[This article originally appeared in VideoInk earlier today.]YouTube v2.0 -- you know, the ad-free/paid subscription model?
By all indications, it's coming soon (just in time for the holiday season). But, two fundamental questions remain: (1) will consumers care -- and pay for it -- when they have been trained for years to get all they want gratis (and when many of them are young with no credit cards)?; and (2) will video creators care -- and agree to YouTube's reported "take it or leave it" business terms -- when most of them have built their businesses on top of YouTube's ad platform and are dependent upon it? This post addresses this second question -- the reactions of video creators faced with YouTube's coming new world order.
First, let's set the stage. Faced with significantly increasing competition, YouTube is widely reported to soon be launching an ad-free paid subscription option to woo more of us, retain more of us, and generate more revenues from us. To accomplish its goals, YouTube sent all video creators new controversial terms of use that asks creators: (1) to agree to make all of their videos available for ad-free viewing; and (2) to agree to YouTube's notorious 55/45 revenue split for resulting subscription revenues (that are apportioned based on the individual creator's share of overall subscription-based ad-free viewing). Here's the rub in all of this.
Creators must agree to these new terms of use by October 22nd or, in YouTube's words, that creator's
"videos will no longer be available for monetization in the United States." In other words, if you don't agree to play by YouTube's rules in YouTube's new subscription game, then you must sit out the entire YouTube series -- you won't be allowed to make money on YouTube period. Your ad revenues are gone.
So, with this dramatic backdrop, what do the video creators themselves think about YouTube's new subscription schema -- and the decisions and ramifications they face to be part of it (or not)?
I asked several CEOs and top execs of well-respected, well-known and leading digital-first video companies
(some call some them "MCNs") this question. I wanted
their perspectives -- and promised them anonymity in order to get the most candid responses possible. And, here they are -- real responses culled from five top execs from five different companies -- each of whom I respect and know at least fairly well. You will notice a definite pattern and general universality in their feedback.
(1) First, practically speaking,
few video creators have the real-world option to reject YouTube's new policy -- and all of these interviewed execs have signed up for it (after all, YouTube -- and resulting ad revenues -- are still a fundamental part of most video creator strategies). In the words of one CEO,
"Sure, one could say no, but then, for a digital first video company, one would be cutting off critical pieces of business building." Another put it more bluntly. When asked whether saying "no" is even an option, the response was
"No because of the obvious" (although this CEO also added that he/she is
"sure there is an idiot out there looking to teach YouTube a 'lesson'"). One other CEO was a bit more sanguine about it. In this exec's words,
"Most folks don't have any issue with this. Some folks cannot do it because they have pre-existing restrictions. So, some carve-outs are inevitable. At the end of the day, this is critical for YouTube and they will ram it through (although clearly it hasn't been easy for them). My understanding is that the most vocal 'no' vote has been amongst folks that manage the talent."(2)
YouTube's new subscription service and policy are causing significant heartburn for many creators. "
Yes, it causes me a lot of anxiety," says one CEO.
"[W]e use YouTube True View advertising in a very key, and very methodical and disciplined manner to build audience, loyalties and brands. So, no ads is a clear burden for us." Another CEO, however, felt that YouTube's policy change will be
"net neutral" to its business, because
"we control windowing of content, not them, so limited to no impact on our ability to make money off our content. There may even be incremental income in SVOD. Imagine that."(3)
Anxiety and indifference are exacerbated by the great unknown of what exactly "it" is and a high degree of skepticism as to its prospects for success. In the words of one CEO,
"I am not personally bullish on its prospects. Too many competing options out there. People know YouTube as a free place to consume videos. SVOD road will be hard." Another top exec from another leading company agreed, saying
"We're inherently skeptical. People are used to YouTube being free and come to it for that reason. Changing an ingrained behavior is a very heavy lift." One CEO was simply annoyed.
"They are intentionally being vague about it [the new subscription service]." While another was more troubled by the "great unknown."
"No one knows what the ... service will really be, so we have no idea whether it's even a good buy for viewers -- the subscriber subs will maybe be big viewers and hurt us all." (This CEO nonetheless pointed out that
"In general, I think YouTube tries hard to work well for creators, it's their DNA to be partners after all ... [but] there's the disconnect between the business teams and the product teams, an endemic problem at YouTube ... [and] as a viewer, I'm all for the program. I think companies offering us choice is really really consumer friendly.")
(4)
Virtually all of these execs strongly knocked YouTube for how it rolled out and communicated its new terms of use to video creators. In the words of one CEO,
"It's their house. Everyone realizes that if they want to shift the furniture around they will.... I don't think they particularly lose sleep over the creators but I may be biased. Maybe they care about the biggest ones that everyone else wants to woo away." But, here's the kicker. And, this part is the widely-shared reality that is (or should be) most troubling to YouTube. This same CEO said -- in words worth highlighting:
"Peter, the net out for us: we don't care. We've shifted our focus away from YouTube fairly dramatically about 10-12 months ago. The vast majority of creators we work with today are non-YouTubers. We are focused on Facebook to build our audience and are aggressively developing our tech platform which includes both publishing and creator management. We've also been creating content for other OTT platforms. I have spent maybe 5% of my time thinking about YouTube in the last year. They used to be the only game in town. They're not anymore."And, that CEO was not alone. Another was even more direct, saying, "
This is a ballsy move. They act like an 800 pound gorilla, but they aren't anymore. So many of our relationships are with advertisers, and now this is going around that. I don't know how you can discard the ad market with such an iron fist."Should any of this be cause for concern for YouTube? Perhaps not with respect to the new terms of use for creators themselves, because all of these execs have signed the dotted line. But, certainly "yes" on some of the overarching themes, including the widely-held belief by creators that they effectively had no choice or voice in the matter -- and most importantly, the emotional/philosophical independence from YouTube that is shared by many.
(You can read more on this issue in the companion guest article from yet another anonymous top exec from one of these companies that is now on my Digital Media Update blog; it is a smart, frequently angry opinion piece that reflects the passion that this issue has evoked in many video creators and touches upon all of these issues in depth and is worth reading).
