Will Pay-to-Play Payoff Online or Will it Kill the Golden Goose?

By Carl Weiss
Money (That's What I Want) (Photo credit: Wikipedia)


It’s said that the best things in life are free.  But as Berry Gordy so aptly added in 1960, “But you can keep them for the birds and bees.  Give me money, that’s what I want.” The song aptly named , "Money (That’s What I Want)" went on to become the first hit for Gordy’s Motown record label Tamla.  It also went on to be covered by many prominent recording artists such as the Beatles, the Rolling Stones and the Doors, among others.  

Even though 54 years have passed since "Money" first became part of the public consciousness, the concept behind it seems set to make a revival on the Internet if a number of powerful portals have their way.

YouTube Announces a New Paid Subscription Service

As recently as three days before Halloween 2014, YouTube CEO Susan Wojcicki publicly confirmed that Google’s video portal was considering the introduction of a subscription service.  Since other popular video portals such as Netflix, which started as a subscription service and Hulu, which began as free only to turn into a subscription service as HuluPlus, have been using a monthly pay-to-play charge to vend everything from first-run movies to television series, this isn’t likely to cause people to run screaming into the streets.  The chief difference between the likes of Netflix and Hulu when compared to YouTube is tthey both stream professionally produced feature-length content.  Whether or not a portal where the lion’s share of the content is created by amateurs can make a go of it is anybody’s guess. 

The New York Times logo
The New York Times logo (Photo credit: Wikipedia)
An article in the "New York Times" sums it up like this: "YouTube’s subscription effort is still in the very early phases, according to a person with knowledge of the matter. In essence, the company is making phone calls to potential partners, including anyone from big media companies like Disney to popular individuals with millions of subscribers, to see if they might be interested.  At first, the model is likely to be similar to YouTube’s long-planned subscription music service, which Ms. Wojcicki said would be introduced “soon.” Rather than an entirely new paid YouTube, there would be several subscription services based on certain topics – for instance, a subscription service with nothing but video games."  http://bits.blogs.nytimes.com/2014/10/28/youtube-weighing-new-subscription-service/?_r=0
Courtesy of www.youtube.com
Currently, YouTube produces revenues for airing in-stream ads that are displayed on participating videos on the world’s most popular video portal that streams more than four billion videos per day.  The portal has also gone to great lengths to partner with homegrown content producers such as these ever-popular channels: PewDiePie, Stampylonghead, SkyDoesMinecraft, and CollegeHumor, just to name a few.  While some of PewDiePie’s videos have garnered as many as 59,917,883 views, it is questionable how many people would choose to pay to play short videos with titles such as "How to Get Ebola," "Corpse Party," or the animated "Brain Transplant."
HBO is Now Entering The Fray
While the idea for an online subscription model is hardly new, what YouTube is hoping to capitalize on is the ever-growing disenchantment many people have toward broadcast and cable programming.  What with the advent of the four-minute commercial break, as well as the ever-more costly way in which cable companies charge families for the hodgepodge of channels foisted on them, even major players such as HBO have started to realize that people want better choices. 
english: This is the american HBO brand logo. ...
english: This is the american HBO brand logo. ® 2008 Home Box Office, Inc. All Rights Reserved. portugu√™s: Este √© o logotipo da marca estadunidense HBO. ® 2008 Home Box Office, Inc. Todos os Direitos Rervados. (Photo credit: Wikipedia)
The above-cited "New York Times" article added: "An example is the service recently announced by HBO, which said that next year it will start a stand-alone streaming service aimed at 'cord cutters,' people who want cable quality shows but refuse to pay several hundred dollars a month for the jumbled mess of cable channels.
That’s right, starting in 2015, HBO will begin a pay-to-play online streaming service that will not require a subscription to a traditional TV provider.  Recognizing the fact that there are currently more than ten million homes in the US that do not subscribe to either cable or satellite TV services but who do have Internet access, the CEO of HBO, Richard Plepler announced that the opportunity was ripe for direct-to-web programming.
While 10 million households seem like a drop in the bucket when compared to the sheer number of consumers with cable or satellite TV access, the number of households that are expected to switch to services such as Netflix continues to grow. 
“Netflix has more subscribers in the United States than HBO, which counts about 30 million subscribers. But HBO delivers more profits because of lower costs and its distribution through cable and satellite providers. HBO generated $4.9 billion in revenue in 2013 and about $1.8 billion in operating income. Netflix had $4.4 billion in revenue in 2013 with $228.3 million in operating income.”
English: A graph to show the increase in subsc...
English: A graph to show the increase in subscribers on YouTube to Anonymous' videos. All dates indicated on the graph are 2008 (Photo credit: Wikipedia)
YouTube Verses the Boob Tube
The real question for portals such as YouTube is how much of an impact it can make on the viewing public.  Currently, the Boob Tube (regular TV) outguns YouTube four to one, seeing as how most American adults watch an average of four and a half hours of broadcast and cable programming per day on average versus about an hour of online video.  It has been suggested that YouTube can try to bump these numbers up by either improving the technology and/or trying to create higher-quality content that people will come back to watch week in and week out.
To this end, YouTube has built production studios in such places as New York, LA and Sao Paolo, Brazil, to help their 'creators' produce more TV-like programs.  They are also seeking to woo show producers with Hollywood or broadcast TV experience, many of whom are underemployed.  Whether YouTube can reinvent itself as an entertainment service that people will line up to pay for is still in question.  But as the world’s viewing habits change and companies with online audience loyalty continues to grow, what does this hold in store for the future? 
What’s in Store for Blogs and the Social Nets?
Will popular blogs start charging readers to peruse their pages?  Will social networks demand a fee to allow their users to connect with more than a handful of friends? The trends are definitely heading in that direction. Recently, Facebook announced that it is throttling back the exposure your post get on the fans news feed time line. Now to get maximum exposure, you'll have to pay for advertising. If your customer base is on Facebook and garners lots of engagement and leads from this platform, you will have to ante up to keep that traffic going. Twitter also recently announced that it will be providing targeted ads in the twitter feed as well. Google+ also provides in feed ads and LinkedIn has been doing this for some time.
The real question is will they start to charge for the member subscriptions? Currently, your subscription to the top five social networks are free, however, they sell your information as targeting criteria for their pay per click advertising. If these companies get greedy and change to a tiered pay to a subscriber social platform, it will usher in a whole new era. This will also open the door for competitors to exploit this weakness. 
Courtesy of  www.customerparadigm.com

