a YouTube music service (already launched in beta) and offered for $10 per month.

Content partners have until October 22 to accept a new terms-of-service agreement from YouTube Inc. After that, partners that haven't signed off on the new ToS will find their videos unavailable on the site. The timing supports another rumored detail reported by Kafka, which is that the new subscription video service is scheduled to launch late next month.

YouTube, which is owned by Google (Nasdaq: GOOG), may have a tough time getting users to upgrade to a paid offering. Despite luring professional and semi-professional content producers to the platform, the site is still best known for its amateur style and do-it-yourself ethos. It's the opposite of a company like Netflix Inc. (Nasdaq: NFLX), which has made its brand about delivering select premium content for a price.

At the same time, YouTube has every reason to want to diversify its revenue stream. Plus, other companies have shown that a hybrid ad/subscription model can work for media consumption.

Want to know more about the impact of web services on the pay-TV sector? Check out our dedicated OTT services content channel here on Light Reading.

The best examples are in the music industry where services like Slacker and Spotify offer free ad-supported streaming supplemented by paid subscription packages. In the video space, the experimentation with hybrid models is newer, but the Tennis Channel is one example of a content company successfully generating both advertising and subscription revenue online. (See OTT & the Net New Effect.)

Hulu LLC also recently launched a commercial-free version of its video service for $11.99 per month. (See Hulu Goes Ad-Free.)

As for YouTube, the company has been teasing a subscription service for nearly a year. The latest communication with content partners, however, suggests the company may finally be ready to pull the trigger.

— Mari Silbey, Senior Editor, Cable/Video, Light Reading

nasimson 9/28/2015 | 10:43:09 PM
Re: Ad blocker Vimeo and DailyMotion are fast catching up. I think YouTube will continue both free and paid versions. Millions of users used to free YouTube for years will not accept a paid model easily.
Nitin Narang 9/28/2015 | 10:09:44 PM
Used to free content on YouTube.. difficult switch. Unless YouTube gets some great exclusive, premium content it is unlikely that it will get many paid subscribers. Users have been used for free youtube content for so long that a switch without a key differentiator is not thinkable.. Ad based free content on YouTube is similar to display advt and google search. 
Kruz 9/28/2015 | 5:55:47 PM
Ad blocker The world's favorite free streaming service will always attrack the majority of its users by the current ads supported model. Ad blocker will be smarter with time - despite Youtube's effort to counter these - offering an ad free experience. Other free alternatives might become available should Youtube focus too much on its paid version.
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