Kerry Trainor on the rise of the paid online video model

The CEO of Vimeo talks to StreamDaily on why he thinks we are now shifting away from an ad-supported streaming ecosystem.
November 5, 2015

Ask Vimeo CEO Kerry Trainor if this is the year his company finally gets the respect some feel is overdue from the big players in the streaming space, and he won’t disagree.

It’s a timely question. Vimeo’s paid-content model — via its transactional VOD service Vimeo On Demand, which launched in 2013 — hasn’t always garnered much attention in an industry that’s been largely dominated by YouTube’s free-to-watch, ad-supported offerings.

But there’s been a noticeable trend this year among linear and digital brands moving their streaming content behind paywalls, either subscription or transactional. Among the new subscription-based services in the space are Vessel, launched earlier this spring by former Hulu execs Jason Kilar and Richard Tom, NBCUniveral’s comedy-only Seeso, launched in October, and the sci-fi/fantasy-focused platform by Comic-Con International and Lionsgate.

Even YouTube can’t resist the temptation: YouTube Red, a subscription service offering original content crafted by some of the streaming platform’s most popular creators, went live in the U.S. Oct. 28.

Trainor sees the rise of the paid online video model as validation that Vimeo has been right all along: there is a strong appetite for quality content and if it is good enough, fans are more than willing to pay to see it without interruptive advertising, he says.

Trainor spoke to StreamDaily in advance of his Stream Con appearance in New York on Oct. 30 on why he thinks we are now shifting away from an ad-supported online video ecosystem, the future of YouTube Red and why Vimeo is leading the way for the consumption of paid video on the open internet.

The following is an edited transcript of that conversation.

Can you tell us more about Vimeo’s evolution to a transactional VOD service model?  

Vimeo has always charged for its product. Instead of giving away the tools for free, the platform for free, Vimeo said, ‘You can use it at a certain level —  plus and pro — so you can have more features and creators can now subscribe to Vimeo to use more advanced versions of the platform. That was the start of the transactional, paid-based model. We now have over 660,000 paid creators who subscribe to Vimeo Plus or Pro levels of memberships for our platform. That is our core.

Additionally, in 2013, we took it one step further. We said not only are we going to invest in a paid model for our creator base, but we also launched an extension service, Vimeo on Demand, which said to creators ‘Obviously many of you are also interested in earning money.’

Vimeo on Demand had now grown to more 8,000 creators selling content, 27,000 VOD titles have been added for sale and we are selling to over one million viewers and 217 countries and territories worldwide.

Not to pick on YouTube, but are you saying that “quality content” is what YouTube is not? How do you define “quality?” 

People are fanatically interested in what is on YouTube. That is a fact. But I don’t think it represents the pinnacle of quality. I don’t think it’s about  quality storytelling or often about quality craft in terms of making a great looking video. For that reason, I think it is exactly the right kind of environment to be monetized for free for advertisers. It’s a bit like America’s Funniest Home Videos on global internet crack. It is amazing. People love that stuff.

But at Vimeo we are focused on a different world: creators who are trying to often tell intricate stories…and we feel that deserves to be presented and celebrated in an environment without the intrusion of interruptive commercial messaging. We believe viewers are passionate enough to be able to pay for it. Vimeo is for a cut above. It’s for the storytellers who are propelling online video creation to a new level of quality. That is really what we focus on.

How do you see YouTube Red and YouTube’s decision to put premium original content behind a subscription paywall?

I think a lot of YouTube’s interest in Red and their desire to try something paid is, frankly, a reaction to what premium paid services like Vimeo and Vessel are doing. It’s the first time I’ve seen YouTube act somewhat defensively. Frankly, I think they should be very confident in what they’ve built which is, by far, the world’s largest video platform and wonderfully suited to a free-to-consume service with advertising.

On the one hand, I agree with creators’ interest in a paid service with advertising. I also agree with audiences’ interest in paying for those services and content without advertising, I just don’t think that is right for YouTube.

I also think there is creative consideration. Even if Red is successful, the brand business at YouTube will always be king of the hill. The influence on brands in terms of the stories creators are telling on YouTube, it is nearly impossible to remove that influence in terms of themes in the storytelling and the approach. There is a reason the The Sopranos didn’t premiere on broadcast TV, but on HBO. It is just not appropriate for ad-supported platforms. Brands aren’t comfortable with it.

Does Red’s entrance into the VOD market change anything Vimeo is doing?

The exciting thing for us is that it doesn’t change what we are doing one bit. The issues I just cited, I feel are things we’ve already addressed. Our transactional service allows the creators’ full vision to come to life with no restrictions from brands in terms of what they can produce and sell. We put no economic restrictions on them. They get to charge what they want and we take 10% of revenue.

We’re also targeting an older audience, between 18 to 35 years. They tend to be employed, with higher household income (than Red’s tween and teen, male-skewing audience), and that means they probably have credit cards, and we have a proven track record of them paying. We will be approaching well over 1.5 million total paying customers who have used Vimeo — that is, put down a credit card and bought something from us.

Brands must want in on Vimeo’s content. What’s been your response?

For all of our focus on no interruptive advertising, no preroll advertising, people think we hate brands. That is absolutely not the case. We love creative storytelling sponsored by brands and we think there are many who do a phenomenal job of it and, frankly, are using the flexibility of the internet to tell brand-supported stories.

We have a boutique practice here at Vimeo where we have a  team of five individuals who are focused solely on working with brands and connecting them with members of the Vimeo community to create innovative, creative content. The ground rules are that we don’t create ads and we don’t wedge into anyone else’s stream. We are very upfront about the fact that we are not for everyone.

How big a part do brand partnerships play in Vimeo’s overall revenue stream?

It is the smallest of our three lines of business – between our core creator-subscription products, our VOD marketplace platform, the brand partnerships business is the smallest of the three. But it is a nice business for us and we continue to grow it.

Let’s talk about Vimeo’s recent move into original video content creation. What’s the strategy behind that investment? 

It really flows pretty naturally from everything from what I have been describing. At our core, we are an open platform that anyone can use. We stand for quality, for empowering creators with the best platform to make and share and sell video on the highest quality possible. We start by building the best technology that we possibly can and providing best environment and community that we can. With the introduction of VOD — and the proof now of what we believe is a whole huge world of content that is meant to be charged for — investment in original content is our opportunity to bring some of that content to life.

The three new shows (Bianca Del Rio’s Rolodex of Hate Comedy Special: Live from Austin, expected to drop on the platform in December; Darby Forever, due in December 2016; and The Outs, the much-talked-about web series from creator Adam Goldman, expected to drop year-end 2016.) represent a very natural extension of our commitment to quality…But we’re very different than Netflix. We’re an open platform and we celebrate that. We’re not trying to make TV that can be distributed over the internet.

Looking forward into 2016, what do you see happening within the industry? 

(Whether transactional, subscription, ad-supported), it is not necessarily an either/or situation in the end. Vimeo lets anyone create any paid window that they want. Maybe (the content) comes out in theatres, on iTunes, Netflix, and, later, maybe on Crackle or another free service with ads. For some reason we’ve assumed that the only way forward has been with advertising, but what we are proving out is that that is just not true.


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