YouTube just gave a big clue that its $12-a-month premium service is headed for extinction after only eight months (GOOG, GOOGL)
- Starting in 2019, new original content on YouTube will be available for free with advertisements, rather than being available exclusively through the company’s subscription service, YouTube Premium.
- The goal behind the streaming platform’s decision to move its original content outside of its subscription service is to expand its audience and “meet the growing demand of a more global fanbase,” YouTube said.
- But the move raises serious questions about the future of YouTube’s $12-a-month premium subscription service and underscores a longstanding tension within YouTube’s business.
It’s been less than eight months since YouTube launched its $12-a-month “Premium” subscription service — and there’s already reason to wonder whether its days are numbered.
YouTube said on Tuesday that its original video programs, including sci-fi dramas and reality shows, will no longer be reserved for Premium subscribers starting in 2019. Instead, YouTube’s Originals will be available on the site for free, with ads, to everyone.
A YouTube spokesperson told Business Insider in a statement that the decision to move its original content outside of its subscription service was in order to expand its audience and “meet the growing demand of a more global fanbase.”
But the move raises serious questions about the future of YouTube Premium.
Access to the Originals was one of the key selling points of YouTube Premium. The subscription product — which combines YouTube Music Premium and YouTube Originals — was launched just this May. For $11.99 per month, users get access to a Spotify-like music-streaming service, plus a slate of over 100 Originals, including “Cobra Kai,” inspired by “Karate Kid,” and the sci-fi drama “Origin.”
With those Originals now available for free with ads, why would anyone pay $12-a-month for YouTube Premium? If you really hate ads, perhaps it’s worth it for the ad-free version of the Originals. But a lot of people will probably decide they can live with ads on videos, and opt for the cheaper $10-a-month, music-only YouTube Music Premium service instead.
The YouTube spokesperson would not directly respond to Business Insider’s query on whether it planned to eventually kill off YouTube Premium.
“YouTube Premium’s value proposition remains the same. Those users who want offline, all of YouTube ads-free and a great ads free music experience will continue to sign up for YouTube Premium. That includes watching YouTube Originals ads-free,” the spokesperson said.
The decision is part of a new strategy, YouTube says, where YouTube Originals can be accessed to all audiences — those who are willing to pay for an ad-free experience and those who are not. The company notes that Premium subscribers will continue to get exclusive access to Originals like “Cobra Kai” that have already been produced (it’s just that all the new original content will be available for free in 2019).
Is YouTube’s ad business too powerful to leave room for a subscription business?
YouTube’s shift in strategy comes as Apple plans to launch its own original content, streaming service as early as March 2019. Apple’s service will include a combination of original content and licensing deals with production companies and is rumored to be free for anyone accessing it through an iPhone or iPad.
But the move also underscores the long-running tension between YouTube’s ad-supported business (which generates billions of dollars in revenue every year) and the fledgling subscription business. The potential to reap ad revenue from the Originals video content is so strong that YouTube can’t afford not to capitalize on it — even if doing so means jeopardizing the potential of the subscription business.
YouTube does not disclose the number of subscribers for its Premium or Music Premium services.
It’s a dilemma that YouTube has been wrestling with for years, and according to some industry insiders, it’s the reason why YouTube has struggled to create a successful for-pay subscription service. And to judge by Tuesday’s move to bring Originals outside of the subscription paywall, it looks like the ad side of the business has won again.
NOW WATCH: How to train the last days before a marathon