YouTube Confirms Plans For An Ad-Free, Subscription-Based Service

Confirming reports from last fall, YouTube announced today its plans for an ad-free, subscription-based service by way of an email sent out to YouTube Partners. The email details the forthcoming option, which will offer consumers the choice to pay for an “ads-free” version of YouTube for a monthly fee. The additional monetization option requires partners to agree to updated terms on YouTube’s Creator Studio Dashboard, which notes that the changes will go into effect on June 15, 2015.

The email touts the potential for YouTube Creators to generate additional income beyond what’s available today through advertising and speaks of the subscription service as something that will “excite your fans and generate a previously untapped, additional source of revenue for you.”

YouTube’s plans to move into subscriptions have been underway for some time. In October, YouTube head Susan Wojcicki, who had been spearheading the monetization efforts, explained at the Code Mobile conference that the option would especially appeal to mobile viewers who are increasingly interested in avoiding advertisements. With the subscription model in place, YouTube would begin to resemble something that’s more like Netflix – a place where consumers pay for access to content that can be streamed on-demand, uninterrupted.

According to YouTube’s updated Partner Program Terms, YouTube will pay creators 55 percent of the total net revenues from subscription fees – this is the same percentage associated with advertising revenues. Specifically, the updated Terms states:

YouTube will pay you 55% of the total net revenues recognized by YouTube from subscription fees that are attributable to the monthly views or watchtime of your Content as a percentage of the monthly views or watchtime of all or a subset of participating content in the relevant subscription offering (as determined by YouTube). If your Content is included in and viewed by a user in multiple subscription offerings, YouTube will pay you based on the subscription offering with the highest amount of net revenues recognized by YouTube, as calculated by YouTube.

One thing that neither the letter to creators nor the updated Terms references is the price of the subscription offering. Nor does it disclose when the service will be offered to the public. The June 15 date references when the Terms changes go into effect, but this doesn’t necessarily mean that the service will be immediately public to all YouTube users at that time. It could be a staged roll out, or YouTube could have simply wanted the legalese in place ahead of the broader subscription service’s launch. However, sources told Bloomberg the offering is expected to go live this year.

We understand the reason the time frame and the pricing were not disclosed in the letter to partners is because that’s something that’s still yet to be determined.

This is not the first subscription service to be offered by YouTube, as you may recall. In November 2014, the company debuted “Music Key,” a subscription offering that provides consumers with access to Google Play’s entire library, as well as ads-free music videos. During its beta period, that service was priced at $7.99 per month – a discount from the $9.99 standard price. It additionally includes offline access, which is something that will likely arrive in the new offering, as well.

YouTube’s subscription-based offering could also mean increased competition for startups like Vessel, the so-called “Hulu for the YouTube generation,” from Hulu’s former CEO Jason Kilar. Vessel is offering a subscription-based service for $2.99 per month, which provides early access to videos consumers would normally watch for free on YouTube, and has been reaching out to creators to participate.

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YouTube offered us the following comment when asked for more information on the program details:

While we can’t comment on ongoing discussions, giving fans more choice to enjoy the content they love and creators more opportunity to earn revenue are always amongst our top priorities.

The full letter to YouTube partners is pasted below; screenshots of the email, terms and dashboard are above:

Dear YouTube Partner,

Your fans want choices. Not only do they want to watch what they want, whenever they want, anywhere, and on any device they choose, they want YouTube features built specifically with their needs in mind. Over the past several months, we’ve taken bold new steps to bring these experiences to life. Since inviting hundreds of thousands of fans into our YouTube Music Key Beta, we’ve seen tremendous engagement. And we’ve seen an equally enthusiastic response for our new YouTube Kids app, designed to give families a simpler and safer video-viewing experience— it’s already crossed 2 million installations in less than one month.

We’re excited to build on this momentum by taking another big step in favor of choice: offering fans an ads-free version of YouTube for a monthly fee. By creating a new paid offering, we’ll generate a new source of revenue that will supplement your fast growing advertising revenue.

So what’s next?

Launching a new paid offering will require us to update your terms through your Creator Studio Dashboard—a process that should feel familiar to anyone who went through a similar process three years ago when we began distributing and monetizing your content on mobile devices. Today, mobile represents over half of all watchtime and mobile revenue is up 200% in the last year. Just as with mobile, we’re confident this latest contract update will excite your fans and generate a previously untapped, additional source of revenue for you. Please look out for our notification, review it and let us know your thoughts.

It’s an exciting year for YouTube, as we push ourselves into uncharted territories. But we continue to be guided by a desire to deliver the choices fans want and the revenue you need. By working closely with you, we know it’ll be a successful journey.

The YouTube Team