YouTube is looking to generate more subscription revenue.
The video platform began testing a discounted version of its YouTube Premium product in certain European territories, The Verge reported last Monday. The discounted subscription product, dubbed Premium Lite, costs just €6.99/month (compared to the €11.99/month YouTube Premium roughly costs around Europe) and offers ad-free YouTube viewing.
Premium Lite doesn’t offer other key perks included in a YouTube Premium subscription, like access to ad-free YouTube Music and YouTube background play (the ability to have YouTube videos continue playing even when another app is opened).
And there seems to lie the problem with YouTube’s initial Premium Lite push.
While ad-free YouTube viewing is an enticing perk, not including background play as a Premium Lite feature feels like a particularly glaring misstep.
There may currently be a substantial portion of YouTube users who are willing to pay for a Premium Lite-priced subscription product that offers background play.
A U.S. survey fielded in July by GetWizer for Variety Intelligence Platform found that YouTube was the most commonly used platform to access podcasts among all age groups.
The data above suggests YouTube is the go-to podcast platform for many Americans. And there’s likely a good deal of these consumers who don’t like having to keep the YouTube app open when using the platform to listen to podcasts on the go (as doing so is an easy phone battery drainer).
Assuming Premium Lite starts testing in the U.S. as well, YouTube should tweak the subscription offering to include background playback to better monetize its podcast listener base.
Including background playback in Premium Lite wouldn’t completely undercut the YouTube Premium offering either. Perks like access to ad-free YouTube Music streaming, YouTube originals and downloading YouTube videos for offline viewing would still be reserved for YouTube Premium.
Accelerating the growth of Premium Lite would help Google become less reliant on ad revenue. YouTube ads accounted for 12.3% of Google Services revenue in Q2 ‘21, up from 10.9% in Q2 ‘20. YouTube doesn’t regularly disclose how many Premium subscribers it has but reported 30 million subscribers across YouTube Premium and YouTube Music in October.
It will become harder for YouTube to convert its podcast listeners into paying subscribers as time goes on.
Platforms including Spotify and Amazon Music are increasingly looking to lure podcast listeners to their platforms with exclusive content. But Spotify is the bigger threat in the podcast space given how much longer it has been pushing for listeners by locking up big exclusive deals.
Among those age 15-29, Spotify was the most popular music streaming platform, GetWizer found in its July survey.
The platform will be well positioned to further entice younger users if it broadly rolls out its $0.99/month Spotify Plus plan that lets users stream ad-supported Spotify songs of their choice.
Some users who try out Spotify Plus could eventually upgrade to a regular Spotify Premium subscription to be able to listen to ad-free music and buzzy exclusive podcasts (such as the Joe Rogan Experience) on one platform. And these users might rule out paying for a subscription like YouTube’s Premium Lite.