YouTube Premium is changing because it has to

YouTube is gearing up to offer its prestige lineup of original series and films for free to all users, turning to its traditional ad-supported system in an attempt to bring in more viewers.

The company is looking to pull back on its ad-supported programs by 2020, limiting the number of original series and films it orders, according to The Hollywood Reporter. Series that are ordered, which include a few with Hollywood star talent attached, will be available to all YouTube users for free, regardless of whether they’ve signed up for YouTube Premium. In the past, pilot episodes were free to watch, but users had to pay a monthly $12 fee to watch the entire series.

Robert Kyncl, YouTube’s chief business officer, told The Hollywood Reporter that the company learned through experimentation that “a lot of the projects work incredibly well” when they’re made available for free through ad-supported networks. It’s a different approach than what YouTube’s team originally wanted to do.

“If you look at our originals over the last few years, our main goal was to drive subscribers to YouTube Premium,” Kyncl said.

A FORK IN THE ROAD
That original approach didn’t work out the way the company hoped. Although YouTube hasn’t released the exact number of subscribers YouTube Premium (formerly YouTube Red) has the company reportedly only registered 1.5 million subscribers in 2016. The paid tier didn’t exactly deliver on the promise of more prestigious, exclusive programming for users. The shows were limited, they didn’t receive great critical feedback, and, perhaps most importantly, it appeared that YouTube’s team ran into trouble transitioning people who were used to a free platform into paid content.

All of these elements led YouTube to a fork in the road: it could pursue original series more aggressively and hope for more subscribers, or it could scale back. Instead, YouTube found an alternative. The company invested hundreds of millions of dollars into expanding YouTube Premium (then Red), teaming up with celebrities like Kevin Hart and Ellen DeGeneres for original series. Although the paywall still existed, YouTube explored releasing many of these series for free to all YouTube users. The new series relied heavily on ad support and sponsorships. The concept was simple: big names will attract big advertisers, and that means more money in YouTube’s pocket.

As a result, subscriptions became less important as YouTube expanded its ad-supported network of original series. It’s something that other companies that work with YouTube noticed, too. An executive told Digiday that YouTube Red subscriptions made up “less than one percent” of revenue for major channels.

YouTube continued to expand its library, relying heavily on ad support from big-name companies like Johnson & Johnson, which signed on for a Ryan Seacrest-led show. But no one, not even YouTube, could quite agree on what YouTube Red was, especially in a sea of rapidly growing original content from Netflix, Amazon, and Hulu. The company showed no signs of slowing down, and it felt pressure to compete, according to a 2017 article from Bloomberg. More shows were added, more celebrities were chased, and more advertisements were secured.

Considering how invested YouTube seemed in original series at the time, news of the company’s decision to scale back may seem out of the blue, but executives like CEO Susan Wojcicki have hinted at this direction for some time.

THIS WAS COMING
Then, in February, Wojcicki made headlines after telling Recode’s Kara Swisher that YouTube Premium was a music service. It marked the first time that a YouTube executive specifically called out the subscription platform as a music service, putting the emphasis on the platform’s video library through its partnership with Vevo.

“Our goal is to be a large, leading video platform and have a large diverse set of content,” Wojcicki told Swisher. “There are all these categories that no one is really providing a solution to, and we can be best at breeding there. Shows and movies is a very competitive space; it needs to be paid for economically with a subscription service.”

When asked if YouTube was interested in developing a series that could compete against a prestige original show from Netflix or Hulu in the same vein as House of Cards, Wojcicki offered another insightful answer into what the company’s plans were.

“We could, but I’m not sure that would further what we’re trying to do at YouTube,” she said.

This was a stark 180-degree pivot away from where the company’s plans were two years prior. Susanne Daniels, the former head of MTV’s original content who oversees YouTube Premium, told reporters in 2016 the exact opposite.

“YouTube is all in on original content,” Daniels said. “We want to open Hollywood’s Rolodex and introduce our creators to visionary directors, writers, and producers.”

It’s a short period for a massive shift in winds. A few things happened that can help explain YouTube’s reluctance to pursue more original series â€" especially with individual creators who have huge followings on YouTube.

Part of YouTube’s plan with original series was to attract bigger advertisers, but in the wake of multiple controversies â€" including disturbing children’s content, misinformation, conspiracy theories, and terrorist content appearing with ads on the platform â€" companies became reluctant to place ads on YouTube videos. YouTube couldn’t promise safety, and that was a big concern for advertisers.
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