Streaming services are routinely attacked for the inability of their royalties alone to sustain creators. The former head of video streaming service Hulu believes he has a solution.
Called Vessel, the service is the creation of Jason Kilar, the former chief executive of Hulu, and Rich Tom, a former chief technology officer at Hulu. Benchmark, Greylock Partners and Bezos Expeditions, the personal investment company of Jeff Bezos, are reported to have put $75 million into the company. In his blog post the service, Kilar said Vessel will launch “early next year.”
Vessel employs a “freemium” business model as well as a windowing release strategy to give payers the perks while also offering content to free viewers. Videos will be available only to paying customers for at least the first 72 hours of their release (the creator can choose to extend that window of exclusivity longer). Free viewers will have access to the videos once the access period has expired.
Creators get good terms. A creator that releases videos first to Vessel’s subscription service will get 60 percent of subscription revenue (allocated based on creators’ share of total viewing time) and 70 percent of advertising revenue earned against their videos. In addition, creators will earn an unspecified amount of money for each referral to the subscription service.
The per-play royalty is the money shot: Vessel projects creators will earn roughly $50 for each 1,000 views their videos generate in the early-access period available to subscribers. No estimate is given for views from the free tier. That’s well above the roughly $6 per 1,000 views paid by Vevo and about $2 per 1,000 views often achieved on YouTube channels. (Those generous terms were the crux of a Wall Street Journal article about Vessel poaching stars from YouTube.)
Although the service seems targeted at YouTube stars and the millennials that love them, Vessel has partnered with Warner Music Group, A&E Networks and YouTube networks Machinima and Tastemade, according to a New York Times article. Suppliers of videos for the free tier include Vevo, the New York Times and CollegeHumor.
Why Vessel? Kilar explains that online viewing alone isn’t enough to create full-time, professional creators. “Despite the many positive things that the Internet has made possible in media, to date there hasn’t been a clear path for most of these talented creators to build sustainable, enduring businesses on the basis of their video storytelling alone. We believe that media can, and should, do much better.”
There are a number of questions here. How will creators’ fans react to the windowing strategy that places subscribers over free viewers? How will the early access period inhibit the viral nature of online video when viewers’ friends are not also subscribers? And will people pay to watch short-form videos that have until now been free?
Most important is the question about Vessel’s mission: was it created for creators or viewers? Kilar’s missive stressed Vessel’s value to creators — it was, after all, designed to attract creators to the service. But a service with good terms and handsome royalties is only valuable if it attracts a large crowd. What good is a high royalty if almost nobody is watching? And consumers won’t value online media more just because a new, idealist service was built to support creators. It will come down to how well Vessel serves viewers.
Keep in mind that Kilar has faced skepticism before. Leading up to its launch in 2007, Hulu was thought by many critics to be a doomed venture. How could three owners — 21st Century Fox, Comcast/NBCUniversal, and Disney — that poured $750 million into the joint venture create a destination for television and movies? And how could it get some viewers to pay? Yet Hulu has exceeded most expectations and surpassed 6 million subscribers in April.