YouTube Needs to Be More Like Netflix, Less Like Pandora

After a few false starts, YouTube is hoping to finally get it right when it comes to premium streaming.

Google's (NASDAQ: GOOGL  ) 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 (NASDAQ: NFLX  ) and less Pandora (NYSE: P  ) .

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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  • Report this Comment On May 11, 2013, at 3:08 PM, Easttexas9 wrote:

    Google/Youtube need to do a revenue sharing deal with the studios on new release movies similar to the old Rentrak model that they had with video stores. Either a la carte or subscription or a combination of the two.

  • Report this Comment On May 11, 2013, at 3:31 PM, Wingeddamnation wrote:

    I really hope Youtube fails. It just goes to show that something that is free at first and ends up needing to be paid ends in failure. Netflix succeeded because it was ALWAYS a pay thing. A free month just shows the consumers what shows and such you can watch with no stupid commercials to get in the way. Another reason why Youtube will fail; ad sharing with the videos is getting way too retarded.

  • Report this Comment On May 11, 2013, at 4:23 PM, Polisny wrote:

    Nah, try again. If youtube starts charging for channels ill dump it and listen to music for free elsewhere. Second point, it doesn't matter if national geographic wants a presence there or not. If it does then let it create and maintain its own content, however it does so for free, or not at all. Don't like it? Fine, YouTube goes down the drain and national geographic back to tv. I don't care if it is YouTube or elsewhere. It will be free or not at all. They can put up adds or commercials, fine. But some 99c per month bullsh:t for "national geographic" is called cable tv, not the Internet. If you can't adjust to the market, then you're going to drown. The only problem with YouTube is that it is in the US. There are PLENTY of free music sites all over the net. And if people want national geographic for free they are going to torrent them, so may as well adjust to the market.

    Bad move YouTube. Netflix isn't even necessary when streaming is legal.

  • Report this Comment On May 11, 2013, at 4:34 PM, Polisny wrote:

    As well, companies like national geographic chose to put their content there, however the site is called YouTube for a reason. If people want to share music that's fine, because even if it is prohibited it won't matter, the music will be played and shared elsewhere for free,so that's fine. But when it becomes a market for companies to advertise their content, wherein we are the ones that have to flip the bill, then no, sorry, elsewhere the world will go.

    Movies aren't allowed there? Then neither is tv. The channel is about people, not tv. People can already make money using their channel, as can the stupid companies, they just have to allow commercials to play on their videos and you tube will pay them. STILL not enough?? Fine, GO THE HELL BACK TO TV!!!!!

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