YouTube, Google’s all-powerful streaming video giant, has plans that will soon dramatically change how consumers access some video. According to reports, YouTube is preparing to push paid subscriptions for some of its partner channels later this year. It’s not particularly surprising, and in the age of cord-cutters and slowly shrinking cable subscribers, it’s not even all that revolutionary.
Still, YouTube’s decision to charge subscribers will start a ripple that could very well turn into big waves for online and traditional content owners. YouTube is redefining how customers choose to support the entities that make and deliver content, and if its model catches on, it could eventually affect the cable TV industry.
Based on early reports, YouTube’s initial subscriptions will be limited to select channels. While it appears monthly fees will mainly be charged for access to new content, the key here is that YouTube is asking consumers to decide how to spend on the individual channels that they want to pay for. If these channels are successful at getting audiences to adopt a paid model, they’ll then likely generate higher revenues than ad-based models.
This could quickly become the norm in online video distribution, with traditional content companies building their own paid channels, complementing their free-to-air product (e.g., cable versus OTA Broadcast). So far this online version of an a la carte cable offering has failed to build enough momentum to defeat the cable giants. If YouTube can make a buffet subscription model work for previously free content, then -- and only then -- there’s finally reason for the big cable operators to worry.
Consider some of the basic economics: YouTube already offers live streaming of select events. If the company experiments more with different events (sports, concerts, award shows, etc.) available on a pay-per-view process, it is giving consumers a clear bargain by eliminating cable's flat monthly fee. If YouTube starts offering competitive pay-per-view pricing for events like boxing or professional wrestling, than there’s really no reason for consumers to use cable (other than Monday Night Football!). Why pay a monthly fee on top of the pay-per-view price, when the same video is available online for a lower rate, and available for viewing anywhere?
Granted, it’s already possible for consumers to subscribe to their favorite shows through iTunes and other digital stores and platforms. But rest assured, networks are watching this latest move from YouTube. If consumers are willing to pay for original Web content, then there’s a clear market for the networks to leverage this model as well. Whether they share only certain shows or their entire libraries is up to them, but once one or two players make this decision, cable operators may have to evolve their business model (to include add-ons like home security) quickly. If they don’t, Google may very well change the game and -- if it is lucky -- kill cable.