The YouTube Premium Ponzi Scheme: Who's really getting paid? 💸

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Almost a year back, I got the YouTube Premium for the same reasons that you might have… to save time.

But then last month, when I was asked to reset my autopay, I caught myself wondering… what about the people who don’t have Premium? How are they still watching everything for free? And if Premium subscribers skip ads completely, how are creators supposed to get paid?

That’s where the story gets interesting 👇

In 2015, YouTube executives were sitting in a room, looking at two problems. 

Problem one - they're spending billions keeping 2+ billion users on a free platform. 
Problem two - they need a subscription business to compete with Netflix and Spotify.

The solution they came up with was genius, but it wasn't entirely honest.

Instead of building a premium service that directly paid creators more, they built a system where Premium subscribers would essentially subsidize the entire platform while thinking they were just removing ads and supporting their favorite channels.

Now in 2025, that strategy has created one of the most profitable revenue arbitrage schemes in digital media.

Let's see what happens when you pay $13.99/month for YouTube Premium:

YouTube tells you it goes to "support creators" based on your watch time. 
What they don't clearly explain is how that actually works.

Your $13.99 doesn't go into a little bucket marked "for the creators I watch." Instead, it goes into a massive pool with every other Premium subscriber's money. 

Google takes 45% off the top. 
The remaining 55% gets distributed to creators based on total Premium watch time across the entire platform.

So when you binge-watch a specific creator, thinking you're directly supporting them, you're actually contributing to a revenue redistribution system that averages your contribution across thousands of other creators.

Multiple creators have discovered that their earnings per minute from ad-supported views in high-value markets actually exceed what they get from Premium watch time. 

The pooling system dilutes individual value, while advertising pays based on actual market dynamics.

This means Premium subscribers who think they're giving creators a "premium" experience are often giving them less money per minute watched than viewers who sit through ads.

YouTube serves content to 2.5 billion people monthly. 

No doubt the infrastructure costs will be too much like the bandwidth, AI recommendation systems, content storage, and moderation across 100+ languages. 

Traditionally, advertising revenue had to cover all of this, but Premium changed the game.

Now, YouTube has a predictable revenue stream from 125 million subscribers that helps cover those fixed costs. 

This reduces pressure on the advertising business and allows YouTube to maintain free access for everyone else.

The subsidy gets even more interesting when you look at pricing. 

A US Premium subscriber pays $168/year. 
An Indian subscriber pays $18/year. 
The UK subscriber pays $175/year.

High-value market subscribers aren't just paying for their own ad-free experience... they're subsidizing platform access for users in lower-revenue markets AND helping maintain the free tier for billions of non-paying users.

Industry sources tell us the creator community began questioning Premium economics around 2020-2021. 

Channels started comparing their Premium revenue to ad revenue on a per-minute basis and discovered something uncomfortable.

The "Premium pays creators more" messaging was technically true in aggregate - Premium subscribers generated more total revenue than the average user. 

But for many creators (especially those with audiences in high-advertising markets), individual Premium views were paying less than ad-supported views.

This created a paradox. 

Creators were encouraged to promote Premium subscriptions to their audiences, but doing so could actually reduce their per-view earnings.

Unlike advertising where auction dynamics create some transparency, Premium revenue allocation remains completely opaque. Creators can see their total Premium revenue but have no visibility into the per-minute rates or allocation formulas.

This opacity isn't accidental - it prevents creators from optimizing for Premium revenue and maintains Google's control over the economic narrative.

YouTube's dual revenue model has created something remarkable... a business that's almost impossible for competitors to replicate.

New platforms face a chicken-and-egg problem. You need billions of users to make the cross-subsidization math work, but you need the subsidization to support billions of users affordably. YouTube solved this by building the free platform first, then adding Premium to strengthen the economics.

Running both advertising and subscription businesses simultaneously requires different expertise, different infrastructure, and massive upfront capital. Most competitors choose one or the other, not both.

Premium subscriber watch-time needs to be distributed across thousands of creators to work. This requires a massive, diverse content ecosystem that takes years to build.

This is why every "YouTube killer" focuses on either being completely free (TikTok) or completely premium (streaming services), but rarely attempts both successfully.

Legal experts in digital platform regulation have started paying attention to YouTube's Premium economics. The concerns center around marketing versus reality.

Premium is positioned as directly supporting creators, but functions more like subsidizing platform operations with creator benefits as a side effect. Consumer protection advocates argue this could constitute misleading marketing.

The complete opacity around revenue allocation could trigger disclosure requirements similar to what other digital marketplaces face. Regulators want to understand how much subscription revenue actually reaches creators versus platform operations.

Some antitrust experts view the subsidy model as potentially creating unfair competitive advantages that warrant regulatory examination.

The Premium promise isn't delivering what it appears to promise. Creators optimizing for Premium revenue might be leaving money on the table compared to focusing on high-value advertising markets. The smart play is treating Premium as supplementary income rather than premium income.

YouTube's economic model represents a fundamentally different valuation framework than pure subscription or pure advertising businesses. The cross-subsidization creates defensive moats but also regulatory risk. Revenue transparency requirements could significantly impact how investors evaluate platform economics.

The capital and scale requirements for replicating YouTube's model are much higher than previously understood. This explains why direct competitors have struggled while adjacent platforms (TikTok, Twitch) have succeeded by focusing on different economic models entirely.

YouTube Premium represents something larger than just a subscription service - it's a masterclass in platform economics and revenue optimization. The genius lies not in what it does for creators, but in how it strengthens YouTube's entire economic foundation.

Premium subscribers aren't just buying an ad-free experience. They're funding the infrastructure that keeps YouTube free for everyone else, while their subscription fees get redistributed across the platform in ways that prioritize platform stability over creator optimization.

This model is working brilliantly for YouTube but creating fundamental tensions with creators and raising questions about consumer transparency that regulators are just starting to examine.

As the industry watches these dynamics play out, expect more platforms to attempt similar dual-revenue strategies, and more regulatory scrutiny around how subscription revenue gets allocated and marketed.

Creator Sentiment Shift: Multiple high-profile creators quietly diversifying revenue away from YouTube's systems, citing unpredictable Premium economics.

Platform Response: YouTube testing different revenue sharing percentages in select creator partnership programs to address creator concerns.

International Strategy: Premium expanding to emerging markets with ultra-localized pricing, further complicating the global revenue redistribution model.

Competitive Moves: Other platforms studying YouTube's dual-revenue approach but struggling with the capital requirements for simultaneous implementation.

Regulatory Timeline: Industry lawyers expect formal inquiries into Premium revenue transparency within 12-18 months as consumer protection focus increases.