YouTube Red: The Story So Far
YouTube Red, the new ad-free subscription service from YouTube, has certainly made a splash in the streaming video community, generating many many open questions:
- How many people will actually pay for an ad-free YouTube?
- Is an offering across many targeted YouTube apps too confusing for consumers?
- Is the original content slate compelling enough to attract a large audience, or only hardcore fans of individual creators?
- Is it too similar to a user’s subscriptions to other streaming services like Spotify?
- Can YouTube Red gain more traction with users than their last fizzled subscription model?
But perhaps the largest looming question for both creators and media networks is: Will YouTube Red make me money?
The answer is yes, though not as much as advertising (for now).
Earnings: Subscription versus Advertising
Bent Pixels sampled over 4,000 years of total watch time, along with estimated earnings data from October 28th to December 8th. This time period is from YouTube Red’s launch to 10 days after YouTube Red free trials started to expire and convert to paid subscriptions. Our objective was to capture earnings data during early-adopter free trials, and see if it moved significantly once trials expired.
Overall we found that YouTube Red generated an average of about 1.5% of earnings paid out to creators over that period. Earnings from advertising represented most of the entire remainder, with a negligible contribution from transaction earnings such as Fan Funding.
1.5% isn’t disruptive on the surface, but we were surprised to see that share of earnings generated by what is likely a much smaller percentage of YouTube’s 1+ billion active users. We consider 1.5% the baseline to measure future growth against.YouTube Red really hasn’t been in market for long enough to win a large number of subscribers, or communicate a significant value-add beyond an ads-free experience (original content hasn’t been released yet).
Time will tell, but for now Red is currently positioned as a service for the YouTube power-user, with regular extended session times on music or other content that is easily disrupted by ads. As a result, YouTube networks could end up seeing large percentages of network watch time sourced from the relatively small pool number of Red subscribers. That said, we think total earnings from YouTube Red could continue growing for the following reasons:
- Marketing efforts from YouTube increase, increasing the number of users.
- 30-day free trials continue to expire, and users convert to paid subscribers.
- Positive reviews and word of mouth around the service.
- YouTube Red becomes available in markets outside of the United States. Per YouTube, 80% of watch time comes from outside of the US, with strong growth in other regions, such as Asia and Latin America).
- YouTube Red expands its content offering to premium TV shows and movies, attracting more paid subscriptions.
- Creators strategically generate long-form content to capitalize on YouTube Red’s earnings for watch time.
- YouTube possibly bundles YouTube Red in with other subscription services in the future, as they have done with Google Play Music.
It is notable that in the last week as free users convert to paid subscribers, YouTube has entered the Top Grossing chart in the iOS App Store, at one point cracking the top 10 (ahead of Netflix). As of this posting, YouTube is in free-fall, dropping to #93. YouTube is still absent from the Top Grossing apps list on Google Play.
*Still beating YouNow!
A New Challenge for Multi-Channel Networks
For established MCNs and media companies looking to enter the space, YouTube Red presents additional complexity for aggregating earnings and distributing them to creators. Remember that little 1.5%? For an MCN, It can means anywhere from many dozen to tens of thousands of incremental adjustments to channel payouts, depending on the size of your network.
In response to this challenge, Bent Pixels is integrating YouTube Red earnings into our existing, simple payment system. This feature is in active development today as part of our Bent Pixels’s Network Administration toolset, so stay tuned for its upcoming release!
About Bent Pixels
Bent Pixels is the the premier technology company for multi-channel networks and next-generation media companies. Four of the top five American MCNs and dozens more globally use Bent Pixels. Our Network Administration tools simplify network management by streamlining creator applications and contracts, automating payments, facilitating network communication, and providing business intelligence. For more information, request a demo at BentPixels.com.
Some final notes on our data
New subscribers for YouTube Red receive a 30 day free trial, and creators are not compensated for those trials. So why is there earnings data before 11/28 when free trials started to expire? YouTube Red was added to existing paid Google Play Music subscribers at no extra charge to them, so there was money to distribute from those customers on day 1. It is also important to note that we assessed estimated earnings data from YouTube, and it can have some variance compared to final payouts. This variance typically minimal in our experience, usually less than 5%. Earnings data was sourced from partner-provided content in the Bent Pixels network. YouTube Red Earnings as a percentage of total earnings likely vary across other networks due to many variables, including but not limited to: size of US audience, popularity of channels, typical length of watch sessions on network content, etc.