A New YouTube Rival Wants to Snag Stars With Promise of More Profit

Vessel wants YouTube stars to focus on another platform

Shane Dawson

Photographer: Maarten de Boer/Getty Images

People now invariably use the word YouTube when describing a specific type of online video: a relatively short segment produced by someone who couldn't walk through your average high school cafeteria without getting mobbed. Now the founder of Hulu is betting he can persuade people to dissociate those types of video from YouTube itself. 

On Wednesday, Dec. 17, two former Hulu executives—Jason Kilar, one of the company's founders, and Richard Tom, its former chief technology officer—offered a preview of their new company, Vessel. Like Hulu, the company will offer a free service with advertisements and a premium service with a subscription fee. In Vessel's case, the subscriptions will cost $2.99 a month and will feature exclusive content from creators who grant the company a three-day window during which videos will play only on its site.

For months there have been rumors about potential YouTube competitors. Aside from the Vessel founders, much of the speculation has centered on George Strompolos, the chief executive of YouTube network Fullscreen. If there's a way to succeed at this, Vessel is well positioned to do so. Its founders are big names who have tens of millions of dollars in funding and deep connections in the media industry. But they've also got two major challenges: The company has to persuade YouTube stars to focus on another platform, and it has to persuade YouTube viewers to pay for something they're used to getting free. 

Vessel is based on the conviction that something is broken in the YouTube economy. "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," Kilar wrote in a blog post on Vessel's website.

YouTube gives 55 percent of the ad revenue from videos to its creators, which has inspired some grumbling from people trying to make a living producing videos for the site. Vessel will set aside 60 percent of its subscription revenue to split among creators, based on how many views their videos get. Musicians make more money per spin when people listen to their songs on paid subscription services as opposed to the free versions, and the same will likely be true of video.

Vessel will also give creators 70 percent of ad revenue, and it claims it will get much higher ad rates than YouTube because it contains none of the user-generated content that makes many advertisers queasy. Between subscription and advertising, Vessel thinks it could pay artists $50 per thousand views, which it says is 20 times the rates that YouTube stars currently earn. Of course, creators' effective income on Vessel could still be lower if it can't replicate the massive audiences that YouTube draws today. 

Several high-profile YouTube stars and brands will give Vessel exclusive content for its subscription service, including Shane Dawson, Rhett & Link, and Ingrid Nilsen, as well as such YouTube networks as Machinima and Tastemade. Many other content companies will post their videos to the free version of the site. 

Even YouTube stars who haven't signed on with Vessel would stand to benefit if it succeeds. Until now, Google was the only game in town. A true competitor could force the company to sweeten its own deal, as artists with big followings play different platforms off one another. The more that Vessel becomes a threat, the more intense the competition for talent will become.

None of this means that creators will have to choose whether to be YouTube stars or Vessel stars. YouTube could maintain its status as a place to draw millions of views, while Vessel could serve as a way for creators to cash in by creating a way for superfans to pay for early access.

Paid subscriptions are something YouTube itself hasn't quite figured out. Google has never succeeded at getting people to pay for online services, even as other companies are starting to do so. Paul Verna, an analyst at eMarketer, is skeptical that Vessel can do so, either, given that the entire medium has been developed as something people can access for free. But he thinks Vessel may actually have an advantage: It's not YouTube. "For YouTube, I think that challenge is even bigger, because they're part of that free economy," he said. "It's easier if you're a new thing."