Google Inc. (GOOG:US)’s YouTube video site will begin selling subscriptions to film and TV services over the Internet, creating paid channels with more professional content to compete with Netflix Inc. (NFLX:US)
On-demand content from the initial 30 channels will vary from family-friendly “Sesame Street” to Ultimate Fighting Championship martial-arts bouts and cost about $2.99 a month each, YouTube said today on a conference call.
Google is using YouTube to host other suppliers, avoiding the high costs incurred by services like Netflix, which license programming directly from creators. The approach lets others take the risk of making content, while bolstering options for consumers who want to watch shows online. The channels also represent a step toward a-la-carte programming that some media players such as Comcast Corp. have resisted.
“This is really just the beginning,” Malik Ducard, YouTube’s director of content partnerships, said on the call.
The first 30 channels will be part of a pilot program, Ducard said. All will offer free 14-day trials and some will offer discounts for annual subscriptions. Sales from subscriptions will be split, with the programmers keeping the majority.
Google, based in Mountain View, California, has been stepping up efforts to boost YouTube’s revenue beyond advertising. Its video-rental service includes titles from Viacom Inc. (VIA:US)’s Paramount Pictures and Walt Disney Co. (DIS:US), for a typical price of $3.99.
Content creators will also have the option to run ads, Malik said, comparing the arrangement to cable-television channels.
“There’s some cable that have ads on the pay channel and some don’t,” he said. “What we’re trying to do is really put that power in the partners’ hands.”
Other channels include National Geographic Kids, Jim Henson Family TV and Laugh Factory comedy programming.
YouTube will generate an estimated $3.6 billion in revenue this year and accounts for as much as $21.3 billion of its parent’s market value, according to a report this month from Barclays analysts.
The Web-video company has built a state-of-the-art production facility in Los Angeles, and is spending $100 million on grants to filmmakers and artists ranging from few hundred thousand to a few million dollars.
While those outlays are significant, YouTube’s most popular fare is typified by the young-adult goofing of channels like “Smosh” and comedian Ryan Higa. By contrast, Netflix and Amazon have been bidding up traditional television content such as “Breaking Bad” and “Downton Abbey,” while expanding into original programming with shows such as “Orange Is the New Black,” produced by Lions Gate Entertainment Corp.
Cinedigm Digital Cinema Corp. (CIDM:US), a New York-based distributor of independent films, will offer Docurama, a documentary film channel, for $2.99 a month on YouTube.
Cinedigm will update its programming weekly, the company said in a statement. It manages a total of 1,250 documentary titles and the channel will draw from that library.
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