YouTube Subscription Model in the Works, Trouble for Embattled Cable Companies Looms

Posted by · June 15, 2012 11:56 am

YouTube Subscription modelIn what could be a pivotal move in the future of how television is consumed—and another blow to cable companiesReuters is reporting that Google-owned YouTube is exploring the idea of migrating toward a subscription model. The idea behind the move would be to provide a standalone outlet for channels that don’t draw a lucrative audience.

Speaking to that point at the Reuters Media and Technology Summit on Thursday, YouTube point man Salar Kamangar explained how he has “seen demand from the kind of networks that have smaller audiences on cable.”

“I see those kinds of networks becoming available in the future on the Web and I see those becoming available in an a la carte basis,” he predicted.

As the price of even the most basic cable bundle continues to slip out of reach for the average consumer, the prospect of a per-channel option poses broad implications for both consumers and cable companies. Increased competition at the individual channel level is certain to deflate currently bloated prices for television—a potentially massive gain for the everyday viewer. On the other hand, cable companies—which are already fighting to keep viewers from fleeing to Internet streaming alternatives—clearly aren’t nearly as enthusiastic about the idea.

The Reuters report continues:

New entrants like Google, Intel Corp and Microsoft Corp among others have tried to convince major content owners to allow them to sell smaller bundles of TV networks to consumers over the Internet. But the network owners have refused to break the cable bundles for fear of undermining their lucrative $100 billion relationship with their traditional distributors.

Nevertheless, such a trend is showing signs of deviation. After its big makeover last December, YouTube has begun attracting attention from these fortified institutions. Eyeing the potential of the site’s new “channels” feature, major networks are looking for ways to capitalize on the opportunity without hurting their traditional bundle business.

“The top network executives are really taking notice,” Kamangar said. “They’re asking questions about who is doing well, about who is building a professional management team. And I think eyes are very much on this space now.”

Taking such interest—not to mention the 100 original video programming deals that YouTube already has—into account, it only seems natural for the site to move into a subscription-based direction.

Although he said they “don’t have anything to announce now,” Kamangar was hardly secretive about YouTube’s plans. “It is something that’s really important to as a lot of our existing content creators as well as ones that aren’t on YouTube today,” he explained. “[S]o we’re taking [the subscription model] very seriously and we’re thinking about it very carefully.”

As the Department of Justice moves forward with its investigation of controversial bandwidth caps, the possible addition of the world’s #1 video streaming site to those services disgruntled by such a practice does not bode well for cable companies. Attracting some 4 billion views per day and backed by the powerful Google brand, YouTube’s movement toward a subscription model may well be the straw that finally breaks the back of the archaic model upon which cable kings like Comcast and Time Warner have long relied to preserve their dominance.

For more on the YouTube subscription model…