Will Pay-To-Play Payoff Online?

By Carl Weiss

It’s said that the best things in life are free.  But as Berry Gordy so aptly added in 1960, “But you can keep them for the birds and bees.  Give me money, that’s what I want.”  The song aptly named, ‘Money (That’s What I Want)’ went onto become the first hit for Gordy’s Motown record label Tamla.  It also went onto be covered by many prominent recording artists such as the Beatles, the Rolling Stones and the Doors, among others.  Even though fifty four years have passed since ‘Money’ first became part of the public consciousness, the concept behind it seems set to make a revival on the Internet if a number of powerful portals have their way.

As recently as three days before Halloween 2014, YouTube CEO Susan Wojcicki publicly confirmed that Google’s video portal was considering the introduction of a subscription service.  Since other popular video portals such as NetFlix which started as a subscription service and Hulu which began as free only to turn into a subscription service, have been using a monthly pay-to-play charge to vend everything from first run movies to television series, this isn’t likely to cause people to run screaming into the streets.  The chief difference between the likes of Netflix and Hulu when compared to YouTube is the fact that they both stream professionally produced feature-length content.  Whether or not a portal where the lion’s share of the content is created by amateurs can make a go of it is anybody’s guess. 

An article in the NY Times sums it up like this: YouTube’s subscription effort is still in the very early phases, according to a person with knowledge of the matter. In essence, the company is making phone calls to potential partners, including anyone from big media companies like Disney to popular individuals with millions of subscribers, to see if they might be interested.  At first, the model is likely to be similar to YouTube’s long-planned subscription music service, which Ms. Wojcicki said would be introduced “soon.” Rather than an entirely new paid YouTube, there would be several subscription services based on certain topics – for instance, a subscription service with nothing but video games.  http://bits.blogs.nytimes.com/2014/10/28/youtube-weighing-new-subscription-service/?_r=0

Currently YouTube produces revenues for airing in-stream ads that are displayed on participating videos on the world’s most popular video portal that streams more than 4 billion videos per day.  The portal has also gone to great lengths to partner with homegrown content producers such as these ever popular channels: PewDiePie, Stampylonghead, SkyDoesMinecraft, and CollegeHumor, just to name a few.  While some of PewDiePie’s  videos have garnered as many as 59,917,883 views, it is questionable how many people would choose to pay to play short videos with titles such as ‘How to Get Ebola,’ ‘Corpse Party,’ or the animated ‘Brain Transplant.’

The Backstory

While the idea for an online subscription model is hardly new, what YouTube is hoping to capitalize on is the ever growing disenchantment many people have toward broadcast and cable programming.  What with the advent of the four-minute commercial break, as well as the ever more costly way in which cable companies charge families for the hodgepodge of channels foisted on them, even major players such as HBO have started to realize that people want better choices. 

The NY Times article added: An example is the service recently announced by HBO, which said that next year it will start a stand-alone streaming service aimed at “cord cutters,” people who want cable quality shows but refuse to pay several hundred dollars a month for the jumbled mess of cable channels.

That’s right, starting in 2015 HBO will begin a pay-to-play online streaming service that will not require a subscription to a traditional TV provider.  Recognizing the fact that there are currently more than ten million homes in the US that do not subscribe to either cable or satellite TV services but who do have Internet access, the CEO of HBO, Richard Plepler announced that the opportunity was ripe for direct-to-web programming.

While 10 million households seems like a drop in the bucket when compared to the sheer number of consumers with cable or Satellite TV access, the number of households that are expected to switch to services such as Netflix continues to grow. 

“Netflix has more subscribers in the United States than HBO, which counts about 30 million subscribers. But HBO delivers more profits because of lower costs and its distribution through cable and satellite providers. HBO generated $4.9 billion in revenue in 2013 and about $1.8 billion in operating income. Netflix had $4.4 billion in revenue in 2013 with $228.3 million in operating income.”

The Boob Tube vs YouTube

The real question for portals such as YouTube is how much of an impact it can make on the viewing public.  Currently the Boob Tube outguns YouTube four to one, seeing as how most American adults watch an average of four and a half hours of broadcast and cable programming per day on average versus about an hour of online video.  It has been suggested that YouTube can try to bump these numbers up by either improving the technology and/or trying to create higher-quality content that people will come back to watch week in and week out.

To this end, YouTube has built production studios in such places as New York, LA and Sao Paolo, Brazil, to help their ‘creators’ produce more TV-like programs.  They are also seeking to woo show producers with Hollywood or broadcast TV experience, many of whom are underemployed.  Whether YouTube can reinvent itself as an entertainment service that people will lineup to pay for is still in question.  But as the world’s viewing habits change and companies with online audience loyalty continues to grow what does this hold in store for the future?  Will popular blogs start charging readers to peruse their pages?  Will social networks demand a fee to allow their users to connect with more than a handful of friends? Who knows?

Just as the opening of Pandora’s Box unleashed a number of unintended and unwanted problems for the masses, what is left to discover is whether pay-to-play is to become a benefit or a burden to those who want the web to remain free?  While the future of pay-to-play Internet programming is anything but a sure thing, I will leave you with a little pearl of wisdom from a man who was clearly ahead of his time: Berry Gordy.

Money don't get everything it's true
What it don't get, I can't use
Now give me money
That's what I want
That's what I want, yeah
That's what I want

While Carl Weiss doesn’t always get everything he wants, you can listen to him every Tuesday at 4 p.m. Eastern on BlogTalkRadio