Hulu vets launch Vessel, a premium mini YouTube with a price tag

YouTube may have 300 hours of video uploaded every minute, but new service Vessel believes there's room for more.

Vessel, an online service for short videos, launched Tuesday as the HBO to YouTube's massive public access network. People who pay $2.99 a month get early access to clips from video creators who already have big followings.

"Consumers of Web video care so deeply about this video that they're willing to pay to get it early," said Jason Kilar, Vessel's cofounder and the former chief executive of Hulu.

(First adopters won't need to make that choice: Vessel is offering a free subscriptions for a year to anyone who signs up through Thursday.)

Consumers are watching more video on mobile devices, and YouTube -- backed by the might of Google -- has become the undisputed leader in delivering it. While YouTube can't be beat for reach, some creators complain that YouTube doesn't pay them at levels commensurate with the size of their audiences. Vessel aims to address that issue, believing it will attract the best content that, in turn, will pull in viewers.

The new service will share 70 percent of advertising revenue and 60 percent of subscription revenue with content providers. YouTube doesn't disclose the terms of its deals with creators, which can vary widely, but its standard revenue share is widely known to be 55 percent of advertising revenue. Its top creators enjoy more lucrative terms under a program called Google Preferred.

Formed by Kilar and Hulu's former Chief Technology Officer Richard Tom, Vessel's emphasis is on short-form clips, and many of its marquee faces are familiar from Google's giant site. But Vessel differs from YouTube by hosting only established video makers, asking viewers to pay for early access to clips and offering creators a bigger cut of the rewards.

"It's like the 1979 introduction of cable," Kilar said. "Consumers got better product... and it brought in a business model that didn't exist before, which is subscription."

YouTube has offered a paid channel option to individual content providers since 2013, but it never gained widespread traction. The question for Vessel is whether consumers will pay for content they can get for free three days later.

A YouTube representative noted that revenue to the top 100 creators in Google Preferred increased more than 70 percent by the end of last year versus a year earlier. And for the third year in a row, members of Google's overall YouTube Partner Program saw their revenue increase 50 percent. YouTube's overall watch-time also grew by 50 percent last year.

Vessel will offer exclusives, which typically last 72 hours. Their creators are largely native to Internet video. These include Good Mythical Morning, a daily morning talk show with more than 6 million YouTube subscribers; and Shane Dawson, a comic vlogger whose biggest YouTube channel also has more than 6 million subscribers. Vessel will also host content from traditional TV networks, such as A+E, and mainstream celebrities, such as a series starring Alec Baldwin. Viewers can watch Baldwin drive around New York in a taxi doling out relationship advice to unsuspecting couples who get into his cab.

Vessel will also serve up Tastemade, often described as a digital next-generation Food Network. The new-media venture got its start on YouTube. Steven Kydd, a founder of Tastemade, called Vessel a unique offering that can give creators what they always want: a way to improve their brand, their audience and their revenue. While the consumer reaction "remains to be seen," he said, "Jason [Kilar] and his team have a proven track record of great appeal to consumers."

Vessel will also have music exclusives. Vessel signed deals with Universal Music Group and Warner Music Group, two of the world's big three labels, for early access to video content.

People who don't subscribe to Vessel can still watch video on the service at no charge, just not early-access content. Both subscribers and nonpaid viewers will see ads: five-second spots before a clip rolls and "motion posters," which are a bit like moving, full-page magazine ads that you can flip away or pause to check out at your own discretion.

The free part of Vessel has more traditional media outlets providing content, such as Sports Illustrated, Discovery Communications, People magazine and the New York Times.

Vessel is backed by Amazon founder and Chief Executive Jeff Bezos through his personal investment arm, Bezos Expeditions, as well as venture capital firms Greylock Partners and Benchmark.