Google taking YouTube subscription business seriously
In the previous part of this series, we saw that Google (GOOG) has been able to grow its video ad business for its YouTube platform by helping advertisers attract viewers to their videos. Google has also gradually started taking the non-advertising business for YouTube seriously.
YouTube launched its YouTube Red subscription service in October 2015 for $10 per month. The service offers streaming of ad-free videos and music and allows subscribers to watch videos offline.
During its 4Q16 earnings call, Google said it has produced 27 originals to date. It named This is Everything: Gigi Gorgeous as a popular series that’s driving new subscribers for YouTube. Original content helps a streaming provider strengthen its brand and drive viewing hours.
Investing in original programming is nothing new for companies such as Netflix (NFLX) and Amazon (AMZN). Netflix intends to produce 1,000 hours of original programming and plans to spend $6.0 billion on content in 2017. Amazon is also focusing on increasing its original content. It plans to triple the number of its original TV shows and movies. Some of Amazon’s prominent original series that are in production or have premiered are Transparent, Mozart in the Jungle, and The Man in the High Castle. Some of its original children’s series include Tumble Leaf and Niko and the Sword of Light.
YouTube could be in talks with TV networks to stream channels
YouTube has reportedly been in talks with the Walt Disney Company (DIS) to stream a bundle of channels from Disney networks, including ESPN and ABC, according to a report from the Wall Street Journal.
During its 4Q16 earnings call, Google refused to comment on its deal with CBS (CBS) to stream CBS channels on YouTube. But one thing is clear. Google is looking to grow non-advertising revenues from its YouTube platform. That could help YouTube gradually become more important for Google.
Although Google doesn’t disclose the revenue contribution of YouTube to its overall revenues, an eMarketer report suggests that YouTube’s net US video ad revenues rose from $0.77 billion in 2013 to ~$1.6 billion in 2015. That growth translated to a YouTube contribution to Google’s US revenues of 3.0%–4.5%, as you can see in the above graph.