Will People Pay for YouTube? After 1 Month, 'Red' Seems to Prove They Will.
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Precisely one month after YouTube Red’s launch last October, just after a free trial offer from Google expired, YouTube’s flagship app suddenly entered the Top Grossing iOS app charts.
The entry on Nov. 28 at number 129 signaled an auspicious kickoff for YouTube Red -- which represents a momentous cultural shift for YouTube and arguably its biggest product launch to date. Two days later, the YouTube iPhone app made it up to number 4 on the Top Grossing charts, and today is holding steady at 14.
At this rate, Techcrunch reports, YouTube Red -- a subscription tier that can be purchased through the flagship YouTube app -- could be raking in as much as $350,000 per day. (Somewhat curiously, however, Red is nowhere to be found on the Top Grossing Android app charts -- though this may be due to the fact that existing Google Play Music subscribers automatically gain access to YouTube Red.)
Nevertheless, the ascent provides a hopeful clue to a fundamental question: Will viewers be willing to pay for content that they can already consume for free?
To be fair, it’s still very early days. And as a multi-tiered bundle, the most compelling feature of Red in many analysts’ eyes -- original content starring bold-faced YouTube stars that is slated to debut behind the paywall in January -- has yet to arrive.
And more as-yet-unannounced features could be forthcoming. The Wall Street Journal reported last night that YouTube is in talks with Hollywood studios and production companies about attaining streaming rights to existing movies and TV series in a bid to make Red more enticing.
Such initiatives are of particular interest because 10-year-old YouTube has historically positioned itself as a technology company -- a free and egalitarian platform where a community of creators rose to prominence organically. But in making a play for original content (and now, reportedly, streaming rights), YouTube will have to become “more of a media company,” explains Rich Raddon, co-founder and co-CEO of ZEFR, a YouTube marketing and data firm.
“There’s something really beautiful about YouTube in that a kid from Iowa can become as famous as a huge media brand,” Raddon explains. But as the company delves into content licensing and promoting the work of certain creators, he says, “it’ll be interesting to see if they move philosophically away from that viewpoint.”
While some creators initially balked at the idea of YouTube Red, dubious about how an ad-free model might impact vital AdSense revenues, these fears seem to have been allayed for now. Based on early numbers, says YouTuber Jordan Maron -- a 23-year-old Minecrafter with 9 million subscribers who goes by the moniker CaptainSparklez -- Red stands to be beneficial from a revenue standpoint.
Maron arrived at this conclusion because the percentage of his revenue coming from Red, he says, is outpacing the percentage of total YouTube users he estimates have signed up for the service thus far -- a figure he currently pegs at less than one percent.
And if YouTube Red is successful, notes Chris Erwin, COO of digital talent firm Big Frame, it could do a well of good for creators. An ad-free model could create a kind of scarcity that might drive up CPMs -- or the rate that advertisers pay creators per 1,000 views, he says -- or even place a greater emphasis on highly lucrative native advertising.
“If there’s no longer that pre-roll or mid-roll spot,” says Erwin, brands might subsequently become more interested in “integrating the product or brand into storyline of the video itself.”
But what constitutes success for YouTube Red? If the company can ultimately migrate 10 percent of its more than 1 billion users to Red, Raddon estimates, the powers that be at YouTube would be happy. Such an audience would place Red above other leading subscription services like Netflix (69 million users) and Spotify (75 million users.)
Perhaps feeling the crunch of competing platforms like Facebook and Snapchat, which continue to cull massive video viewership, YouTube has undergone a cultural shift in recent years, some creators say. The algorithms and automations that governed the platform at its outset have given way to a much more hands-on approach.
"We’ve been in contact with YouTube much more in the past year than we ever have before,” says Benji Travis, patriarch of the popular family vlog channel ItsJudysLife.
“I’ve heard from different YouTube reps that one of the goals of the outreach is to make sure people are able to generate a sustainable income on YouTube,” he adds, “both with ad revenue and outside of ad revenue.” (Creators are paid monthly by Google, and will reportedly receive 55 percent of all revenues from YouTube Red. In the same way it splits ad revenues, YouTube will take home a 45 percent cut.)
Travis, who is using Red, says he’s enjoying the service -- partly because it has helped his three young children steer clear of inappropriate ads. But other fans have been less enthusiastic.
Fifteen-year-old Destiny Wagner of Manhattan says she initially subscribed to YouTube Red for a feature that would enable her to download videos and watch them later offline. “It's okay I guess,” Wagner says of the service. “I thought I would use it more but I don't really.” She said that she plans to cancel her subscription.
YouTube, for its part, emphasized the gradual nature of the rollout.
“While we're incredibly pleased with its growth so far, YouTube Red is a long-term bet,” the company told Entrepreneur, “and we see its success being measured over the next few years.”