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nScreenNoise – Can YouTube Red break through to the big time?

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Since YouTube Red’s launch on October 21 2015, many news outlets have touted it as a failure. Though it’s certainly not a success it remains to be seen if the SVOD service has truly dropped the ball.

Chapter 1: What is YouTube Red (0:31)

YouTube is, of course, the giant of advertising-supported video on-demand (AVOD), with 1.5 billion users per month. The service attracts more viewers in the 18-to-49-age-group than any television network. With such popularity, the company decided to adopt the freemium model and roll out a premium subscription service, YouTube Red, in addition to the AVOD.

So what are YouTube Red’s premium features? The service provides advertising-free streaming of all videos hosted by YouTube, and offline play and background playback of videos on mobile devices. Users also get access to advertising-free music streaming through Google Play Music and access to YouTube Red Original series and films. YouTube Red also gives users access to YouTube Music. YouTube charges $10 a month for the service.

YouTube Red is currently only available in the US, New Zealand, Australia, and Mexico.

Chapter 2: How YouTube Red is doing? (1:12)

Google does not reveal subscription or usage data. However, we can piece together data to get an idea about how the service is doing.

According to the Verge, the service is outpacing the growth of video competitors, including. CBS All Access and Sling TV. There are 1.5 million subscribers to Red and another million in the trial period (first month). Original YouTube Red shows have reached over 250 million views. Red has partnered with top YouTube creators, such as PewDiePie, to create programs with familiar characters. The creators featured see benefits too, and have seen a boost to their channel as a result. Subscribers to Red watch 75 percent more YouTube on their TVs than average users.

While adding 1.5 million subscribers would seem like a great success to most, it is not to YouTube. The number represents less than 0.1% of the total monthly user base. Among AVOD services YouTube dwarfs all the others combined. However, according to data from TiVo, less than 3.6% of people say they use YouTube Red. On the iTunes app store, it ranks at number 22, far below Netflix and Hulu.

Though Alphabet, Google and YouTubes parent company, doesn’t break out revenue figures for Red there is some directional data available. According to Digiday a spokesman for the Young Turks, a company which manages over 30 YouTube channels, stated the company gets less than 5% of company revenue from Red.

Growth in Red is also disappointing since users increased just 0.6% between Q1 2016 and Q1 2017.

Despite these findings, a spokesperson from YouTube has stated that:

“While we don’t release or comment on speculative numbers, we’re seeing strong engagement of the service in the four countries we’ve launched, leading us to invest in more original series and movies for 2017 and increased marketing of YouTube Music.”

That said, most digital analysts would agree that these numbers are smaller than expected.

Chapter 3: Future forecasts (2:22)

What are the prospects for growth of YouTube Red in the future?

The ad-free experience has limited appeal to many since free ad-blocking software is widely used and effective at blocking YouTube ads.

The music packages, though a nice add on, are competing with a wide variety of established streaming apps such as Spotify.

The original content may be enticing to certain younger demographics. However, with such a limited amount of content, it is likely this demographic will binge-and-bolt once their trial is up.

Finally, SVOD growth is slowing in the United States, falling from 30% last year to 4% this year. Will this limit the ability of YouTube Red to expand as quickly in the countries it is currently available in? In Asia, SVOD market growth is faster and could be a better place to expand with the original content.

Opportunities, however, can be found in the larger numbers of users viewing their videos on the television screen. Many of these users are Red subscribers and they watch 75% more than the average user. Ad free content is more appealing here as ad blocking software is not readily available. Music streaming software such as Spotify is also not as TV friendly.

Google is new to the SVOD industry and as such it has many challenges, but it also has many opportunities. With a huge user base from its AVOD service to market to, time will tell if YouTube Red can break through to much larger subscriber gains.

Why it Matters

YouTube Red is the first SVOD service launched by Google

Though it has experienced growth it has not enticed many of its 1.5 billion monthly users to subscribe

Red has many challenges to face but it also has real opportunities to capitalize on

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