Is Vessel YouTube’s next big challenger?

Just how do publishers make money from short form video content? Up until now the best bet has been to upload videos to services like YouTube and Vimeo. However, with CPMs starting at around just US$2, many publishers have grumbled that the return on their investment just isn’t good enough. 

Vessel logo ()

Enter Silicon Valley video start-up Vessel. Created by Jason Kilar and Richard Tom, previously the founding CEO and former CTO respectively of video service Hulu, it claims to be the publishers’ friend, promising financial returns of up to twenty times that of ‘free, ad-supported online video services’ (i.e. YouTube). 

“We’re projecting that creators will make over $50 per thousand views for the period of time they’re making their video available on Vessel for early access,” Kilar told The Guardian recently. 

Vessel’s launch has certainly excited music companies. One of the most recent to sign up is Universal Music, which is using Vessel to upload music videos from its biggest artists. “Vessel represents the latest business model innovation for premium short-form content and we’re pleased to extend our industry-leading track record of empowering entrepreneurs who are growing the playing field for new content services,” said Lucian Grainge, chairman and chief executive officer of Universal Music Group in a statement.  

“Jason and his team recognise the substantial value of the music videos created by our world class roster of artists and have built a platform that promises fans a first-rate experience while providing artists and labels new ways to increase the monetization of their creative work.”

But what exactly is Vessel and how does it differ from subscription-free services like YouTube? Essentially, like music streaming service Spotify, Vessel has two business models. There’s a free, ad supported service where the viewer can access a limited amount of content, and a $2.99 (or £2.29) per month subscription service promising fewer ads and “early access to the web’s best short-form videos.” 

Importantly, videos will be available to Vessel subscribers for at least 72 hours before moving to its free tier and rivals like YouTube. However, creators will be able to extend the exclusivity period for as long as they like. Vessel says it will divide up 60 per cent of its subscription revenues between channels on its early-access tier, based on their share of viewing time: “If a creator’s videos accounted for five per cent of all the minutes consumers spent watching subscription content on Vessel, that creator would get five per cent of the subscription dollars set aside for creators,” explains the company’s FAQ. Channels will also receive 70 per cent of all the revenues from advertisements running around their videos on Vessel’s free tier, and will also be able to earn money from referral fees if their fans sign up to a subscription.

Certainly the service has captured investors’ imaginations as well as their wallets. In June 2014, Series A funding raised $77m with investment from Amazon founder Jeff Bezos via his investment vehicle Bezos Expeditions, as well as funding from Benchmark Capital and Greylock Partners. This was followed last month with a further $57.5m Series B funding led by venture capital firm Institutional Venture Partners, which has previously invested in other internet successes including Netflix, Dropbox and Twitter. Series B funding also included all of the Series A investors. 

“Each of these investors brings experience, resources and long-term thinking that will guide us as we continue pursuing our ambitions,” wrote Jason Kilar in a blog post recently. “Their investment in Vessel will enable us to grow, as a company and a business, equipped with the world-class team and resources we need to make our visions real.” Currently Vessel employs around 40 staff but the number of staff is expected to rocket as is investment in other key areas. 

So what does the platform have to offer to publishers? It’s still very early days but so far Vessel has signed up a number of partners including three YouTube multi-channel networks (MCNs) – Machinima, Tastemade and DanceOn. Individual YouTubers already on board include Rhett & Link, Shane Dawson, Marcus Butler, Caspar Lee and Ingrid Nilsen. For founder Jason Kilar getting the new generation of ‘YouTubers’ or Vloggers on-board is particularly important. 

“Around the time that my co-founder, Rich, and I started Vessel, we observed that the audiences so coveted by traditional TV were gravitating toward a new generation of digital storytellers,” wrote Kilar in a blog post. “Many of these voices have become brands in their own right, building passionate audiences that rival the size of the most popular shows on network and cable TV.”

But that’s not to say there aren’t opportunities for more established brands too. Whether you sign up using the web-based service or via the app you can choose the type of content you are most interested from various categories, including sport, Vloggers, TED talks, automotive, Blue Planet etc. In April, US television star Ellen De Generes joined Vessel while others include TV firm A+E Networks, actor and producer Alec Baldwin and music label Warner Music Group. As with Universal, Warner’s artists will be able debut new videos on Vessel first before launching them elsewhere on YouTube, Vevo and other music video sites. Vevo is a partner for Vessel’s ad-supported tier too.

Nor are these the only companies expected to climb on board Vessel. Jason Kilar claims ‘thousands of brands’ have applied to become partners. 

So what are the more established platforms doing to combat the potential threat to their audience? YouTube has already responded with its own Google Preferred initiative to package up popular channels to advertisers and, hopefully, improve revenue to the creators of those channels. It’s also planning a paid subscription tier without the ads. Meanwhile Yahoo is keen to poach YouTubers for its shortform video platform, possibly within Tumblr. If it means more money for content creators and publishers then this increased competition has to be a good thing. 

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