How YouTube’s New Lower-Priced, Ad-Free Tier Could Impact the Industry

YouTube is planning to roll out a lower-priced, ad-free version of its paid video service, and streamers and creators should stay tuned.

The package, which includes podcasts and how-to videos, will be called “premium lite” and is soon to be announced in the United States, Australia, Germany, and Thailand, targeting viewers who want to watch content other than music videos, according to Bloomberg.

“As part of our commitment to provide our users with more choice and flexibility, we’ve been testing a new YouTube Premium offering with most videos ad-free in several of our markets,” a YouTube spokesperson told ADWEEK in a statement. “We’re hoping to expand this offering to even more users in the future with our partners’ support.”

YouTube Premium currently costs $13.99 per month in the U.S., allowing subscribers to watch everything on the platform, including music videos, without ads. The company did not specify what it would charge for its lower-priced tier.

The Verge previously reported that a premium lite plan was being tested overseas over the last few months, but now it will launch more broadly for the first time.

That launch could position YouTube to better compete as the streaming industry continues to shift.

What the new tier could mean for YouTube

Ross Benes, a senior analyst with eMarketer, said the move will allow YouTube to expand its subscriber base.

“YouTube revenue primarily comes from advertising, but the subscription side has become quite large itself,” Benes told ADWEEK. “By getting more direct payments from users, YouTube will be less reliant upon advertising eventually, even though ads will be its primary revenue driver for the foreseeable future.”

Benes said that most streaming services, including Netflix, have relied on revenue coming from subscriptions, which leads them to prioritize ads more than they had in the past.

“YouTube is the reverse. It is reliant upon ads, but it’s emphasizing subscriptions more than it used to,” Benes added. “The top streaming services will be hybrid.”

YouTube is already becoming a more hybrid platform, with company CEO Neal Mohan recently announcing that YouTube viewing on TVs has surpassed mobile. And as the company’s viewership has changed, the news of a lower-priced tier can also change the company’s revenue streams.

Brandon Katz, a senior entertainment industry strategist at Parrot Analytics, said the move is just another step in YouTube’s ongoing efforts to create a diversified ecosystem with multiple access points and flexible pricing that solves for a variety of consumer needs. 

He referenced how YouTube Premium surpassed 100 million subscribers globally last year.

“Company executives likely believe a small portion of that audience and/or a percentage of prospective subscribers will be interested in the premium lite version, adding yet another monetization tool to its ever-growing product suite,” Katz said. “In success, this could also help create a second pool of subscriber-driven revenue with which to pay creators, as ad revenue comprises the bulk of that currently. In failure, this likely isn’t a hugely capital-intensive effort for the company. Why not experiment?”

Katz said that the development comes during a time in which competitors are ramping up their own varied revenue-sharing efforts.

For instance, Netflix is reportedly interested in complementary podcast content and has already been partnering with brands like Nike for lifestyle content. Meanwhile, Spotify is pushing further into video and considering a VIP concert ticket program.

“In this industry, stagnation is unacceptable,” Katz said.