YouTube Under Pressure to Retain Talent

It’s unlikely that YouTube will ever be ad free, but if a subscription model will retain creators, YouTube will likely implement one.

At Recode’s Code/mobile conference last month, YouTube CEO Susan Wojcicki mentioned the possibility that YouTube would roll out a subscription option for users. How would a subscription model look within YouTube, and how could it impact the video network’s economy and the site’s ability to retain talent?
YouTube has been experimenting with a subscription option since May of 2013; users could subscribe to premium content for a set fee per month. The initiative has provided some fairly mediocre content, and it seems since launch, few have been interested in subscribing to the channels provided.
That subscription model, in addition to YouTube’s movies-on-demand service, which launched in 2010, has not resulted in big success. Unfortunately, these services, which could have competed with Netflix or Hulu, have not generated the kind of interest that would turn them into powerhouses of content-hosting and revenue-generation.
Of course, YouTube’s primary model of revenue generation has been advertising, and it’s been very successful. As previously noted by SocialTimes, most of the advertising revenue is generating value for YouTube and larger content providers, and not the independent YouTube creators. The issue is that the creators (and not premium content) drive and retain viewership, as evidenced by low premium subscriber numbers to date.
YouTube’s latest product, which launched Wednesday in beta, is a streaming service that would allow subscribers access to ad-free music. YouTube Music Key will cost $9.99 a month, and revenue will be split between YouTube, record companies and artists. While the specifics of the agreement are unclear, indie labels have not been very keen on Google’s terms.
As Brendan Gahan, a YouTube expert writing for BetaBeat, points out, innovation and creator retention should be YouTube’s key focus going forward. It’s clear that Google made retention a priority in the case of Music Key, waiting until they struck a deal with labels rather than rolling out a product without certain artists.
Innovation is necessary because of increased competition in the video market, but retaining the creators is much more important. YouTube realizes this, and has been working on tools to empower creators.
But what would a new subscription model look like? “We’ve been thinking about other ways it might make sense for us [at YouTube]. We’re early in that process, but if you look at media over time, most of them have both ads and subscription services,” Wojcicki said at Code/mobile.
Hulu has had success with a mixed subscription-ad model but there are rumors that executives may be considering cutting back the number of ads served to viewers, which is currently double the average ads displayed to YouTube users.
Gating content behind paywalls hasn’t worked very well for YouTube in the past, and offering users the ability to pay to remove ads doesn’t make sense when Adblock already does it for free. It’s unlikely that YouTube will ever be ad free, but if a subscription model is what it takes to retain creators, the network will likely implement one.