As the pay-TV industry looks to take a piece of YouTube's audience with new ad-supported platforms like Verizon's (NYSE: VZ) Go90 and Comcast's (NASDAQ: CMCSA) Watchable, Google (NASDAQ: GOOG) is going the other direction with the official launch of its new ad-free, subscription-only YouTube Red service.
Robert Kyncl, the chief business officer at YouTube, was at the streaming video company's Los Angeles studio Wednesday to introduce the platform to media. At launch, YouTube Red will deliver very much the same content found on the ad-supported platform for $10 a month, only with no requirement that viewers see ads.
"People are embracing paid subscriptions for ad-free content at an incredible pace," Kyncl said. "In the first decade of YouTube, the way we derived revenue was advertisers told us what the viewers' eyeballs are worth. In this case, it's the user saying over time what those videos are worth."
YouTube said it will pay content providers 55 percent of revenue derived from the new platform, with the size of individual cuts based on viewing time. Kyncl said 99 percent of YouTube's creators have agreed to let their content appear on the service.
Down the road, YouTube will add original content to the subscription service that it will charge a premium for. For example, YouTube said it is partnering with the producers of AMC's The Walking Dead and Maker Studios to build a tongue-in-cheek horror series around Swedish YouTube star Felix Kjellberg, aka PewDiePie.
The platform has also reportedly strong-armed conglomerates including 21st Century Fox and NBCUniversal into programming deals.
None of this movement implies there's anything wrong with the 10-year-old advertising-supported platform, Kyncl said. The number of campaigns running on YouTube is up 40 percent year over year, he noted, and spending among the top 100 advertisers has increased by 60 percent.
YouTube's audience is still growing. According comScore, Google video sites attracted over 168 million unique users in August, up from nearly 160 million during August 2014.
For its part, Variety noted one interesting wrinkle to the service: If a user signs up through YouTube's iOS app for Apple mobile devices, they're charged $12.99 per month. The extra cost is due to the 30 percent "iTunes tax" Apple charges app publishers to go through its platform.
Despite having the same base price as SVOD leader Netflix, Kyncl resisted any comparison to the service.
"Our membership service is completely different from what Netflix is," he said. "Every step that we have taken along the way is 180 completely the opposite of what Netflix is doing."
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