Markets

Inside YouTube Red, Google's $9.99 Ad-Free Video Service

An image of a compass on a chart
Credit: Shutterstock photo

We love YouTube - but not the ads that accompany the videos.

Ads are, in all probability, the most irritating part of the YouTube experience. How much would you be willing to shell out (if anything at all) to avoid them?

YouTube is hoping that the figure is $9.99 per month.

AlphabetGOOGL has rolled out a premium video service called YouTube Red that will allow users to stream content ad-free for $9.99 per month for Android and Web users, and $12.99 for iOS users (since Apple charges a 30% premium).

Why So "Red"?

Remember how the name "iPad" was mimicked initially? But now that it's such a huge hit, no one really cares!

"YouTube Red" has also been mocked as the name sounds similar to RedTube, a popular porn site. YouTube, however, maintains that they aren't bothered by it.

According to an executive, "The term 'red' is often associated with YouTube. It has a lot of meaning in terms of love and the red carpet." In fact, the YouTube logo is of the same color.

Hopefully, if the service succeeds, people will not remember the initial reactions to the name.

Inside Red

Set to launch on Oct 28, YouTube Red will let subscribers watch YouTube videos ad-free, save videos for offline viewing, and play videos in the background while switching apps. The subscription will be levied whenever users sign into YouTube, including the company's Gaming and Music apps.

The service covers the new YouTube Music app and access to Google Play Music. YouTube Red could help boost Google Play Music subscribers' rank.

Next year, the company plans to introduce exclusive original shows and movies from YouTube creators like PewDePie and the Fine Brothers for Red subscribers.

Initially, it will only be available in the U.S.

Competitors

YouTube Red isn't priced too differently from competitors. Netflix NFLX charges $8.99/month, while Amazon AMZN charges $99/year or about $8.25/month.

The company will also give U.S. viewers the option to sign up for a free one-month trial later this month.

For those who don't mind the ads may continue to use YouTube for free. However, none of the new perks that come with the membership, including original content, will be available to them.

YouTube creators who currently earn a cut from YouTube's ad revenues have signed revenue share deals for YouTube Red. Actually - as TechCrunch reports - they were forced to sign the deals as YouTube hinted that their videos would be marked as private and thus hidden from both paid and unpaid users.

Going Ahead

From YouTube's perspective, the deal makes sense. There is an explosion in consumer appetite for ad-free experiences.

According to PageFair, a firm that seeks to counter ad blockers, worldwide usage of ad blockers rose 41% last year to nearly 200 million users.

However, content providers are finding a way to make money from eliminating ads.

For instance, Internet radio giant Pandora Media Inc. P garnered $54.6 million from subscription and other revenues in the quarter through June, largely from its $5-a-month ad-free plan, Pandora One.

Alphabet holds a Zacks Rank #3 (Hold).

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days.Click to get this free report >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

ALPHABET INC-A (GOOGL): Free Stock Analysis Report

AMAZON.COM INC (AMZN): Free Stock Analysis Report

NETFLIX INC (NFLX): Free Stock Analysis Report

PANDORA MEDIA (P): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story

AMZN GOOGL NFLX

Other Topics

Stocks

Latest Markets Videos

Zacks

Zacks is the leading investment research firm focusing on stock research, analysis and recommendations. In 1978, our founder discovered the power of earnings estimate revisions to enable profitable investment decisions. Today, that discovery is still the heart of the Zacks Rank. A wealth of resources for individual investors is available at www.zacks.com.

Learn More