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YouTube May Begin Nickel-and-Diming Viewers

By Erika Morphy E-Commerce Times ECT News Network
Jan 31, 2013 12:03 PM PT

Google is getting ready to launch paid subscription channels on YouTube, AdAge reported on Tuesday. The new offering would be part of Google's larger plan to keep viewers tuned in to its popular video service as long as possible, while developing new revenue streams including premium ad dollars.

YouTube May Begin Nickel-and-Diming Viewers

Google reportedly has asked a select group of channel producers to submit applications to create paid channels. The subscription price would be between US$1 and $5 a month.

Room for Another Player?

Whether Google can duplicate the success that Hulu, Netflix and Amazon Prime have experienced with paid digital content is the question. Hollywood movies, TV shows and original videos are all streaming to digital devices, creating new revenue opportunities for content providers and distribution partners.

"The immediate rewards will be the subscription revenues, but this will also be a great way to increase its ad revenues as well," Bryan Sullivan, a partner with Early Sullivan, told the E-Commerce Times.

Google's Challenge: Changing Viewer Habits

Google's success is not guaranteed with this venture. Unlike the example of Amazon Prime, which set out charging users from the beginning, YouTube will have to be careful as it weans its viewers off its free content model.

"It is always a risky strategy to begin charging for a service that used to be free, kind of like putting toothpaste back into the tube once it's squeezed," Philip Salas, a professor at Drexel University's Westphal College of Media Arts & Design, told the E-Commerce Times. "They have to be extraordinarily careful when they roll it out."

Netflix, a service that has always charged for content, experienced a well-documented marketing hiccup when it attempted to change pricing strategies, Salas noted.

Still, the risks could be worth it if Google pulls off the transition. "The cord cutters and the cord nevers have learned to live without cable," Salas said. "The introduction of any new, relatively inexpensive subscription service will be appealing, especially given its universal availability on all screens."

Subscription Fatigue?

A long list of micropayment options for consumers points to another potential danger for Google: subscription fatigue.

Google should not underestimate the association consumers have always made between "YouTube" and "free," Keith Trivitt, director of marketing and communications for MediaWhiz, told the E-Commerce Times. "Moving away from that model, while presenting a huge upside for Google in terms of a new revenue stream, risks alienating consumers."

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