By Sahil Patel
YouTube is mulling some type of ad-free subscription service in an attempt to diversify its revenue streams, according to CEO Susan Wojcicki.
The online video site, which is projected to make $1.13 billion in net video ad revenues in the US alone this year, wants to go the way of the media giants — both video and print — that have come before it.
“We’re early in the process, but if you look at media over time, most of them have both ads and subscription services,” said Wojcicki, during an on-stage interview at Recode’s Code/Mobile conference in San Francisco. “YouTube right now is ad-supported, which is great because it has enabled us to scale to a billion users. But there’s going to be a point where people don’t want to see the ads.”
This isn’t the first time YouTube has considered making content available via subscriptions. As recently as last year, the company offered paid-channels from a variety of traditional and native content providers including “Sesame Street” and The Young Turks. That initiative fizzled rather quickly.
Wojcicki did not elaborate on how a new subscription service would function, including what it would mean for content creators generating significant viewership and ad revenue on the site.
Since coming on board as YouTube CEO in February, Wojcicki has made it a priority to serve the needs of the site’s creator community, which has long complained about how difficult it can be to make money on the site. YouTube takes a 45% cut of all ad revenue generated on the site, hamstringing creators who then need to find other ways to monetize their business.
This issue has opened a void that potential YouTube competitors, including Yahoo and Jason Kilar’s Vessel, are looking to fill. These companies are trying to poach some top YouTube talent by offering them multiple monetization options with better revenue-sharing agreements.
Sensing this need to reinvest in its creator community, YouTube has started to offer more revenue-generating options for creators, including a crowdfunding “tip jar.”
The company has also started funding original content, with a focus on developing projects with some of its top stars. This initiative is led by a new “YouTube Originals” team that includes division head Alex Carloss, head of scripted content Tim Shey, head of unscripted content Ivana Kirkbride, and head of comedy Ben Relles.
An ad-free subscription offering would join these efforts in providing YouTube creators with different sources of revenue.
It will be interesting to see how the service functions if and/or when it goes live — especially on mobile, which now accounts for half of YouTube’s viewership, according to Wojcicki.