Wednesday, January 30, 2013

You Tube Likes The Subscription Model

The formula that cable networks have masterminded, a dual revenue stream from advertising and subscription, has been quite successful.  So much so that even broadcast networks moved from "must-carry" basis to license fee to take advantage of subscription revenue.  Hulu and Amazon have each built their own subscription models as well.  So the news that You Tube wants to enter this world should not only been expected, but one could wonder what took so long.

Per the news, "YouTube has reached out to a small group of channel producers and asked them to submit applications to create channels that users would have to pay to access. As of now it appears that the first paid channels will cost somewhere between $1 and $5 a month, two of these people said."  Will consumers seek out these services and can You Tube prove the value?  Obviously, if the content is proved compelling, unique, and different enough to justify a fee, consumers will embrace it.  Selling unknown content, unlike Hulu and others selling known shows, may make the value harder to prove.  Others have used well known actors to entice views. So building a pay model is possible.

On the other hand, consumers may feel beaten down that they are asked to subscribe everywhere they go.  Cable continues to own the market and adding a TV everywhere approach to extend its content to multiple platforms helps to maintain their dominance.  Hulu, Netflix, and Amazon are building out successful models too.  With the right content, As You Tube and others add  to the mix, fragmentation results and the landscape looks cluttered until a tipping point occurs.  Ultimately, the big fish will eat the little fish and the fewer survivors will remain.

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