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Google Inc. (GOOGL) Readies Paid, Ad Free YouTube Package

Youtube Alphabet GOOG

Google Inc. seems to have the content streaming space in its sights but it won’t take on Netflix, Hulu, and Amazon Prime. Rather, Google is working out better ways to make money from its YouTube platform for infotaiment while the Netflix and its rivals fight over the movies streaming space. Recode reports that YouTube is almost ready to launch a premium paid ads-free service for watching YouTube videos.

google Inc youtube is the source of value

Google has not made an official statement about its plan to launch a paid ads-free version of YouTube but the firm has been dropping hints about this kind of service over the last one year. The latest hint about paid YouTube was seen in an email that the firm sent to content owners about the need to agree to new terms by Oct.22 as it wants ” to ensure that fans who choose to pay for an ads-free experience can watch all the same videos that are available on the ads-supported experience.”

YouTube Controls 5% of TV Viewing Market

Netflix, Amazon Prime, Hulu, and Apple TV are all pushing the cord-cutting wave that threatens cable TV; yet, YouTube might be the real threat to cable. YouTube is the king of the online video space and Wall Street reckons it has huge potential going forward. Google’s YouTube controls about 5% of the global TV viewing market; yet, it saw a 60% Y-O-Y growth in the number of hours viewed in the last quarter.

In February, Atlantic Equities analyst James Cordwell posits that Google’s YouTube could be the next television. He resolves that YouTube’s ad revenues might grow at a CAGR of 50%+ through 2017. He also expects YouTube to generate more revenue starting from$14B from 2017 to about $50B in 2015. In fact, YouTube is currently valued at $70B, which is above market cap of Netflix.

Analysts are already seeing 8 Million Paid Subscribers

Rumors about YouTube’s plan to launch a paid service surfaced sometimes in April and analysts think that YouTube is making a smart move. Bob Peck at SunTrust Robinson Humphrey posits that YouTube could attract as much as 8 million users who would gladly pay $9.99 per month to use the service. Peck posits that Google can expect to see a 16% increase in its YouTube revenue in the medium term.

The paid service that YouTube wants to offer is a two-in-one service that combines its music service with the usual YouTube videos without ads. Combining a music service with a video streaming service in essence tries to provide a mix of Spotify and Netflix for the price of one. Peck thinks that the move would help Google stay strong in the video space. In his words, “Further, offering multiple forms of content monetization could support better brand advertiser adoption, content creation and other positive outcomes.”

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Victor Alagbe is a seasoned business and finance writer with a specialty in writing about how to invest for the long-term in healthcare, pharmacology, energy and tech stocks. His long-term focus is on stocks that provide a nice mix of growth and income. For the short term, he passionately writes about trading stock options for the excitement and leverage that stock options offer.

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