YouTube Paid Content Will Fail

Media

Published: May 10, 2013 6:24 am

Last Updated: May 10, 2013 7:03 am

YouTube, the video operation of Google Inc. (NASDAQ: GOOG), will enter a field in which it has no business being. It will offer consumers paid channels of premium video content. YouTube’s problem is that, despite its huge number of visitors, people already have many of choices to get paid video on demand. And many of these sources have done extremely well in attracting visitors, which leaves YouTube without much of a market.

YouTube announced:

Starting today, we’re launching a pilot program for a small group of partners that will offer paid channels on YouTube with subscription fees starting at $0.99 per month. Every channel has a 14-day free trial, and many offer discounted yearly rates. For example, Sesame Street will be offering full episodes on their paid channel when it launches. And UFC fans can see classic fights, like a full version of their first event from UFC’s new channel. You might run into more of these channels across YouTube, or look here for a list of pilot channels. Once you subscribe from a computer, you’ll be able to watch paid channels on your computer, phone, tablet and TV, and soon you’ll be able to subscribe to them from more devices.

Setting aside whether people want to watch such a limited menu of shows, YouTube has to take market share in an industry that is crowded already. These established firms have done well, if their numbers are an indication. Netflix Inc. (NASDAQ: NFLX) has more than 20 million subscribers. Hulu claims to have four million. Each service competes with related services from tech powerhouses Apple Inc. (NASDAQ: AAPL) and Amazon.com Inc. (NASDAQ: AMZN). Satellite providers, cable systems and telecom fiber products also have live and on demand premium video.

YouTube also must wrestle with its own image among consumers. The site has tens of millions of visitors in the United States each month. But the site remains crowded with low-resolution, amateur video. Visitors are bombarded with these on YouTube’s homepage, and this content dominates the site to the point that YouTube cannot escape its current image for hosting video junk.

YouTube will continue its efforts to sell advertising, even if marketers have to be convinced that its low-quality video can offer an adequate environment for marketers. VOD does not have a chance to be a viable model.

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