Is Online Video Service Vessel Ready To Challenge YouTube?

YouTube competitor Vessel just launched an early version of its much anticipated online video service with an eye to attracting producers and performers in advance of a planned mass-market launch early next year. Vessel is one of several internet and media companies that are building video libraries, including Facebook, Yahoo and Dreamworks Animation, in their attempts to create their own versions of the massive success of YouTube.

According to unnamed sources who are familiar with the situation, YouTube executives are especially concerned about Vessel, based on the company’s ability to raise in excess of $75 million, as well as its attempts to steal away some of YouTube’s stars for its own service. YouTube has been signing some of its biggest stars to exclusive deals in an attempt to keep them from being enticed by Vessel or any other competitor that’s building an online video service.

Vessel was founded by two former executives from the online video service Hulu: Chief Executive Jason Kilar and Chief Technology Officer Richard Tom. The San Francisco-based company is backed by venture capital firms Benchmark Capital and Greylock Partners, as well as Amazon’s Jeff Bezos’ investment firm Bezos Expeditions.

“Around the time that my co-founder, Rich, and I started Vessel, we observed that the audiences so coveted by traditional TV were gravitating toward a new generation of digital storytellers,” wrote Jason Kilar in a blog post. “Many of these voices have become brands in their own right, building passionate audiences that rival the size of the most popular shows on network and cable TV.”

It appears Vessel is positioning itself to become the next big player in online video services. The company has already made a deal with Alec Baldwin who will produce and star in a show called “Love Ride”, in which the actor will advise couples while riding with them in a taxi. Several current YouTube stars have also agreed to exclusivity periods with Vessel, including musical group Boyce Avenue and entertainment duo Rhett and Link. The company has also made deals for music videos with Sony Music Entertainment, Warner Music Group and Universal Music Group, although none of these record labels will be offering exclusive content, at least to start.

Vessel says it will offer both a $2.99-per-month subscription service with exclusive short-form videos and an ad-supported service like Google’s YouTube. Vessel’s subscription service will provide exclusive access to videos for three days or more. After that period, the same videos will be viewable for free, accompanied by advertising. Although Internet users are not accustomed to paying for short-form video content, the company feels that the combination of inexpensive subscriptions and the strong fan bases of Vessel’s performers will attract subscribers.

In its attempts to attract more video makers to its service, Vessel has offered cash advances and a portion of subscription fees to some, based on the popularity of their videos. Another enticement for video makers is the promise that they will receive 70% of the advertising revenue associated with their videos, in comparison to only 55% that video makers typically receive from YouTube.

In response, YouTube has been offering bonuses to keep some of its own stars in exclusive content deals. The company also started testing a music subscription service of its own last month, and the expectation is for YouTube to start offering subscription services at some time in the near future.

While Vessel is showing great promise for gaining some of the online video service market share, YouTube currently boasts over one billion users and will likely be able to keep a large amount of control over this market in the coming period.