Just under a year ago, Jason Kilar and Rich Tom left Hulu. Kilar, the company's longtime CEO, had built it into an online powerhouse for premium video, backed by Tom, his chief technical officer. Nearly as soon as they left, the duo decided to try it again. Vessel, which is opening its doors to video creators today, is yet another premium video service. But instead of serving mass-market television and movies, as most of them do, Vessel will show you your favorite web video series a few days before you can see them anywhere else. When Vessel starts selling subscriptions early next year, you'll pay $2.99 a month for access to everything on its site and mobile apps.
"A missing piece in the ecosystem"
The idea goes something like this: YouTube, the main home for web stars, takes around 45 percent of the ad revenues generated by their videos. That has left a lot of them restless and looking for other ways to make money. Meanwhile, the biggest stars have millions of fans who will follow them anywhere — and might even pay to get an advance look at their work. "I very much look at this as a missing piece in the ecosystem," Kilar says. People pay a premium to see movies in a theater, he says, and they'll soon pay a premium to watch the most anticipated web videos on day one. Videos posted to Vessel won't be available anywhere else for at least 72 hours, and creators can make the window longer if they like. "It's fundamental human nature to want things early," Kilar says. "The movie theater business is a massive success based on 3 to 4 percent of Americans going to theaters this weekend."
For now, you can't watch videos on Vessel. Instead, the company is courting people who regularly make high-quality videos on the web and show them to large audiences, primarily on YouTube. Early next year, once it has rounded up enough of them to make its subscription offer compelling, it will open to the public. In addition to the subscription service, there will be a free offering that aggregates videos from sites like CollegeHumor and Funny Or Die. (Those videos will be posted on Vessel the same time they appear everywhere else.)
Vessel has already signed up big networks like Machinima and Tastemade; YouTube stars like Shane Dawson, Marcus Butler, and Ingrid Nilsen; A&E Networks; and music videos from Warner Music Group. Vessel says that 1,000 views make the average YouTube star $2.20; on Vessel, 1,000 views will net $50. That's made possible by giving creators 60 percent of subscription revenues, and 70 percent of ad revenues.
That's right: ad revenue. As on Hulu, paying for a premium experience doesn't get rid of advertising. Every video will be preceded by a 5-second spot; and some will get a 15- or even 30-second pre-roll ad. Kilar insists it won't feel overwhelming. "I'm very sensitive to ad overload and tone-deaf ad execution — this is not that," he says. The 5-second ads will all be custom-made for Vessel, and Kilar says they're long enough to make an impression but short enough that they don't "feel like a tax."
Kilar is the first to admit that the service isn't for everyone. And if you don't follow many creators on YouTube, the appeal may escape you entirely. But audiences on YouTube are huge — PewDiePie, the No. 1 creator, has more than 32 million subscribers — and luring even 5 percent of them to Vessel could double their revenue. (Vessel encourages creators to continue posting their videos on YouTube and wherever else they like, once the preview period has elapsed.)
Google is worried
There are a few big unknowns about Vessel. The biggest is how YouTube will react. The Wall Street Journal has reported that the Google-owned company is "particularly concerned" about Vessel, and has moved aggressively to sign its biggest stars to new deals that make their content exclusive to YouTube for a certain window of time. Vessel will only work if big web stars post their videos there, and while the company has raised $75 million to lure them over, it will still struggle to compete with Google's pocketbook.
There's also a more practical concern — what's to stop all these fanatical teens from ripping Vessel videos and immediately posting them to free sites? I put the question to the company several times, and it didn't respond.
We won't have any answers until Vessel starts selling subscriptions. In the meantime, its team has built a slick, beautiful product that creators used to YouTube will likely love. And their subscribers might, too, if they can get over the purchase price. "We didn't engineer this for the ambivalent consumer," Kilar says. "We built this for the fan."