Google Set to Unveil Subscriptions for Specialist YouTube Videos

You Tube
Lionel Bonaventure | AFP | Getty Images

Google is on the verge of unveiling an à la carte subscription service for some of YouTube's specialist video channels, to finance a broader range of content and add a second revenue stream to the digital video market leader.

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The move, which has been in the works for months, could be announced as early as this week. It will apply to as many as 50 YouTube channels, people familiar with the plan say. Viewers will be able to subscribe to each channel for as little as $1.99 a month.

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The subscription service will enable channel operators to produce different content, such as TV shows and films, a person familiar with the plan said.

Advertising on YouTube and rival video sites has risen fast, but remains a fraction of television budgets. Digital video advertising will jump from $2.93 billion to $4.14 billion in 2013, eMarketer estimates, but will account for just 2.4 per cent of all ad spending.

YouTube claims the lion's share of that revenue. Brian Wieser at Pivotal Research estimates that YouTube's ad revenues will rise from $1.3 billion in 2012 to $2 billion this year and Bernstein Research said on Friday that its revenues could exceed $15 billion "in the next several years", roughly matching CBS or Viacom.

YouTube told the Financial Times that it had "nothing to announce" regarding channel subscriptions but was "looking into creating a subscription platform that could bring even more great content to YouTube for our users to enjoy and provide our creators with another vehicle to generate revenue from their content, beyond the rental and ad-supported models we offer".

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YouTube's channel partners include Howcast, World Wrestling Entertainment, The Onion and Machinima—a network for gamers. It is unclear which channels have signed on to the new service.

Cable and satellite channels, which traditionally rely on a dual revenue stream model, are eyeing YouTube's subscription service to generate revenue from older shows and new programming, according to another person familiar with the project.

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YouTube has moved away from its early days as a destination for user-generated content to professionally produced video that would not look out of place on television. In the past 18 months it has spent more than $200 million on advances to dozens of start-up channels.

The new channels have helped expand YouTube's audience to 1 billion users who watch 6 billion hours of video each month. Every one of Ad Age's 100 largest brands has advertised on the site.

"We're seeing a myriad of brands increasing their media spend," said Robert Kyncl, global head of content partnerships for YouTube.

Time Warner, The Chernin Group, Bertelsmann, Discovery Communications and Comcast have all invested in companies that create or aggregate YouTube content.

Traditional media companies are also eyeing audiences flocking to individual YouTube channels: DreamWorks Animation, the company behind the Shrek movies, this week acquired Awesomeness TV, a "teen-focused" YouTube network in a deal that could be worth $117 million if earnings targets are met.

Subscription YouTube channels will compete with the likes of Netflix, the streaming service with more than 30 million subscribers, and Hulu, owned by Walt Disney, News Corp and Comcast, which said last week it had surpassed 4 million.