YouTube Needs to Be More Like Netflix, Less Like Pandora
May 10th 2013 9:27PM
Updated May 11th 2013 8:10AM
After a few false starts, YouTube is hoping to finally get it right when it comes to premium streaming.
Google's video-sharing website launched a pilot program for premium channel subscriptions yesterday. Viewers can pay as little as $0.99 a month to subscribe to a particular channel.
No, this doesn't mean that YouTube is instituting a pay wall. The premium model will attract providers of specialized and polished content. The first wave of paid channels consists mostly of niche-specific programming by seasoned producers. We're talking National Geographic Kids, UFC, and Cars.tv. It's not a vlogger invasion, at least not yet.
Google has been here before -- and failed.
Three years ago, it rolled out five critically acclaimed Sundance flicks, charging $3.99 for each streaming rental. It was a dud. More than three years later, the most prolific of the options -- The Cove -- has been streamed fewer than 2,700 times. The price was even chopped in half along the way.
Sure, it's incremental revenue for the studios. However, the producers would have probably made far more had they simply monetized it through YouTube's ad platform.
We'll find out soon enough if this is a hit. For now, YouTube better hope that its future is more Netflix and less Pandora .
What's so good about Netflix? Well, everyone knows that you have to pay to use Netflix. Beyond the free trial, everyone's paying $7.99 a month to stream video.
Pandora's at the other end of the spectrum. Sure, it's growing quickly. The music discovery leader reached 70.1 million active listeners last month, 35% ahead of where it was a year earlier. However, the vast majority of its users are freeloaders. Subscription revenue accounted for just 12% of Pandora's revenue, suggesting that roughly 1% of Pandora's users are actually paying for ad-free streaming.
YouTube would take it. Getting just 1% of its billion visitors worldwide to open up for premium subscriptions would be material. However, given its lack of success in the past in erecting tollbooths, it would be a tall order to expect that much.
There's naturally plenty of money to be made if consumers stop approaching YouTube as Pandora and more along the lines of Netflix.
There's so much that Google can do if it starts collecting payment information the way it does through Google Play. It may even be able to get its fledgling financial transaction platform to gain some traction this way.
However, it may be too late. Hulu rolled out Hulu Plus -- at Netflix's $7.99 price point -- early in its tenure. Too many people see YouTube as a site to stream video clips for free, and that may never change.
You can't blame Google for trying. There's so much money waiting to be had if YouTube can succeed in collecting change for a change.
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The article YouTube Needs to Be More Like Netflix, Less Like Pandora originally appeared on Fool.com.Longtime Fool contributor Rick Munarriz owns shares of Netflix. The Motley Fool recommends and owns shares of Google and Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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