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How Well Is YouTube Red Really Doing?

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by Tim Mulligan

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AVOD
Online video
Online video
AVOD
Online video
SVOD
YouTube
YouTube Red
Media and Marketing

When YouTube Red launched in YouTube’s main market of the US back in October 28th, 2015 there was a lot of excitement mingled in with anticipation. This emanated from the media, analysts, professional YouTubers and way down the line, from the YouTube channel audiences. The media and analysts were excited because the world’s largest video platform, which for its first decade had run on an AVOD (Advertising supported Video On Demand) model, was now looking to upsell a premium SVOD (Subscription Video On Demand) model to its broad viewing audience. A recent six country consumer survey fielded by MIDiA Research shows that 66% of all consumers watch videos at least once a month on the site and that only in the 50+ demographic cohort was monthly YouTube viewing a niche consumer activity (ie under 50% of consumers engaging in this activity.) Clearly, of all the AVOD services out there, YouTube is the greatest opportunity for successful conversions of freemium viewers into paying premium subscribers based upon its vast and broad consumer engagement metrics. The premium proposition for YouTube Red played safe combining the two most widespread forms of VOD monetization: ad free and original programming. Although originally an iteration of YouTube’s earlier Music Key subscription service, its re-launch last year positioned it heavily towards the native content creators which account for 48% of the fastest growing channels on YouTube (the biggest category - see The State Of The YouTube Nation Report for more details.)

As such a significant portion of the marketing was aimed at enticing social talent audiences to subscribe to exclusive content from the likes of PewDiePie (43 million freemium YouTube subscribers) whom were going to be made on a studio basis with established TV story telling teams – YouTube’s original zombie flick ‘Scare PewDiePie’ was made with the production team behind AMC’s The Walking Dead.

Due to rights clearance issues (mainly with music) YouTube Red has only expanded beyond the US to Australia and New Zealand, and this week’s bizarre reports of chromecasts being offered to YouTube Red subscribers suggests YouTube Red is struggling to get up to speed.

The Size Of The Market Opportunity

According to MIDiA Research’s recent consumer survey, 12% of US consumers would be willing to pay to view exclusive YouTube videos from their favourite show or stars. In Australia, 5% of consumers would pay for the same access. Across the six countries surveyed, 11% stated that they would pay for this type of service. The choice of the US and Australia then as two of the three current markets for the YouTube Red suggests that Google owned platform is going to experience widely differing subscription conversion from its user base.

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YouTube are notoriously coy about putting out key performance figures for their services. However the YouTube App (with YouTube Red being the only in-app purchase) in February was the 22nd highest grossing app in Apple’s App Store - way behind Netflix and Hulu and only just above HBO Now. Our analysis suggests that its subscriber level is currently around the 2 million mark. With 161 million freemium subscribers in the US, this represents a conversion rate of 1.24%, above the default levels for online monetization of digital audiences but only monetizing 10.3% of consumers who have expressed and interest in exclusive YouTube content.

SVOD Versus AVOD

In many ways YouTube Red is a classic example of online video’s monetization challenge. Platform owners know that if they charge for access to video content then they will have greatly reduced audiences, where as the AVOD model allows them to get the audience share but at greatly reduced monetary value. Because of this YouTube set the limited goal of driving 5-10% in revenue growth in addition to ad-supported revenues for content creators participating in YouTube Red, which has reportedly been achieved.

However if YouTube Red is to become a standout success for the creator community, then it has to start reaching the 89.7% of interested consumers who are not currently subscribing to the premium service.

