Youtube Red

YouTube Red is a new video streaming service offered by YouTube, which was announced on October 21 and launched in the US on October 28. Red users are able to watch YouTube videos ad-free, save them offline, and play them in the background when multitasking on smartphones. Additionally, there will be original content available only for Red users, inaccessible to ordinary YouTube watchers. There is supposed to be a monthly fee of $9.99 (raised to $12.99 for those who, for some reason, decide to purchase it on an iOS device), but at the moment there is a 30-day free trial. Furthermore, the cost is bundled with the Google Play Music All Access music streaming service: this means that Google Play Music subscribers automatically gain access to YouTube Red, and YouTube Red users automatically gain Google Play Music All Access. The “old”, advertisement-supported YouTube service will continue to function as normal.

This is not YouTube’s first foray into paid subscription. In 2013, YouTube added paid channels, which are paid for by users rather than advertising. They also launched Fan Funding, whereby certain YouTube channels could receive donations from users. These efforts went more or less unnoticed, except by fans of channels that joined these schemes. A more significant turning point was last year, when YouTube launched the Music Key beta. For $9.99 a month, users were able to play music videos in the background, without advertisements. In an interview with the Verge, Robert Kyncl, YouTube’s chief business officer, said that “the most common and most frequent point of confusion was why this set of features didn’t work across YouTube”.

So YouTube’s strategy shifted: instead of offering narrow, a-la carte payment options, they would offer all of YouTube’s videos, with more than Music Key’s features, for a single monthly fee.

Obviously YouTube and its users are not the only stakeholders here. Will advertisers turn away from YouTube, now that the most affluent segment of their target audience will not be seeing any adverts? Kyncl is not worried at all. “Ninety-nine point nine percent of the content on YouTube will be free, as it always has been,” he said. Furthermore, even if YouTube Red gained 100 million users (as much as the entire US paid television market), that would be less than a tenth of YouTube’s total viewership.

The other major stakeholders are the content creators, the uploaders, the people who put their rants, cat videos, and five minute animations on YouTube. There are millions of YouTubers, and it was difficult to convince all of them to offer their videos without adverts. In this context, “convince” actually means “bully”: so-called “partners” who would earn advertising revenue but did not agree to the YouTube Red revenue-sharing scheme would no longer be able to share their videos with the public. In fact, their already-uploaded videos would be hidden as well. Threats were not YouTube’s only negotiation tactic: apparently they “remain committed to working closely with these partners with the goal to bring them on board”. While some creators are rather annoyed by all this, others manage to earn large portions of their revenue from product placement, merchandising and offline events. YouTube’s position is that creators would earn as much or more revenue from Red views than from ad-supported views. They’ll even be paid during the free trial, but less significantly.

Some new content will be available exclusively for YouTube Red users. An illustrative example is Scare PewDiePie, where the YouTube celebrity PewDiePie “encounters terrifying situations inspired by his favorite video games”. This series is, believe it or not, backed by the creator and executive producers of The Walking Dead, and two smaller studio companies. This the heart of YouTube’s original content strategy: coupling celebrities that made it big on YouTube with professional Hollywood-level production talent.

Speaking of Hollywood, the large media conglomerates had to be roped in with another round of deals. They wanted to receive a larger cut of revenue than regular YouTubers, on the grounds that content from the old guard would be the main source of viewership for YouTube Red. YouTube did not oblige, but almost all the major studios (barring Disney: they couldn’t let it go) agreed to work with YouTube anyways. This is a reflection of the change in the media landscape, and YouTube’s position of power within it. While movie and TV studios are watching their viewership decline, YouTube’s total viewing time jumps by 60% percent each year.

While YouTube is a giant in the media industry, it does not stand alone. In the living room, YouTube will need to compete with the likes of Hulu, HBO and Netflix. These services do not stream children biting each other: they offer professionally-produced shows, with juggernaut celebrities and massive fan bases. While YouTubers operate on shoestring budgets, these services pay millions merely to license possible hit shows. YouTube does not really plan on following in their footsteps. According to Kyncl, “To us what is important is we are not doing what everyone else is doing, competing for the same sources of material, the same creative elements. We are looking for people who are proven to work really well on our platform.”

However, among smartphone junkies and distracted office workers, YouTube has another competitor to consider: Facebook. Last year Facebook users watched a billion videos per day, and this year the number has jumped to 4 billion. Last year only 30% of videos watched on Facebook originated on Facebook, but this year the proportion of “native” videos is 70%. Some of the difference was caused by quiet improvements to Facebook’s video uploader. The rest was caused by allowing videos to automatically play in the Facebook news feed (a feature inspired by The Daily Prophet magic newspaper in Harry Potter). Facebook is one of few firms that can compete with YouTube’s reach and Google’s user data, making them attractive to advertisers and content creators seeking a large audience. Of course, not every auto-played video is noticed: perhaps this is why these days YouTube touts total viewership time when pitching to advertisers.

YouTube’s biggest competitor might be itself. Red isn’t just meant for “superfans”: the aim is for even casual users to join. Perhaps not many people are really willing to pay for a better YouTube experience, especially those who tune in only a few minutes a day. People uninterested in downloads and original content could just as well use an adblocker on YouTube instead of paying $9.99 a month. Speaking of original content, will PewDiePie really earn enough from original shows to justify acting in them (and to justify being spooked)? Some content creators fear elitism could ruin YouTube, if (despite Kyncl’s assurances) some high-demand content became Red-exclusive. Up until now, when a high-profile YouTuber wanted to be paid for their work, they would make paid content available on their own site. It is unclear if they would be willing to cede even more control of their business to YouTube.

Attention is a precious resource, and YouTube Red will need to fight for it. The free trials and bundles can only be helpful to a point: eventually YouTube Red will need to make a profit, and Google Play All Access has its own share of attention deficit. Miscommunication is pretty much guaranteed, given the number of disparate features bundled in YouTube Red. Of course if users misremember the “Tube” and the “Red”, Google will have a heated, heavy struggle to seduce them back.