History shows that when companies take for granted their bread and butter (in this case, billions of active free subscribers), they usually falter. By starting to charge subscribers for something that was perceived as free before, they will lose market share. The truth is, subscriptions were never actually free. Subscribers give up their rights to the data posted and their psycho-graphic information to the social networks. This way, Facebook and others would turn around and sell this information as a targeting criteria to advertisers.
It’s been my experience that every ten years or so,the dominant players in any industry are poised for a fall. If they get greedy, take their clients for granted, assume that their products are unbeatable,(in this case we, the subscribers are the product) or they believe they can do no wrong. Eventually ... BOOM! The fall comes!
Just as the opening of Pandora’s Box unleashed a number of unintended and unwanted problems for the masses, this, too, will have consequences. What is left to discover is whether pay-to-play will become a benefit or a burden to those who want the web to remain free?  Will it usher in a new era of growth or kill the golden goose? While the future of pay-to-play Internet programming is anything but a sure thing, I will leave you with a little pearl of wisdom from a man who was clearly ahead of his time: Berry Gordy.
"Money don't get everything it's true,
What it don't get, I can't use;
Now give me money,
That's what I want
That's what I want, yeah
That's what I want."

In this article I discussed the pay-to-play subscription trend that Google recently announced for YouTube. I further discussed how HBO plans on launching its own Internet subscription service in hopes to compete with Netflix. Plus, many of the social networks such as Facebook and Twitter seem to be following this trend as well.  Lastly, I explored the implications and consequences that pay-to-play will have on the whole social infrastructure of the Internet.

If you'd like to read more articles like this one, check out “Making Pay-Per-Click Pay Big Dividends”, “2012 - The End of Conventional Advertising as We Knew it Would Be!”, "The Evolution of Internet Advertising", “How to Get Fish to Jump in The Boat - A Social Media Analogy”, or enter your keywords in the Search box at the top of this blog. If you found this article useful, please feel free to share and repost it. I welcome your related opinion and comments; just add them to the Comments section below.

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While Carl Weiss doesn’t always get everything he wants, you can listen to him every Tuesday at 4 p.m. Eastern on BlogTalkRadio.
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