When National Geographic started looking into alternatives to cable, it found an as-yet-unreleased product that might be a good fit: YouTube paid channels.

The National Geographic Society was in a quandary. It knew it wanted to launch a video channel for kids based on the success of its children's magazine and games, but wasn't entirely sure which platform to use. The company initially considered creating another cable channel, but it wasn't convinced that advertising — the main source of revenue for TV channels — was the best business model when going after that type of audience.

Instead, National Geographic started looking into alternatives to cable, including reaching out to YouTube last August. National Geographic had found great success in the past publishing clips on YouTube, but the video site said there was no way to monetize a video channel other than through ads. But in October, YouTube got back in touch with National Geographic to propose its new YouTube paid channels.

Even at that time, YouTube's plan to introduce a paid subscription model was one of the worst-kept secrets in tech. Google, the parent company of YouTube, first signaled interest in the concept in late 2011 with a patent application for a "self-service channel marketplace." During the next few months, execs at the company repeatedly teased the idea in public, with YouTube's CEO Salar Kamangar noting last June that there was demand from smaller networks for this feature.

However, it wasn't until the fall of 2012 that YouTube started contacting content providers to be part of the launch, according to several sources familiar with the situation. In those conversations, YouTube emphasized that it wanted to move beyond "one-off videos" and viral hits, and build a new generation of successful channels that content creators could build businesses around.

"The general pitch was, 'Hey, here's a new business model to experiment with and hopefully it will be successful. With the audience we've got and the right partners, it could be something big,'" said Adam Sutherland, National Geographic's SVP of corporate strategy and development.

For National Geographic, the new service offered the promise of a way to monetize kids' videos from the start with subscription revenue rather than ads. National Geographic ended up being one of about 30 content companies to partner with YouTube for the launch of paid channels on May 9. Collectively, those companies created just more than 50 channels, ranging from concert footage to instructional videos to kids content.

The Long Road to Paid Channels

The introduction of paid channels may have seemed inevitable as YouTube evolved and looked for new revenue streams, but it wasn't as simple as flipping a switch or adding in a couple lines of code.

Around the same time that Google's patent application was published in late 2011, YouTube introduced a major redesign that made channels more prominent and provided more templates for channel creators. Google also pumped hundreds of millions of dollars into creating and marketing dozens of ad-supported premium video channels in 2011 and 2012.

These initiatives helped lay the groundwork for paid channels, but it took time to integrate a paid subscription product with these other efforts, according to a source familiar with YouTube's thinking.

Behind the scenes, the team at YouTube spent months talking with content creators and deliberating internally about how best to implement transactions on the website. While YouTube had previously introduced rental products on the site, paid subscriptions took the company into new territory and involved more players.

"This product in particular does involve transactions, so there was a lot more discussion that had to happen to get the product right and make sure it integrates across YouTube right," the source said.

For the launch, YouTube settled on just using Google Wallet for payments, though we hear it will likely add additional options in the future. Paid subscriptions ranged from $0.99 to $7.99 per month, and according to the source, it is taking the same cut from subscription revenue as it previously did with ads through its partner program. The cut that YouTube takes may vary somewhat from company to company, but the media brand always ends up with the majority of the subscription revenue.

The paid channels introduced earlier last month were part of a pilot program rather than a full-fledged launch with the goal being to "introduce the concept" of paying for content, according to the source, before eventually launching the real centerpiece: a self-service option that would let more YouTube partners create paid channels.

It's a pilot program, but one that carries a fair amount of risk — at least for some of the content creators.

A Trial Run With Risks For Some

YouTube arguably doesn't have too much to lose from testing the idea of paid channels, but the same can't be said for some of its early content creators who have invested time and resources to build up their channels. Most of the content companies YouTube selected for the pilot program aren't broadcast behemoths like Viacom or Turner, but smaller businesses.

Big Think, a publishing startup that focuses on big ideas, committed some 30%-40% of its production resources to managing and creating content for its paid channel, Big Think Mentors, according to Jason Gots, an editor at the website. (Disclosure: I have contributed several articles to Big Think in the past.) Likewise, at National Geographic, a non-profit, five to eight full-time-equivalent employees spent the vast majority of the past three months working on the paid channel.

Most of the half-dozen companies we spoke with described their initial subscriber numbers as modest, but noted that they hadn't actively started promoting their own content externally and that YouTube only began promoting paid content to users as suggested videos on the website last week. Some companies have also seen mixed reactions from viewers to the idea of paid channels in general.

"YouTube is a place where people want free content," Gots says. "We are seeing people react [in the comments], not to us specifically, but to the fact that it costs money." He added: "We don't think that would happen on Amazon, for example, or iTunes. We are seeing fear that everything will be behind a paywall."

Still, the content creators we spoke with are prepared to sit tight throughout YouTube's gradual rollout of paid channels. Sutherland says that National Geographic plans to stick with the program for "at least" two years, though he admits that by the end of this year, his team will start assessing whether it's on a "trajectory toward profitability."

Gots, from Big Think, echoed this thinking, though he didn't put a hard timeline on it. "There's a large element of the unknown here for everybody," Gots says. "Obviously, we would have to carefully evaluate to what extent this would be a sustainable model."

Even if the YouTube paid channel doesn't end up taking off, Gots says, "We own the content regardless."

Mashable composite, image via iStockphoto, mikkelwilliam; logo courtesy of YouTube