YouTube will be offering a $9.99 monthly service called YouTube Red from 28 October that will let users view original and exclusive videos, without advertisements and download videos for offline viewing. The service will include Google Play which will allow users to stream music videos.
"By no means would we expect to jump to tens or hundreds of millions of paying users overnight, but there should be strong demand from the start," YouTube's vice-president of product management, Matthew Glotzbach, was quoted as saying by the Los Angeles Times.
"It's great to see YouTube offer an alternative to an ad-only model," Brian Blau, an analyst with Gartner, was quoted as saying by the BBC. "Consumers want choice and options. But pay walls haven't always done well and uptake depends on how users balance the attractiveness of the exclusive content and the pain of sitting through lots of ads." At the moment, it is unclear whether Red will impact YouTube's ad income in a positive or negative manner.
According to YouTube chief business officer Robert Kyncl, the major portion of Red's revenue will go to the content creators. "We realised what we should be doing is we should be amplifying and funding efforts of these incredibly talented people. We have a built-in talent system, which doesn't exist on any other services."
UBS analysts estimated that YouTube could generate an additional $950m per annum if only 5% of its US users sign up for Red. EMarketer, a market research company, said YouTube's US net ad revenue growth is expected to decline in the next three years, but its worldwide net revenue is forecast to rise 41% from last year to $4.3bn in 2015.