In its second-largest acquisition, Amazon buys the company for $970 million.
The web video service already offers movie rentals.
YouTube LLC has begun offering specialized video channels for paying subscribers, the Google Inc.-owned web video provider says. YouTube also earns money through advertising attached to its content and by selling pay-to-view rentals.
So far, YouTube lists 54 paid channels including National Geographic Kids, BigStar Movies, iAmplify Yoga and the Woodworkers Guild of America Premium Channel. Subscribers can try any channel for free for 14 days, YouTube says. After that, channels start at $0.99 per month. YouTube also offers some annual subscriptions at a discounted rate. For example, Rap Battle Network costs $2.99 per month or $24.99 per year, according to the web site. Some, but not all, of the paid channels are ad-free.
YouTube did not say how much money video owners will earn from the paid channels.
For now, consumers must subscribe to channels from a PC, though they may watch content on any web-enabled device, YouTube says. It say it will add the ability to subscribe from other devices soon.
“Today, there are more than 1 million channels generating revenue on YouTube, and one of the most frequent requests we hear from these creators behind them is for more flexibility in monetizing and distributing content,” the company writes in the blog. Over the coming weeks YouTube will allow “qualified partners” to create their own paid channels, it says, without elaborating on what qualifies a video provider to offer subscriptions.
YouTube did not respond to a request for comment.
Online advertising is typically a less profitable and riskier revenue generator for online video publishers than are subscription models, says Dan Burkhart, CEO of Recurly. His company provides subscription billing services for clients that include Eros International Ltd., which streams Hindi and Bollywood films online, and Our Film Festival Inc.’s Fandor.com, which does the same for independent films. By offering channels for subscription, YouTube can offer higher-quality content to consumers and perhaps create its own exclusive programming to compete with other streaming services like Netflix Inc., Hulu LLC or Amazon.com Inc.’s Instant Video, he says.
“There is certainly a demand for subscription-based, niche content in a bunch of targeted verticals—even video game content,” Burkhart says. For example, consumers subscribe to watch some of the world’s top video game players in high-definition during competitions, such as Blizzard Entertainment Inc.’s North American Star League, via the web site of Recurly customer Justin.tv Inc., he says.
The YouTube move could attract independent producers, he says. Like aspiring musicians who, rather than flocking to Hollywood with crossed fingers, now use the Internet to build a fan base and sell music, independent video and film producers are also increasingly selling their creations online. Subscription models provide a more economical and secure way for them to finance that activity than advertising does, Burkhart says.