Ex-Hulu CEO Launches Video Subscription Service to Compete With YouTube

Jason Kilar, the former CEO of video streaming service Hulu, wants to change the way we watch video on the internet. Again.

In an age where internet video stars now have massive reach—achieving more popularity among US teens than mainstream celebrities—Kilar is betting that these online stars can charge for early access to their videos. That’s why he’s launching a subscription video service called Vessel, believing it can not only give content creators more ways to earn revenue, but also improve the quality of online video.

On Wednesday, Kilar and his company announced that Vessel is opening up a beta service to people interested in trying out his new creation. Basically, the startup has inked deals with notable online video creators like Shane Dawson and Caspar Lee, as well as traditional media companies like A+E Networks and Warner Music Group. These creators will publish their content on Vessel for a minimum of three days before posting it on YouTube or other internet services.

The thinking is that, much in the same way that people are willing to pay to watch movies they really want to see in theaters before the movie becomes available for download or on DVD, people who follow these YouTube stars closely will pay to see their videos on Kilar’s Vessel first—before the clips appear elsewhere online.

For the foreseeable future, YouTube will remain the leading destination for internet video. Today, it delivers more than 6 billion hours’ worth of content every month to viewers worldwide. And like services such as Fullscreen and IAC’s Vimeo, it is moving towards subscription video services. But Kilar believes Vessel can accelerate this movement.

In putting more money in the hands of creators, he explains, it will spur better videos. Vessel, he says, can play an important part in dramatically helping to raise the bar on the quality of digital video.

Like Hulu, the service won’t rely on subscription payments alone. It will offer both a free service and a paid service, and both will contain ads. Through subscription and ads, Kilar believes, creators can net more than $50 per thousand views on Vessel, versus $2 to $3 per thousand views on YouTube.

According to the company, 60 percent of subscription revenue will be set aside to pay video creators who post exclusive content on his service, divided up among creators depending on the number of minutes subscribers spent watching their clips. And 70 percent of ad revenue will also go straight to the content creators.

But will audiences really pony up the $3 monthly fee to get early access to their favorite internet stars? Kilar says the cost of the service was designed to be minimal so that it would be a “no-brainer” for users. But with this model, Vessel would be operating on rather thin margins.

Kilar readily acknowledges these challenges, saying he’s happy to compete in a market that’s heating up. “For the first time, next-generation native video creators are going to have a diversity of options,” he says. “The market is on the cusp of some very big seismic changes.”