Online video service Vessel launches in beta

File photo: Jason Kilar, then-CEO of Hulu LLC.
Kimimasa Mayama | Bloomberg | Getty Images

After a successful run at Hulu, Jason Kilar is looking to shake up online video with a totally new business model.

That new model, Vessel, launches Wednesday in a "consumer beta" period, one month after its initial announcement.

Vessel, like IAC's Vimeo, is taking on YouTube's dominance of online video. But rather than just compete for the online advertising revenue and the biggest mass audience, Vessel is going premium, offering a more professional variety of digital video content, for a monthly fee. The website has a fresh user interface, and a specific focus on 14- to 24-year-olds.

"We're not focused on traditional TV, we're not focused on traditional film, but everything else—some of the things that are most popular on the Web today," Vessel CEO Kilar said.

Though Vessel has a free, ad-supported version, Kilar projects 80 percent of Vessel's business will be its $2.99-a-month model, which gives viewers access to exclusive Web video, plus some ads, before being made available elsewhere.

The company has signed deals with YouTube stars and channels like Tastemade, plus traditional content companies including Time Inc. and A&E for such brands as Sports Illustrated and the History Channel. It's also gotten Warner Music and other labels on board, representing a total of 3,000 musicians.

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Most of Vessel's ads are 5 seconds long, but they aren't up long enough to be annoying. In addition to brief the ads, the experience feels different than YouTube or Hulu. Vessel enables "simultaneous browse" so users can find new videos while continuing to watch. It also features a range of new categories—like "Rant" within the comedy category—so it's easier to discover the curated content.

Kilar said a better model for creators should use more, better, exclusive content. "The reason why we started Vessel is that we looked at the landscape of media and we thought it could be better," he said.

"Part of making media better is to serve video creators in a very, very strong way, so we're being generous with the fact that 70 percent of all advertising goes back to the video creator and subscription dollars go back to the video creator as well. So to give you a comparison, on the free Web, a video creator typically earns about $3 per 1,000 views. On Vessel we project that they will make over $50 per thousand views."

Ex- Hulu CEO launches 'Vessel'

So what does it mean that Vessel's launching in consumer beta? People who requested an invitation over the past month will begin to receive access as the service slowly rolls out before formally launching. Anyone with an invitation will be able to try the service with a 30-day free trial, after which the service will cost $2.99 per month. Vessel was designed specifically for mobile devices, and will launch with an iOS app, plus a website, with plans to launch an Android app soon.

Kilar expects creators to help spread the word. "All the creators that are on our service, given that they're making about 20 times what they used to make on a per-view basis, they have a lot of incentive to actually send their biggest fans to Vessel to get early access," Kilar said. "So I wouldn't be surprised if five years from now we look back on how Vessel grew, that a lot of that growth was coming from creators talking to their fans to say 'come to Vessel to watch this content first.'"

Though Vessel's business is built on the idea that people will pay to get content before it's made available on YouTube, Kilar insists he's not trying to eat YouTube's lunch, saying that it's not a zero-sum game. "Players that are out there, focused on free ad supported, it's going to have a very good future," he said. "If you look at the demand, look at the pace of the demand, but I do think it's not going to be the only game in town."

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