Everyone from Facebook to Yahoo to Amazon is readying to make a run at YouTube -- including Hulu's founding CEO Jason Kilar.
Mr. Kilar's planned online video service Vessel may finally roll out as soon as this month, according to several people familiar with the matter, populated with videos from top YouTube stars -- but under terms that keep the clips off YouTube for three days.
Like Hulu, Vessel will have a free tier and a monthly paid subscription service, both of which will feature ads.
Vessel is said to bear many similarities to Hulu, including its leadership and staff. Mr. Kilar's co-founder Richard Tom was his CTO at Hulu. Vessel's ad chief Jean-Paul Colaco had been Hulu's ad chief before leaving to join his former colleagues. And Mr. Kilar has stocked his product team with mostly ex-Hulugans like Hulu's former VP-product Lonn Lee.
Then there is Vessel's design, which is said to look as sleek as Hulu. It's very pretty, said one person who was given a demo of Vessel.
"You're looking at something that maybe if Jason hadn't left Hulu .... You're looking at the best of what he built there," said another person who has seen the service, which was developed primarily for smartphones and tablets.
In addition to the mobile apps, Vessel will have a desktop-and-mobile site, and it plans to introduce apps for connected-TV services, which one person said will likely include Apple TV, Roku and Xbox.
As of early November, Vessel was still finalizing deals with some creators and advertisers. Two people said the service's debut could be delayed until early December, which would mark the second delay since Mr. Kilar announced the company's name in June. One person said Vessel had initially planned to launch in August.
Vessel CTO Richard Tom did not respond Friday to an email requesting comment. The Wall Street Journal previously reported some details of Vessel's plans.
Whenever Vessel launches, it's expected to be a thorn in YouTube's side with the potential to grow into a legitimate competitor for audiences and advertisers. Vessel has honed in on 100 to 200 of YouTube's top creators, signing deals with some of them to populate its service, two people said. (The number at launch could be much smaller because some have also turned down Vessel's approach.)
In effect Vessel is trying to distill the best of YouTube into a Hulu-like premium service. Advertising and entertainment industry execs said the company is trying to recreate the premium talent tier called Google Preferred that YouTube pitched brands during its NewFronts presentation in April.
"If you look at the digital video marketplace, the top of the triangle is the full-episode player from broadcast and cable networks," said one media buyer. "That's brand-safe, familiar content, but it's limited inventory that tends to sell out. The next layer is brand-safe, high-quality, recognizable content. That is the Google Preferred model. That's what Vessel is striving for."
Vessel is also going directly at one of YouTube's weaknesses: creators' and industry executives' complaints about the difficulty of turning a profit solely through YouTube distribution. Even one of the largest YouTube networks, Maker Studios, was unprofitable when it sold to The Walt Disney Company for $500 million in March. One point of contention has been the 45% cut YouTube takes of creators' ad revenue, which sounds like a lot but also accounts for all the free infrastructure like video-hosting and distribution YouTube provides. Another has been the difficulty of standing apart from all the cat videos on YouTube.
YouTube has bent to creators in some respects. In February 2013 YouTube began phasing out its exclusivity clauses with creators so that they could stream their videos elsewhere. And earlier this year it began marketing its biggest stars to boost their mainstream celebrity and juice TV advertisers' interests. While YouTube seems to have benefited from its efforts to an extent, so too may emerging rivals like Vessel.
If YouTube directly subsidizes a series -- as in the original programs it plans to fund -- those videos will be able to post first to YouTube without violating the Vessel deal.
Vessel is looking to sign advertisers to at least six-month-long commitments and is expected to keep the number of launch advertisers to less than 10 brands, two people said. Those advertisers will have category exclusivity, meaning that rival brands will be locked out of Vessel for a time. The brand categories Vessel is eyeing include the usual suspects such as retail, wireless, auto and telecom brands.
Vessel's initial ad products will borrow from Mr. Kilar's old company. In addition to fairly standard 15- and 30-second pre-roll slots, Vessel will also feature a Hulu-like ad selector letting viewers pick which ad they want to watch. Vessel will also let advertisers target ads only to paying subscribers. And as The Wall Street Journal had previously reported, advertisers will only have to pay for completed views. Those views will be all-but-guaranteed for the service's full-screen display ads.
Vessel may put some content behind a kind of ad wall, in which people will be asked to interact with an advertiser -- likely by watching an ad -- in order to unlock content. And people may also be able to view some videos without any ads in exchange for sharing certain information to be shared with advertisers. The company is discussing both opportunities with advertisers, but neither are expected to go live at launch.
Vessel has been looking to get advertisers to pay $40 for every thousand views of their ads, but media buyers have negotiated the company down from to around $25, according to people familiar with the matter. By comparison, advertisers buying ads against YouTube's top talent usually pay between $18 and $20 for every thousand views. Vessel is also selling sponsorships and show ownership deals for a flat fee.
Advertising revenue will be one of three ways for creators to make money from Vessel, which will give them 70% of revenue from ads run against their videos. They will also get a split of Vessel's subscription revenue, adjusted to reflect the views they get from subscribers. And they will receive money for every person who subscribes to Vessel directly because of that creator. This so-called "bounty" is said to run between $7 to $15, said one person. If creators opt out of Vessel's first-window terms, they will only receive the 70% ad revenue split.
Banking on the reported $75 million funding round Vessel raised earlier this year, the company is giving creators some money in advance, but the people declined to say how much Vessel is doling out.
Advertising and entertainment executives voiced concerns over whether Vessel will be able to attract a large enough audience, particularly for its subscription tier. It's unclear how much the company will charge for its subscription service, but three people said the price will be between $5 and $7. However the ad and entertainment execs said the quantity of viewers may not be as important as the quality.
While most of the YouTube stars' fans may rather wait the three days for their videos to hit YouTube, "let's say they get 10% to 15% of PewDiePie's audience," said one online video network exec, referring to one of YouTube's biggest stars. "That's probably worth a lot of money."