Google Tests YouTube Subscription

Zacks

Reportedly, Google Inc. (GOOG)-owned online video portal, YouTube has recently launched a pilot program to test its new subscription service. As part of the subscription plan, video content makers can now charge a certain amount from viewers.

So far, content makers have published their videos on YouTube for free viewing. As reported, under the new subscription service, viewers will have to pay a monthly fee for accessing videos on YouTube. The subscription plans start at 99 cents a month. All the paid channels will offer a 14-day free trial and will be sold at a discount if users opt for an annual subscription.

The new service is aimed at ramping up revenues for Youtube and its content partners. Content makers can now earn more revenues, rather than being solely dependent on advertising revenues. Moreover, a subscription-based model may also attract new channels that were previously not willing to put their video on YouTube.

Viewers would not suffer much as the free services are continuing and the new service is only for premium content at least for now. Instead, lower subscription amount, ad-free videos, hassle free transactions and special offers might attract more users.

We believe that the company is trying to attract more advertising dollars and expand its revenue base in order to win in this cut-throat business world. YouTube’s paid offerings might help the site to compete against streaming services like Netflix (NFLX), Hulu Plus and Amazon’s (AMZN) Instant Video, all of which are developing their own original content.

According to research firm comScore, Google sites, driven by video viewing at YouTube.com, ranked as the top online video content property with 153.9 million viewers in March, followed by Facebook (FB) with 63.8 million, VEVO with 52 million, Yahoo! (YHOO) Sites with 50.3 million and Viacom Digital with 43.8 million viewers. These figures in themselves indicate that Google’s YouTube.com is the No. 1 video viewing site.

In the first quarter of fiscal 2013, Google reported solid earnings of $10.07per share, exceeding the Zacks Consensus Estimate by $1.24. Google’s gross revenue (including total traffic acquisition costs [TAC]) came in at $13.97 billion, representing a year-over-year increase of 31.2%.

Google has a Zacks Rank #3 (Hold).

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