Would you pay $5 per month for an ad-free YouTube experience? How about $10? If not, would you pay a little less for an ad-free subscription to a specific type of content, like sports news?
Those are the possibilities currently being weighed by the folks at YouTube. Such a move would mark a drastic departure from the Google subsidiary’s longstanding business model, which is based entirely on advertising. It also reflects the success of other streaming services like Netflix and Amazon Prime, which rely exclusively on subscriptions for revenue.
"YouTube right now is ad-supported, which is great because it has enabled us to scale to a billion users,” said YouTube CEO Susan Wojcicki at this week’s Code/Mobile Conference in California. “But there's going to be a point where people don't want to see the ads.”
According to the New York Times, the subscription option is far from implementation, but YouTube brass are currently bouncing the idea off major media firms and content producers. The prospective service would likely feature a variety of subscription options for specific kinds of content—for example, one that includes nothing but tech-related videos.
On the surface, YouTube appears to be transitioning to a Netflix-like business model, but the reality is more complex than that.
According to a recent study by Frank N. Magid Associates, YouTube is already the most popular online destination for cord-cutters. A plurality of respondents who have cancelled their cable subscriptions said they rely on YouTube to watch Jimmy Fallon clips and shows like The Walking Dead.
What makes the proposed new business model compelling is its balance between subscription and ad revenue—something only a platform like YouTube can pull off.
Netflix, for example, relies almost entirely on licensed content—an arrangement that's only getting more expensive as its audience grows. (It's one reason why the company has begun producing original programming, like House of Cards and Orange Is the New Black.)
YouTube, meanwhile, offers a mix of professionally produced and user-generated content, which gives it the flexibility to charge for some videos while offering others for free. That flexibility may be key in remaining profitable as the content market shifts entirely to streaming over the coming years.