The Details and Motivations Behind Youtube Red

With Youtube Red being new, there is still naturally a lot of confusion surrounding it. I’ve been researching it, and I thought I’d share what I’ve found.

First: Youtube Red is a necessity for Google: Google is a very successful company, but Youtube is losing them money. Youtube made about four billion in ad revenue in 2014, which is then split with content creators fifty five/forty five. The infrastructure costs three billion, eight hundred million dollars yearly to maintain. Basic math tells us that this doesn’t end up with a positive for Google. With Youtube Red, Google increases revenue in two major ways; through the monthly ten dollar fee, and by lowering the overall amount of ads shown, which drives up prices in bidding, which is how Youtube sells ad time. There will be less adspace available overall, especially in November because of the free trial, which I will also be talking about here. This is good for Youtube and for content creators who monetize through Adsense. Viewers who are signed up for the Red trial will not contribute to that, and this is unclear to people in general and is important for Youtubers to understand. The only revenue from Youtube Red viewers that will be generated in November’s free trial is from already existing Google Play Music users. This is according to the statement directly from http://youtubecreator.blogspot.co.uk:

“4. Let’s talk about free trials. So with Google Play Music subscribers instantly joining YouTube Red, we will pay a portion of the revenue we receive from these subscribers to our creators on day 1. Even with 30 day free trials, our creator community will make as much or more as they would have without YouTube Red.”

Note that that clearly says a portion of the revenue from Google Play Music subscribers. Not the entire amount, but a portion. So, how many subscribers does Google Play Music have? Well, Google likes to stay tight lipped about this, but they have made two statements that we can effectively use to determine the approximate number.

“According to publishers’ data verified by royalty tracking firm Audiam, Google Play Music had around 815,000 paying subscribers in the U.S. in December 2014” -excerpt from http://www.scpr.org/news/2015/06/23/52629/google-adds-free-ad-supported-tier-to-music-app-in/

And the second statement, from June 23, 2015:

“The company doesn’t release subscriber numbers but says the number of users has doubled over the past 12 months.” -excerpt from http://www.bloomberg.com/news/articles/2015-06-23/google-is-competing-with-itself-with-new-music-service

Based on this, we can estimate that, at most, Google Play Music has one million, six hundred thousand subscribers who will transfer over. At ten dollars per month, that’s approximately sixteen million dollars for the month of November, spread out across every single view by every single Youtube Red trial user. That doesn’t seem like it would be enough to keep payments to content creators at a consistent level, but I could be wrong.

As I said before, Youtube Red is a necessity for Google, because they simply do not make enough off Youtube. Part of it may have to do with Adblock, but it’s mostly because advertisers just don’t see enough conversion from ads into actual sales. Youtube Red will certainly help their bottom line, but I think it’s incredibly important that they make sure they aren’t giving content creators the short end of the stick. There are two things that need to be kept in mind:

1. Content creators are the backbone of Youtube. Content creators without Youtube would simply find, or likely create, their own alternative. If a few content creators leave, that doesn’t matter to Youtube, but if there is a mass exodus, Youtube could collapse very quickly. Without content creators, Youtube is just a website for hosting videos. People do not go to Youtube for Youtube: they go to Youtube for content.

2. Youtube is more than just a business: it serves a cultural value. Yes, there are a lot of absurd and random videos, but there is also a huge amount of art, education, and other important subjects that generate value for society. Maybe not monetarily, but in the exchange of ideas and the democratization of publicly consumed media. This should not be overlooked: the sole focus should not be on revenue to the point that Youtube itself loses what makes it special and successful.

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