Vimeo Thinks the World Needs Another Video Subscription Service

In an attempt to attract talent, the company is trying to convince video creators that they'll never make a living from advertising.

Kerry Trainor, chief executive officer of Vimeo.

Photographer: Daniel Acker/Bloomberg

Vimeo is joining the increasingly lengthy roster of companies hoping to turn growing enthusiasm for watching videos online into monthly subscription fees. The video-sharing site will outline plans for a pay-as-you-go service in the next several months, said Chief Executive Officer Kerry Trainor, who hinted that the service will work a lot like Netflix—except stocked with the high-minded independent videos and documentaries for which Vimeo is known.

A subscription service is a logical move for a company that has always rejected advertising. Vimeo on Demand, a service launched in 2013, lets creators set their own fees for downloads and keep 90 percent of the revenue. More than 30,000 videos are for sale on the site today, and about 1.3 million people have paid for a download, according to the company.

Last summer, Vimeo also started giving creators the option to sell subscriptions to their individual channels. Trainer acknowledged that none of these single-creator subscriptions have really caught on. "They’re not producing deep and updated catalogs that can sustain subscriptions," he said. By packaging a bunch of mini-channels together and charging a single price, Vimeo thinks it's putting together a service viewers will be willing to pay a monthly fee to watch.

Consumers are being bombarded with such services, and the clearest strategy for standing out is getting hold of buzzy content you can’t see elsewhere. Like rivals from Netflix and Amazon to YouTube Red and Verizon’s GO90, Vimeo has been buying the rights to original shows and movies, including a push announced last week to spend “in the millions” to fund at least five video projects made by women.

To persuade independent artists and documentarians to choose Vimeo, the IAC-owned company is sharpening a pitch it’s been making for a while: making money from advertising is really hard. The upshot is that creators who charge per view command fatter margins with smaller audiences than those who collect a percentage of online advertising.  It's a pitch designed to resonate with people most likely to post videos to Vimeo, those who specialize in niche content with passionate fans. (If you're interested in the math, read this blog post from Vimeo on Demand chief Peter Gerard.)

A YouTube spokesperson takes issue with this argument, saying that YouTube creators' revenue grew about 50 percent year-over-year in each of the last three years, and pointing out new opportunities such as YouTube Red, a new subscription service. Vimeo also assumes that YouTube creators rely solely on a cut of the revenue generated by the short ads that play before a video starts. In fact, many popular YouTubers are much more focused on making branded videos that are much more lucrative. Then there’s the question of scale: Vimeo’s per-video-view rates are very high, but the number of views are infinitesimal compared to YouTube or Facebook video.

Others have struggled to create a new business model for online video.  Vessel, a service founded by former Hulu CEO Jason Killar, vowed to generate $50 in revenue per thousand views. Traffic peaked in April, according to ComScore, and the app barely registers on popular lists, according to the research firm App Annie.

The new subscription services believe people are finally ready to start paying real money to watch things online. They may be. But flipping a switch is unlikely to draw large audiences from the start. Meanwhile, the folks Vimeo is pitching know only too well  that making money from independent film has always been hard—and probably will remain so for a while.

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