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Google's acquisition of YouTube may prove to be one of the savviest in internet history. Although some believed it appeared rich at the time, ask any of the companies that could have purchased Facebook for $1bn-plus less than a decade ago, and they'd probably tell you that sometimes, eleven figures is cheap.

But a big part of the reason YouTube has been so successful following its acquisition by Google is that the search giant continues to invest heavily in its development. The company is working with Hollywood to produce original content, and has made great strides over the years in inking licensing pacts with content creators.

While YouTube may not be moving the needle in terms of Google's bottom line, Google doesn't need it to, so monetization is secondary. But as Google looks to grow its base of professionally-produced content, it's reportedly looking at a business model many popular online media properties and social networks have thus far shunned: paid subscriptions.

Google's YouTube chief, Salar Kamangar, revealed that the company is considering its options at the Reuters Media and Technology Summit this week. "We don't have anything to announce now [but] it is something that's really important to a lot of our top existing content creators as well as ones that aren't on YouTube today, so we're taking very seriously and we're thinking about it very carefully," he explained.

It's not the first time Kamangar has hinted at subscriptions, but now the content creators he's referring to apparently include smaller cable operators looking to break away from the tyranny of the bundle and sell access to their content in a direct-to-consumer fashion. While cable giants like HBO are adament that they're not interested in making their programming available to consumers a la carte, some smaller players which don't have it nearly as good as the HBOs of the world might be willing to risk a move away from cable.

The big question, of course, is whether YouTube can bring home the bacon. While it's not clear, for instance, how successful or unsuccessful YouTube's movie rental service has been, it doesn't seem to have had an impact on Netflix or Hulu. As a post on DailyFinance last year pointed out, YouTube has an incredible audience, but may not have the economics on its side to compete with Netflix.

That suggests that if YouTube is to go head-to-head with cable, it will have to bring more than just its popularity. It will have to bring a compelling subscription business model with economics that work for everyone involved, consumers included.

Patricio Robles

Published 15 June, 2012 by Patricio Robles

Patricio Robles is a tech reporter at Econsultancy. Follow him on Twitter.

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Comments (5)


Daniel Fendler

Youtube not affecting google's bottom line? I was under the impression that google earned a tremendous amount of advertising revenue through youtube.

over 4 years ago


Daniel Fendler

Went and did some reading - most believe that Youtube has lost money at varying ammounts over the past few years, (http://www.ramprate.com/wp-content/uploads/2009/11/RRMarketCommentary-GoogleandYouTube.pdf is a good report.) Many believe that youtube will be profitable in 2012 and moving forward.

over 4 years ago

John Courtney

John Courtney, CEO and Executive Chairman at Pay on Results SEO, Content Marketing, Social Media, Digital PR, PPC & CRO from Strategy Digital

I would think YouTube would have a good opportunity to launch subscriptions in the UK given how poor the selection is on Netflix and Love Film and Sky Movies.

over 4 years ago


Annie Joseph

This is really a very taunting question. With the big search engine giant taking up services in its stride, it is no doubt that taking up youtube it will not show improvement as it really thrives to move ahead leaving behind Yahoo and Bing and on the contrary Youtube has also gained much success with Google.

over 4 years ago

James Perrin

James Perrin, Digital Communications Specialist at Feefo

Hi Patricio, thanks for the update on the YouTube/Paid Subscriptions story. It's interesting because this has been in the pipeline for sometime, they just need to get some content producers on board - quality ones of course, otherwise their efforts will all be in vain.

I can only see this working if the quality of the programming justified a paid subscription. Otherwise, I don't see what's so wrong with traditional advertising, just like 4OD have on their platform. In any case, I am keen to see what happens. Thanks for the update.

over 4 years ago

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