Google's New YouTube Model Could Boost Revenue By More Than 15%

In a report published Thursday, SunTrust Robinson Humphrey analyst Bob Peck discussed a potential ad-free subscription tier format for Google Inc (NASDAQ: GOOG) (NASDAQ: GOOGL)'s YouTube service.

Reports surfaced on Wednesday suggesting that a paid YouTube subscription could go live later this year at a cost of $9.99 per month. Content creators would be entitled to receive 55 percent of the subscription revenue Google collects, paid out based on their percentage of total views.

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Peck noted that a subscription tier is more than just a revenue lift, as Google wants to promote premium content and user lock-in. The analyst suggested Google could see its YouTube subscriber base total eight million in the near term, which could drive an approximate 16 percent lift to YouTube revenues.

"Google has already begun experimenting with pay tiers most recently with YouTube Music and its overall subscription product is relatively new - but very successful with hundreds of content creators capturing millions of subscribers," Peck wrote. "Further, offering multiple forms of content monetization could support better brand advertiser adoption, content creation and other positive outcomes."

Peck concluded that YouTube is "under attack" as the total online video market continues to grow, but a subscriber tier will allow for a "more refined" environment and entice those with premium content to contribute more to the platform.