YouTube Red Gets The Green Light

WHAT IS YOUTUBE RED?

Let’s start with the basics. What is YouTube Red, and why does it matter so much? The subscription service guarantees that the viewer will no longer be saturated with ads. Viewers will also receive exclusive video content created by popular YouTubers. In addition, for the avid multi-taskers, subscribers using their mobile phones will now have the ability to both stream a video and text at the same time. On top of that, all videos will be downloadable for later viewing offline. YouTube Red is available for a monthly payment of $9.99 ($12.99 for direct subscriptions from Apple devices), which is comparable to the cost of services like Netflix and Hulu.

It would appear that YouTube has positioned itself to not only take on subscription video service providers like Hulu and Nextflix, but they are also positioned to take on music service providers as well. YouTube has decided to bundle Google Play with their subscription service. That means if you buy one service, you get the other one for free.

YOUTUBE RED RAISING RED FLAGS

YouTube was a free-for-all user service, but with YouTube Red, that no longer applies. Many viewers have expressed concerns that they will no longer receive quality content from their favorite YouTubers for free. YouTubers have had their own share of concerns about losing their subscribers during the transition to the new version. If they want to engage all potential viewers, they will now have to create two types of content: paid and unpaid. In addition, when YouTubers upgrade, they may lose the subscribers to their channel that haven’t paid for a premium subscription. In an industry where influence equals income, this could have a significant negative financial impact for many major YouTubers. It isn’t clear how YouTube plans on paying their content creators yet, but according to YouTube’s Chief Business Officer, Robert Kyncl, YouTube Red will pay content creators, “the vast, vast majority of revenue”.

WHAT DOES THIS MEAN FOR THE ADVERTISER?

Although YouTube is the world’s top video streaming search engine, it isn’t the only place to advertise display and video ads. With the many concerns raised about YouTube Red and the numerous options to advertise elsewhere, advertisers may find themselves migrating across various advertising platforms that they hadn’t previously considered in order to remain top-of-mind for a consistent amount of viewers.

Why The Change?

The answer is simple: Due to the immense potential profits that they stand to gain from implementing YouTube Red’s subscription service, YouTube refuses to have advertising revenue as their sole income source. According to The Verge, “If just 5 percent of its US viewers were to sign up for the service, it would add more than a billion dollars in annual revenue to the company’s bottom line”.

The creation of YouTube Red has segmented the YouTube community into 2 new audiences: those who can pay for their subscription service and those who can’t. This could potentially decrease the number of viewers that advertisers can reach with their advertisements. This year Hulu reached 9 million subscribers, following Netflix which boasts a dominant 60-million subscriber base. These large subscription numbers for streaming media services seem to have an increasing trend as more and more viewers move away from traditional media. For example, the number of Hulu subscribers increased 50% in the last year alone. The uncertainty around YouTube Red will likely create new opportunities for other advertising platforms, as advertisers find themselves increasingly straying from YouTube.

Don’t Put All your Eggs In One Basket.

According to a survey conducted by the advertising software company Mixpo, advertisers would much rather run video ads on Facebook than on YouTube. Facebook offers an individualistic approach in audience targeting with specificity in age, gender, interests, and location. Although YouTube offers similar targeting they cannot match the specificity at scale. Instead, advertisers aim their YouTube ads at channel categories like makeup tutorials, gaming, and travel. Don’t forget, Facebook also owns Instagram. With over 1.5 billion Facebook users and an additional 300 million users on Instagram, YouTube should be concerned with Facebook making a grab for their market-share.

GREED IS GOOD – EXCEPT ONLINE.

While Gordon Gecko’s infamous mantra “greed is good” may hold true on Wall Street, it is rarely proven accurate on the Internet. Just because YouTube is the dominant streaming video service in the current digital landscape doesn’t mean that there aren’t dozens of other streaming services that remain free for viewers. If enough viewers get fed up with having premium content blocked, they may just start using another service instead of joining YouTube Red’s subscription service. In addition, if YouTubers lose subscribers in the transition or they don’t feel that they are receiving fair compensation with the new payment structure, they may begin looking elsewhere to post their videos. All of this may well lead to decreased opportunities for YouTube advertising, and increased competition (and therefore costs) for the advertising opportunities that do remain.

Will YouTube Red be what Google needs to break into the subscription-based streaming video market, or does it signal the beginning of the end for YouTube? As with many product launches in the tech industry, only time will tell.