The players competing for online streaming customers continues to grow, and Google (GOOGL -1.23%) hasn't stopped its efforts to gain market share. When Google began actively pursuing Hollywood talent to develop top-flight, original content for its YouTube site a couple years ago, it was pretty clear that the tech behemoth was in the streaming video biz to stay.
In many respects, Google's hinting at a subscription fee for YouTube content, as recently reported in Ad Age, should surprise no one. In fact, Google has said before it would explore ways to generate non-advertising revenue from YouTube -- now the third most popular site on the Internet -- but, according to Ad Age, that time is nearly here.
The specs
With an expected price range of $1 to $5 a month for a few, select channels, the YouTube subscription service isn't likely to add significantly to Google's $50 billion in annual revenues out of the gate. But, as an initial test, a subscription fee opens up a world of possibilities. There's talk of Google soliciting outside, independent producers to submit content with a revenue split based on subscriptions, as well as charging for some of its more popular, existing content.
Taking the idea even a step further, Google has alluded to a pay-per-view type of arrangement for live events broadcast via YouTube, along with charging for self-help type of programming. An unnamed spokesperson for Google put it this way:
We have long maintained that different content requires different types of payment models.
In other words, if the subscription rollout occurs in Q2 of this year, as some believe, it may look quite a bit different by Q2 of 2014, or that a split from Google's traditional advertising specialization might make sense in the case of YouTube.
Now what?
Success breeds competition, and nowhere is that more true than in the world of investing. Netflix (NFLX -9.09%), for all its faults, continues to build its online streaming video cache to the delight of investors. After announcing a surprisingly positive earnings report, Netflix is feeling so giddy, it's decided that institutional investors should invest $400 million via its new debt offering. Naturally, as Netflix grows, so, too, does its competition, and a subscription-based YouTube is just one of many alternatives for streaming customers.
Amazon.com (AMZN -2.56%) and its Prime service is another online behemoth doing more than dipping its feet into the streaming pool. Multi-million dollar agreements with content providers like Epix is only one of the upgrades Amazon.com is making to its streaming service. Original content, particularly as the playing field includes more and more participants, is becoming a critical part of differentiating oneself in the market. Amazon.com is set to rollout six new shows later this year, all produced in-house. Netflix, too, has original content in the works, scheduled for rollout as early as Feb. 1.
What differentiates Google's YouTube from a Netflix or Amazon.com Prime is its leadership position in generating content. In addition to using media outlets, Google has the aforementioned Hollywood types, and other industry pros from around the world, already producing quality content.
Will a monthly subscription fee for YouTube offerings, or a pay-per-view arrangement, be a game changer for the tech titan? Nope, but that's the beauty of Google; the new model doesn't have to be an all-or-nothing proposition. With multiple revenue streams, over $48 billion in cash on the books, and a never-ending source of content, Google can afford to experiment with YouTube as much as it needs to.
