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Cable Technology Feature Article

May 14, 2013

YouTube Eyes Post-Cable World with Paid Channels

By Tara Seals, TMCnet Contributor

In an effort to give content creators a new way to monetize their output, YouTube (News - Alert) launched a pilot program for a small group of partners that offers paid channels with subscription fees starting at $0.99 per month. YouTube will share a portion of the subscription earnings back with programmers, and will use the strategy as a continued initiative in its campaign to craft a post-cable video consumption model.

“We’ve been building a YouTube partner program since 2007 that enables content creators to earn revenue for their creativity,” said the YouTube blog. “We’ve watched them build amazing channels that have made YouTube into a news, education and entertainment destination 1 billion people around the world cannot do without.” However, “one of the most frequent requests we hear from these creators behind them is for more flexibility in monetizing and distributing content,” it added. “We’ve been working on that.”

There are more than 1 million channels already generating revenue on YouTube, primarily via advertising. A paid model offers a different approach for those with professional content and allows online video producers to move upmarket to an approach more reminiscent of premium cable networks. And at 99 cents to $2.99 per channel, the approach also caters to those hungry for more control over their television portfolio.

Cable, satellite and IPTV (News - Alert) operators, thanks to the way they license content, can’t realistically provide an a la carte channel bundling approach that will let consumers pick and choose what channels the pay for. But YouTube’s paid programming could provide a path to that model—a potentially significant shot across the bow to cable. 

“We are the largest independent library of programming for families in the world. These channels represent another way in which the internet is enabling us to monetize our 8,500 half hour library of leading children’s programming,” said Michael Donovan CEO at DHX Media, one of the new paid creators. “Partnering with YouTube on a revenue-sharing basis for these new digital channels is an efficient way to provide children and parents with great entertainment content, when and where they want it,” he concluded.

It’s also a strategy that allows niche media companies to bring their content to a wider digital audience.  “YouTube is once again redefining how, when and where we enjoy our favorite shows," said Richard Goldsmith, executive vice president of global distribution at the Jim Henson Company. "With the launch of Jim Henson Family TV, audiences can watch our hit shows again and again, and we welcome parents to introduce their favorite Henson titles to their children in a convenient and affordable way.”

None of the mainstream Big Media companies are represented in the effort, meaning that competing with Netflix, Hulu (News - Alert), Amazon and other mega-streamers with current-season TV and movies is not the point. It does however broaden YouTube’s reach by providing “long-tail” content for unique interests and specific markets like off-the-beaten-path kids’ fare—something that traditional cable and pay-TV providers can’t do affordably.

YouTube enjoys one billion unique visitors every month and more 18- to 34-year-olds watch YouTube than any cable network. At a recent brand event, execs noted that emerging markets and niche interests could push that number to six or seven billion.

Accordingly, content creators are a wide-ranging bunch. For instance, Entertainment Studios, an independent producer and distributor of first-run syndicated television programming for broadcast television stations and owner of eight 24-hour HD cable television networks, launched eight new paid channels on YouTube with themes like pets, travel, recipes and cars. The channels will be available to consumers in 10 countries, including the United States.

The eight channels are available on YouTube for a subscription fee of $1.99 per month per channel. Viewers will also have the option of subscribing to the portfolio of Entertainment Studios channels via SmartTV.com for a fee of $9.99 per month.

DHX has launched three dedicated paid YouTube family entertainment channels: DHX Kids, DHX Junior and DHX Retro. DHX Kids channel will feature live action and animated series such as Horseland; Mudpit, which will be first run in the US; Sabrina, the animated series; and Sherlock Holmes. The DHX Junior channel will offer content from The Busy World of Richard Scarry; The Doodlebops and Madeline. And the DHX Retro channel is a platform for nostalgic childhood favorites including Heathcliff; Inspector Gadget; Sonic Underground (Sonic the Hedgehog); and Super Mario.

The channels will also be offered in multiple countries, including Australia, Brazil, Canada, France, Japan, Korea, Spain, Russia, the U.K. and the U.S. The content is available for two week free trials, with a subscription price of $2.99 per month each. Discounted yearly subscriptions are also available.

Jim Henson Family TV is launching in English and Spanish on YouTube, with ad-free full episodes of hit shows like Sid the Science Kid and Fraggle Rock, available across Web, mobile and connected TV platforms.

The channel will be available for an introductory price of $2.99 per month or $24.99 per year; the Spanish service has less content and will go for $1.99 per month or $17.99 per year. Subscribers to the English channel will soon be able to upgrade to include the Spanish channel for an additional 99 cents per month or viewers can subscribe to both English and Spanish channels for $34.99 per year.

And there are others: Sesame Street will offer full episodes on its paid channel when it launches, UFC fans can see classic fights, like a full version of their first event from UFC’s new channel and National Geographic Kids, Treehouse Direct and the news show Young Turks are also in the fold.

“This is just the beginning. We’ll be rolling paid channels out more broadly in the coming weeks as a self-service feature for qualifying partners,” the company said. “And as new channels appear, we'll be making sure you can discover them, just as we've been helping you find and subscribe to all the channels you love across YouTube.”

Edited by Rachel Ramsey

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