Vessel, a video sharing website spawned by the former CEO of Hulu, launches today on a limited basis but with an enormous goal—to change the business of online video.
The site aims to be an HBO for the world of increasingly professional but free web video —a premium site with exclusive content that users will actually pay for. For $2.99 a month, viewers will get early access – as much as three days – to a library of videos from creators like fashion video blogger Ingrid Nilsen or YouTube personality Connor Franta. In exchange, Vessel is offering creators 70 percent of all advertising revenue and 60 percent of subscription revenue, above the normal 55 percent cut of ad revenue they get from YouTube.
The company, which has been in gestation for 18 months, has garnered impressive backing. Jason Kilar, Vessel’s CEO, was the founding chief executive of Hulu and before that a longtime Amazon executive. He has raised $77 million in equal parts from Greylock Partners, Benchmark Capital, and Bezos Expeditions, the personal investment vehicle of Amazon CEO Jeff Bezos.
Kilar envisions tens of millions of people ultimately ponying up for the privilege of seeing web videos first, before their friends catch them on better-trafficked free sites like YouTube or Vimeo. “If you think about the number of people that subscribe to paid television, you are looking at hundreds of millions of people worldwide,” he said. “I’m not suggesting we will see those same numbers but we view a future where absolutely huge numbers of people all over the planet subscribe to get great content.”
Kilar draws his confidence from the world of film and television, where content is available first to ticket holders and premium cable subscribers, and then, over time, filters down into free, ad-supported channels. “We are building the web’s first window,” he said. “Early access is very valuable and works well for consumers and creators alike.”
The site, with the tagline “watch your favorites here first,” goes into beta on Wednesday at Vessel.com and with an app for Apple's iPhone and iPad. The company will begin inviting users who have registered on the site to try it free for a month. The service features full-page display advertisements as well as brief, five-second pre-roll ads from the likes of Frito-lay, Corona, Chevy, and Unilever. Kilar contends that because the site will command a paying and highly engaged audience, it can command higher rates of around $50 per thousand viewers for some ad units, as opposed to ad rates in the single digits on other online video sites.
James McQuivey, an analyst at Forrester Research, said Vessel will face the proverbial chicken and egg challenge to draw both content creators and a large paying audience at the same time. “They have to convince people to spend 20 minutes a day there and then to pay for it,” he said. “Three dollars is not a lot of money, but it’s more than you are spending on YouTube.” Mcquivey also notes that “very few YouTube stars are going to be able to win a subscription following.”
Kilar though has a record of past success with Hulu, which drew plenty of skepticism when it was founded in 2007. And dozens of his former employees have followed him to Vessel, which raises the question of why he didn’t just incorporate the new service into Hulu itself. “All companies are defined by a mission and Hulu’s mission was focused on traditional format television and film,” Kilar said. “Given that mission and the ownership of Hulu” – it’s jointly owned by NBC Universal, Fox Broadcasting, and Disney –“this was something very far afield.”
And for the record, he's fine with folks doubting whether Vessel's proposition will work: "The journey of an entrepreneur is to have conviction about the something the rest of the world disagrees with. And the best business are built when those convictions are right."
