) this month introduced paid subscriptions for its
much-trafficked YouTube video site, a move that could draw more
revenue from the lucrative video network.
The new subscriptions allow Google-approved channels to charge
99 cents or more each month for access to videos.
"I think it's an indication that they're serious about
monetizing the business, and not just through advertising," said
Wedge Partners analyst Martin Pyykkonen. "I think it will take a
long time to come to where the advertising on YouTube is
Channels are also able to offer discounted annual
subscriptions, and those subscriptions can be viewed on PCs,
smartphones, tablets and Internet-connected TVs. National
Geographic Kids, for example, priced access to its video library
at $3.99 per month or a discounted annual $29.99.
Sales from the YouTube subscriptions probably are not going to
lead to a boost in Google's revenue right away, but they could in
the future, observers say.
The subscription service is launching with about 50 channels.
Those are the initial partners, but Google will open the program
up to more YouTube producers within the next few weeks, the
company wrote in
a May 9 blog post
. One of the most frequent requests that Google gets from users
who post videos on YouTube is to be able to charge for content,
the company says. Up until now, users have been able to partner
with Google to run ads before or during their videos.
Google didn't say what its cut will be from each channel
subscription, but it probably won't be much. Rival video website
Vimeo.com, which is owned byIAC/InterActiveCorp (
), started a similar pay-to-watch service earlier this year, and
says it keeps only about 10% of each sale.
YouTube may be a popular place for users to post videos of
their cats and music videos, but it's also increasingly a place
where original content is debuting. If video-posters know they
can get paid by viewers, the quality will only get better, says
Pyykkonen. Eventually, as avid teenage YouTube viewers grow up,
the site's content could rival traditional TV viewing, he
As of March, YouTube says it has 1 billion unique monthly
users. The move to monetize those users with premium content puts
YouTube into a potential rivalry with pay-to-watch sites
) and Hulu.com.
"If you think about the really, really big picture, it's like
the very early days of cable TV," analyst Pyykkonen says.
YouTube and those other sites all are trying to figure out
just what types of content they'll run, and how to effectively
package it, observers say. Once Google figures out the best way
to present and package those shows, YouTube subscriptions could
be a material part of Google's business, says Global Equities
analyst Trip Chowdhry.
Down The Road
"Right now, from a Google perspective, it won't move the
needle," Chowdhry said. "If this project is successful, revenue
is probably two, three years down the road."
Now, YouTube advertising likely brings in $3.5 billion to $4
billion in annual sales, according to observers. The company
doesn't break out revenue for YouTube.
And Google's YouTube subscription initiative isn't the only
part of the company that's getting good buzz.
Perhaps the most visible new product from Google is the widely
discussed Google Glass headgear, which has been in development
for three years and is only now landing in the hands of a few
thousand approved buyers. Glass is a wearable computing device
that places a little glass window over one eye. It links
wirelessly to the smartphone in your pocket and can take
pictures, videos, send emails and surf the Web through voice
If Google can figure out how to get advertising on that
right-in-front-of-your-eye product, then it could potentially
serve ads to users all day, observers say. But the form that
those ads would take are seen as a tricky puzzle.
CEO Larry Page says his company is trying hard to continue
innovating because big technology companies often "tend to get
compostable doing what they've always done with a few minor
Despite Google's size, research and development spending is
still climbing year-over-year at the company, jumping 27.4% in
"So a big part of my job is to get people focused on things
that are not just incremental," Page told analysts on an earnings
conference call April 18.
Another of those new initiatives is Google-made cellphones,
including what's being called an "X Phone," Page says.
That could help Google boost sales at Motorola Mobility, the
handset maker Google bought in 2012 that so far has proven to be
a drag on sales. Google's revenue in Q1 came in lighter than Wall
Street expected, in part because of lagging Motorola revenue.
But a new Motorola cellphone that Page describes as
shatter-proof could hit the market as early as this year.
"In just under a year, they have accomplished a lot," Page
said, "and have impressive velocity and execution."