Google's(GOOG.O) YouTube video service is dipping its toe into pay television by starting on Thursday a subscription service with 30 content creators, including children's programmers Sesame Street and Muppet creator The Jim Henson Co, and the Ultimate Fighting Championship.
YouTube, the world's largest video website, allows creators to set subscription fees and accept advertisements, at their discretion, for the channels they create.
For $4.99 a month, subscribers can get golf lessons from the PGA Golf Academy. The Laugh Factory charges $2.99 for clips of stand-up comedy routines and Henson charges $2.99 for full length episodes of "Sid The Science Kid" and "Fraggle Rock."
YouTube has spoken repeatedly about its intent to experiment with paid channels, and has made no secret about its intent to be a major player in quality content.
"If feels to me as if history is repeating itself, said Tony Vinciquerra, former chairman of News Corp's Fox Networks Group. "In the early '80s cable providers subsidized channels to enhance offerings to consumers and increase penetration. Fast forward to today, and YouTube is subsidizing the development of new content offerings."
YouTube will feature content from traditional TV and film producers, company executives said, and at the launch featured children's videos from National Geographic and videos from cable channel HDNet.
That could eventually be a threat to cable and TV operators, but no time soon, said Richard Greenfield, a media analyst with BTIG LLC.
"I think everyone who creates video programming should be worried about the growth of new content channels," he said. "Broadcast TV has been hurt by cable. Broadcast is still a very large business despite fragmentation."
Content creators will get most of their revenue from subscriptions, as they already do from advertising on the site, according to company officials.
In March, YouTube said on its blog that it has more than 1 billion unique users a month. The new subscription service will be available in 10 countries at launch.
YouTube has spent more than $100 million to help about 150 media partners create and promote specialized YouTube video channels dedicated to topics ranging from food to sports.
"Consumers have gotten used to getting their content on the web," said Laura Martin, senior analyst with Needham and Co. "The question is whether they will pay for it."
(Reporting by Ronald Grover; Edited by Edwin Chan and Phil Berlowitz)
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