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YouTube Pay Channels Aren’t Taking Off Yet, Some Partners Say

Two months after site’s launch of subscription services, several content providers haven’t seen much activity

YouTube, which has built an Internet video empire based on free, ad-supported content, has not signed up many paying customers for the 50-odd subscription channels since they launched more than two months ago, according to several partners.

To be sure, the paid channels on YouTube are in a fledgling phase, which the company is terming a “pilot” period. And the Google-owned site says it expects the initiative to pick up traction later in 2013, when it opens up a self-service capability to allow any partner to set up a subscription channel.

But so far, the results appear to be modest at best. Under their deals with YouTube, channel partners aren’t allowed to disclose subscriber numbers.

SEE MORE: View All Stories from Our Special Report on Google

National Geographic Society, which debuted a paid kids’ channel on YouTube, has seen limited success, said Adam Sutherland, senior VP of global strategy and business developer.

“We had hoped to set the world on fire. We are not setting the world on fire right now,” he said, but added that the organization remains committed to the YouTube strategy.

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Mark Cuban’s AXS TV offers the YouTube pay channel Guys Night In, featuring a melange of dude-skewing videos about speedboat racing, late-night parties and scantily clad women originally produced for HDNet. In an email, Cuban said the $1.99-per-month channel is “working OK. Not amazing.”

Meanwhile, Sesame Workshop is a partner that does say it’s pleased at this point. The not-for-profit studio offers several seasons of full episodes of “Sesame Street” and other kids’ programming for $3.99 monthly. “We are very happy with the performance so far,” a rep said.

SEE MORE: YouTube Paid Subscription Channels May Be One Plan Too Many

YouTube, in a statement, said: “We’re in the early days of piloting paid channels. Just as the Partner Program empowered creators to take their channels to the next level, we look forward to seeing how creators bring new content to their fan communities on YouTube.”

The introduction of subscription channels on YouTube is aimed at giving partners another option for monetizing video, rounding out the site’s ad-supported and rental capabilities. In particular, it has attracted firms with rights to library material that are hoping to pull in some incremental digital dollars: This week, Sonar Entertainment debuted a YouTube pay channel with “Lonesome Dove” and more than 500 other made-for-TV miniseries and movies.

But one of the biggest issues is that YouTube visitors expect to get content for free — so they’re not inclined to pay up, said RLJ Entertainment CEO Miguel Penella. RLJ, headed by BET founder Bob Johnson, has two pay channels without advertising on YouTube: urban-themed OnCue for $1.99 per month, and Acorn TV, which provides a selection of British mysteries and other skeins for $4.99 per month.

“The subscription activity we have seen so far has not been particularly high,” Penella said. “It’s more of a testing ground.”

RLJ plans to boost the amount of content Acorn TV later this summer—from 150 to 500 hours—and plans a full-blown launch of the OnCue urban channel with original content in 2014.

“We feel Google and YouTube have a long road ahead of them to build a robust subscription platform,” Penella said. “Even though the audience is not quite right for us and the consumer behavior is not there today, they have tremendous reach and tremendous potential in terms of marketing and promotion.”

SEE MORE: YouTube’s 30 Pay-Channel Partners Run from Kid Fare to Cage Matches

Today, virtually all of YouTube’s revenue — $5 billion this year, RBC Capital Markets estimates — comes from advertising. The No. 1 Internet site is looking for incremental revenue opportunity through paid content. At the same time, it’s dealing with some disgruntled content partners on the free side who say the 45% cut of ad revenue YouTube is excessive.

In any event, YouTube’s pay channel partners are sticking with the program, for now.

Sutherland said the National Geographic Kids channel, priced at $3.99 monthly or $29.99 annually, has been “kind of plodding along” since launch.

But this fall, the company will kick off a promotional back-to-school push for the channel, via promotions online and through National Geographic Kids magazine, which has 4 million subscribers. In addition, the National Geographic Kids channel on YouTube will increase from about 70 hours to 100 hours of video by the end of 2013, with 100 hours of new content slated per year.

“We are not worried about the positioning in this space. Long term it we think it’s a great place to be,” he said. Key to National Geographic’s strategy for the kidvid play is the absence of ads, so “parents can feel comfortable their kids can watch this on their own.”

Added Sutherland: “We have a long and healthy relationship with YouTube and Google. When they launch things, the first wave is not going to be perfect. It’s work in progress.”

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