Will YouTube's Subscription Push Kill Cable?

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.  

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5 comments about "Will YouTube's Subscription Push Kill Cable?".
  1. Chris Stinson from Non-Given , February 19, 2013 at 2:20 p.m.
    The model doesn't work.....First - most feel that anything on the internet for personal use is free.. Second - How do most connect to the internet at home? Via a Phone or Cable compay. It is not only the content, but how you get there. As the number of providers get smaller and those that remain have mergers between content and access, I doubt that even google will take on that giant, toe to toe.
  2. Scott Saunders from Internet Marketing Media , February 19, 2013 at 4:22 p.m.
    I agree with Chris, the number of views currently on YouTube are due to its "free" content. YouTube will have to drastically change their business model to begin charging for access and publication. In saying (ok, typing) that, charging for access WILL change the demographic to more professional. Maybe they develop a paid and a free channel.... Google has increasingly moved towards monetizing everything they do (and rightly so). Why would their YouTube holding be any different. Similar to Google+ vs Facebook, completely different demographic for each.
  3. Jeff Bach from Quietwater Media , February 22, 2013 at 8:30 a.m.
    As a content producer I love this idea. The two writers above are missing half the point in my view. Some content is not free, unless the people making it are doing it for free, which usually gets you something like a dog drinking out of the toilet. As Scott writes above, a free option and a subscription option to support the niche content that the viewer feels is worth paying for seems like a great way to go. While Chris and Scott may like watching dogs drinking out of the toilet or maybe their nephew taking his first steps, there is also an ocean of great content that c/would considerably expand if there was an actual business model beyond the communistic view of "keep it free for the good of the people". I think the free and subscription model allows for both to happily co-exist. Google has long ignored the fact that their "do no harm" motto is greatly harming the creators and artists who lack a revenue model because of it. Going one step further and broadening this idea even more, I think it would be great to see Google take this idea and work in their Checkout tool (is it even still live?) and make that tool work with micropayments. Google could then offer a "pay per view" model (not a subscription model) to the owners of an even wider array of video. This would rally make things interesting. They could also extend that micropayment tool to the print media world. Online newspapers are perfect for an alacarte model that lets the reader pay for what they want to read and leave the rest for others. Conflict with the wire owners of the world is a worthy issue. Some sort of revenue split would seem to be an easy first answer there. They should be getting something. This is not a communist world after all. Finally why are large numbers of free views valued so much? Ads of course. For 99.98% of the content providers on Youtube, ads and the number of views do them NO GOOD. In this increasingly fragmented search-driven content world an ad-supported model does not work. The views are not there. They are spread to thinly. For specialty niche content the views will never be there as the audience is niche not broad. This subscription model if (hopefully when) it is released to a broader group of producers will finally do some good for the rest of us. And maybe even percolate out to the rest of the world, which is sorely in need of a way for creators and producers and their interested followers to make a go of creating compelling content.
  4. Jeff Bach from Quietwater Media , February 22, 2013 at 8:32 a.m.
    sorry about the big paragraph above, looks like line breaks are not honored and I can find no way to edit and reinsert some br tags. Mediapost you guys should maybe fix this???
  5. Scott Saunders from Internet Marketing Media , February 22, 2013 at 3:09 p.m.
    No place for the liberal politics here. If you work you get paid, if you don't work, pound sand. Broken down into many more words and much more detail. Jeff could not be more on target. If Google can monetize everything they do, they should encourage those who produce good content (unique, relevant, informative) should be able to make a living at it, no different than an author does by selling books. Again, I believe there are many of us, professionals who make their living within the scope of Internet Marketing, who are more than willing to pay for professional delivered work, whatever that means. Most of the newspapers are already charging for online reading, as it should be. Give em the first paragraph or two, if they want to read more, charge em. I have 4 good writers I use for most of my content and I pay them well. They deliver, therefore they get paid.