Relucant Media Companies Join YouTube's Subscription Service
October 16 2015 - 5:02PM
Dow Jones News
By Shalini Ramachandran and Mike Shields
Several big media companies have agreed to make content
available for a planned YouTube subscription service that will let
consumers watch videos without any ads, despite their initial
reservations, people familiar with the matter said.
The companies that have signed up include Time Warner Inc.'s
Turner cable unit, 21st Century Fox's Fox Sports, A+E Networks
Inc., and Comcast Corp.'s NBCUniversal, the people said. Walt
Disney Co. is among those that remain in negotiations.
YouTube, which is hoping to launch the service soon, has told
media companies that it plans to charge consumers around $10 a
month for a bundle of YouTube's vast sea of video content and
music.
Under YouTube's deal terms, content creators collectively will
get 55% of the overall subscription revenue generated. Each
individual creator or company will get a slice of that money based
on the amount of time users spend on their videos, according to
people briefed on the terms.
Not every media company was thrilled about carving up the cash
in that manner. Some believed they should get a disproportionate
share compared to smaller YouTube creators, because their brands
and content are critical to getting people to sign up in the first
place.
Nevertheless, YouTube has managed to bring in several big media
companies without altering the revenue split terms. Other companies
are still in negotiations.
"We are progressing according to plan to provide fans more
options in how they enjoy content on YouTube," the company said in
a statement. "We have support from the overwhelming majority of our
partners, with over 98% of content watched on YouTube covered by
agreements, and more in the pipeline about to close."
Recode earlier reported that the service was in the works and
will cost $10 a month.
Getting into the subscription business marks an important shift
for YouTube, whose ad-supported platform has made it a major target
for marketers looking for greater digital media exposure. The site
has built a massive audience -- it says it has over a billion users
globally watching hundreds of millions of hours per day -- but
still isn't a profit driver for YouTube-parent Google. The
subscription offering will bring in a new revenue stream.
Some media companies felt strong-armed by YouTube into
participating in the subscription service, industry executives
said. YouTube has told its creators that they need to sign onto the
service, or their videos will no longer be available on the free
version of YouTube in the U.S., the people familiar with the matter
said. TV channels see YouTube as a tremendous marketing tool, and
generally don't want to be shut out of it.
"I'd rather not have anything to do with it," one media
executive said. But the marketing and advertising benefits from
being able to have clips up on the site "slightly outweigh the
negative" for now, the executive said.
In the absence of preferred rates, some traditional media
companies have been negotiating for extras, such as guarantees that
their content will receive additional promotion on YouTube, to
sweeten potential deals.
There is some sense among traditional media partners that
YouTube's subscription business may end up having a limited appeal,
so that it won't impact their revenue derived from YouTube. And
they expect that YouTube will take measures to ensure that its
creators' businesses are not hurt by this offering--that creators
will at least make as much money from their videos as they would
via the ad-supported YouTube.
Write to Mike Shields at mike.shields@wsj.com and Shalini
Ramachandran at shalini.ramachandran@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
(END) Dow Jones Newswires
October 16, 2015 16:47 ET (20:47 GMT)
Copyright (c) 2015 Dow Jones & Company, Inc.
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