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Comments

LadyUnicorn
If you want to support the creators you watch, and that's more than a very few, then YouTube red is more convenient than patreon or the like. Red pays ordinary creators based on the total view time they get from red subscribers (out of the total view time of all red subscribers). It runs as an alternative to ads. The only way an individual using red is supporting a particular YouTube is if they watch that person, not automatically just by paying for red and that person having a red series. Patreon, on the other hand, requires you subscribe to every person individually, pledging a certain amount (no less than $1) either per month or per video they upload. Even at per month and the minimum, this only takes 10 channels to be spending as much as the red subscription and still having to either watch ads or flip off every other creator you watch by using an ad blocker. I have nearly that many people I watch more than one video per month from just on one topic. Also, if I can't afford it one month (entirely possible), I only have to stop one subscription instead of 10. Patreon is hardly a viable method to be remotely fair to those I watch.
H. Mannertitten
Honestly when youtubers try YouTube Red, it makes me realize how crappy their content looks next to things like Netflix that I actually want to pay money for ... case in point: SeaNanners & Co. Love their regular content, their spontaneous comedy cracks me up every time. With their YouTube Red show, they tried scriptwriting over (crappy) animation. Ended up being terrible content, not even a little bit entertaining. This seems to be the case with most if not all of the YouTube Red content: people are trying something new, leaving their spontaneous style of comedy behind, and their pay-to-view content is actually much less entertaining than their regular content. The only YouTube Red series I considered watching was, ironically, Scare Pewdiepie.
Jim
Figured it was struggling. The ads have really ramped out recently in front of videos, and the presence of RED ads (and general "signage" around Youtube encouraging you to sign-up) has gotten far more ubiquitous. If it was healthy, I doubt they'd do this. I think its a dumb idea. Patreon is what people want - supporting the channels THEY want, not who YOUTUBE wants. **** Pewdiepie and his dumb content; no way I'd want my money supporting that goon. In fact, basing their entire content slate around screechy, obnoxious kids ("youtube stars") is really stupid. If they want people to pay for a video platform, and Youtube isn't putting out content that can stand next to Netflix, Amazon, Hulu, HBO, Crunchyroll, etc. they're absolutely crazy. Do you want Game of Thrones and Westworld, or a loud doofus screaming at video games from his bedroom into a webcam? Or worse, watching that person, who is in no way a comedian, try to make a comedy show? What they're asking people to do is literally insane. Anyway, thanks for crunching the numbers and digging into this situation. Like I've said, I noticed the changes recently and thought I should look into what's up with YTR, see if I could get a picture of where it stands now in 2017 and why Google might be getting more aggressive with pushing it.
Parinda
Great info but it's 5/2/2017 and YouTube Red is still going on smoothly so it may eventually be successful. Wait and watch. Keep up the good work. thanks.
shruthikasuresh
hi, dude.It is really great info.Keep uploading like this.Thank you.
Cynosure
To be perfectly honest with you, Youtube Red was a business strategy to obtain more common viewers. I don't believe it was a bad idea, but the content and delivery was so disgusting it killed itself. Google Plus and now Youtube Red are two failures yet again distributed by Google. I guess as many copypasta's we spam, it will never fix
shruthikasuresh
Can you please explain how can I start my youtube channel...I am a beginner...
Andrew Ryan
typo correction first there was youtube,wasnt owned by google and it was perfect. then google purchased yt and ruined it beyond repair.. then google gave us google plus,it sucked and it failed, now they offer us another failure ,yt red. google suck, its that simple and every thing they touch turns to Sh*t. AD blockers were developed so we users fo not have to tolerate ads and stupid ideas like Yt red.
sarah
Google have ruined YT. Deleted my YT account ages ago, as soon as the hated Google plus was was introduced and have not signed up to you tube since. I have no interest in a YT account simply because it sucks and content is nothing but clickbait so i would never use YT red as i use an ad blocker so i never see ads anyway and i would never! pay for any content or subscription services i just have no interest and avoid these websites like the plague. From what i hear very few people watch YT red, its a complete failure.
no interest
google can shove you tube red up its arse. its a failure, no one wants it and no one gves a rats arse about the content. i wouldnt use the garbage if google paid me, f**k you tube red and f**k google.