YouTube Mulling Ad-Free Video Subscription Service

YouTube, projected to generate nearly $6 billion in ad revenue this year, is considering launching a subscription-video service that would strip out advertising, according to CEO Susan Wojcicki.

The Google-owned service is easily the No. 1 Internet video destination in the world, serving more than 6 billion hours of video monthly. But YouTube is eager to diversify its revenue base by layering in subscriptions — a dual-revenue model established by cable TV and since employed by other businesses like Spotify.

“We’re early in that process, but if you look at media over time, most of them have both ads and subscription services,” Wojcicki said at the Code/Mobile conference Monday night. “YouTube right now is ad-supported, which is great because it has enabled us to scale to a billion users (per month), but there’s going to be a point where people don’t want to see the ads.”

YouTube already has been assembling a subscription music-streaming service, for which it’s inked agreements with major music companies. Google had been aiming to launch the music service this year, but after several key exec departures — including product manager for music Chris La Rosa — the status of the project is unclear. At the event Monday, Wojcicki declined to provide an update on the service.

Wojcicki didn’t offer any details on how YouTube would compensate creators from a subscription service. But in general, YouTube has been trying to offer new options for creators to generate revenue. Those have included a “tip jar” crowdfunding feature and a paid-channels initiative it rolled out a year and half ago (and which hasn’t gained notable traction).

Ultimately, YouTube is looking at a subscription-video service as giving it a new tool for persuading top creators to continue to make YouTube their primary home. The video site’s stars have been approached about exclusive distribution deals by a range of competitors including Yahoo; Vessel, the startup led by former Hulu CEO Jason Kilar; and Vimeo, which Tuesday released “Searching for Katie,” a full-length thriller produced by YouTube creator and musical comedian Taryn Southern.

Another bid to woo creators: YouTube has formed an original programming unit led by Alex Carloss, previously head of entertainment partnerships for the Americas. Carloss and his team are looking at developing — and funding — comedy, scripted, unscripted and family/educational programming with YouTube creators.

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