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Home IP FLASH The end to free lunch, eh?

The end to free lunch, eh?

INTELLECT DESK
The end to free lunch, eh?

YouTube is about to start its paid subscription service and this new batch of fresh contents that would be added, will be exclusively available only to the paid subscribers. Kicking off on Wednesday, October 21, YouTube will also offer paid subscription service for original content.

Time Warner Inc.’s Turner cable unit, 21st Century Fox’s Fox Sports, A+E Networks Inc., and Comcast Corp.’s NBC Universal have already joined in to offer contents as well under the new paid subscriptions. The subscription fee is rumored to be USD 10 a month.

YouTube, however, will continue to operate as a free, ad-supported version of the site, and has said that all of the videos that appear on the free site will be available on its paid version — which is why YouTube is insisting that all video makers who make money from YouTube ads need to participate in the subscription service as well.

It is unclear when you will be able to see the new system of affairs YouTube has announced. Sources say some of the stuff YouTube is paying for has not even been created yet, and will not be available until 2016.

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 portion 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 bigger 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.”

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 hopefully bring in a new revenue stream.

October 21, 2015
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