Why Google Decided to Make YouTube a Paid Online Service

YouTube is the second largest internet search engine (after Google). More than 1 billion people use YouTube, with more than 4 billion videos viewed per day and 6 billion hours of video viewed on YouTube each month. It’s estimated that roughly 100 hours of video are uploaded to the site every MINUTE!

With so much traffic, it only makes sense for YouTube to be used as a means to make money, right? Google has finally decided that it’s time to monetize YouTube, but it has done so in a VERY intelligent way.

Google vs. Amazon

Amazon announced Amazon Prime in mid-2014 and Google responded by offering a paid music streaming service via YouTube. The vast majority of the content on YouTube is still 100% free and available to all, but users who want better service and more curated content will likely opt for the paid service.

But why would someone pay for the YouTube service when they already have access to music, music videos, and all the other content available on YouTube? Simple: for the same reason they pay for access to Netflix--it gives them exactly what they want.

Licensing Deals

YouTube made licensing deals with three major companies: Sony, Universal, and Warner. These massive record labels stand to make a fortune thanks to the fact that YouTube is going to block any content from labels who do not sign contracts for the paid service. Mostly indie labels will suffer from this, but the larger labels will find that signing with YouTube will benefit them, in the long run.

As the second largest search engine in the world and the go-to source for the majority of music, videos, and content, YouTube is in the perfect position to dominate its industry. Services like Spotify, Rhapsody, and Rdio all offer the same product, but what they don’t have is the might and power of Google behind them. YouTube is a juggernaut that cannot be stopped.

Already, a staggering number of individuals, companies, and corporations use YouTube as a marketing and advertising channel. The myriad paid streaming services receive far less in the way of ad revenue, so they rely heavily on the monthly fees paid by users. YouTube, on the other hand, earns a fortune in ad revenue, so they don’t have to charge exorbitant fees for the streaming service. This means that they can--and will--undercut the prices charged by the other streaming services.

Many indie labels are protesting this undercutting, but YouTube and Google don’t seem to care. They are happy to ban Indies from YouTube, which could have a drastic effect on sales and marketing of those labels. With the might of Google behind it, YouTube can pretty much do whatever it wants and the internet will fall in line behind it. Unless YouTube starts charging people to watch "epic fails", "lolcatz", and "flash mob" videos, it will continue to be the unstoppable force that it is. Smart consumers may soon start paying for the YouTube streaming service instead of the Spotify or Rdio services simply because YouTube has more content at a better price.

Do you plan on paying for YouTube or will you keep using the free service? Your thoughts and comments below please...

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