When the world’s largest online silo of video content decides to come out and launch its own TV subscription service, including sought after live sports content, it’s not just the traditional pay TV industry which should be concerned, but the streaming giants too. YouTube TV is here and Apple has to return fire.
YouTube’s much anticipated TV service will roll out to the major markets in the US later this spring, and at a premium price point of $35 a month, the new service is a direct threat to AT&T’s DirecTV Now, Dish Network’s Sling TV, and Sony’s Vue. At present, it will first launch in the US, but Google will be angling to get rights to take this international.
YouTube TV will launch with a skinny bundle of 40 channels combining networks from broadcast and cable, including ABC, CBS, Fox, NBC, ESPN, Bravo, Disney Channel, Fox News, FX, MSNBC, Sprout and USA Network. It will roll out as a standalone app with six accounts available per subscription, and includes unlimited cloud DVR storage with no fixed term contract, allowing subscribers to cancel at any time.
Even at a monthly fee of $35, YouTube TV’s profit will be minimal given the carriage costs of these major networks, but converting just a fraction of its 1 billion viewers to paying members will chip away at the market share of cable and satellite TV. In fact, YouTube also announced this week that it now receives over 1 billion hours of video views on a daily basis. In comparison, Nielsen data suggests the entirety of US TV has a daily viewership of around 1.25 billion hours, a figure steadily dropping in recent years.
Apple’s failure to take control of the viewing experience has been well documented, having struggled to strike content deals. Apple was never going to compete directly with YouTube itself, but there’s no doubt it should have launched its own subscription TV service sooner, and it has long been rumored to be looking to acquire a major content company.
At Apple’s earnings conference last month, CEO Tim Cook noted that the company is exploring original content options for Apple TV, but original content is something YouTube has no issue with, and has already launched its own original content subscription service YouTube Red.
In the YouTube TV offering, there are a few missing names of popular channels such as the Discovery Channel, as well as the channels owned by pay TV operators such as Viacom, AMC and Time Warner. Once it builds up a head of steam, these channels may join in, rather than get left out in the cold as its audience grows.
YouTube’s dominant position in online video is likely to make YouTube TV a huge success, coupled with the convenience of using YouTube as a live TV source appealing greatly to the Android smartphone market, as well as users of Chromecast streaming dongles. Even Apple super fans would be tempted, particularly if YouTube TV launches on Apple TV devices, something yet to be announced. YouTube may want to write an App for Apple devices, but then it would have to give away 30% of its revenue to Apple.
Alphabet’s Google has been interested in NFL rights for years and it certainly has the cash to start bidding for NFL streaming rights next time around, which would be a great way to jump start adoption of YouTube TV. However, all streaming services currently hit a barrier when it comes to watching live NFL games on mobile devices, as Verizon holds these rights exclusively. But what if Verizon decided to partner with YouTube TV and add those games as a premium?
YouTube has not yet announced any deals with pay TV operators or manufacturers to integrate the app onto set tops or smart TVs, but we expect it to forge some partnerships in the coming weeks, particularly given Comcast’s YouTube-focused news this week (see separate article in this issue).
YouTube TV has been two years in the making, according to Product Chief Neal Mohan, who has “bigged up” the quality of service compared to similar offerings from competitors, highlighting “reliability and scalability – more than likely a dig at DirecTV Now which has been plagued with technical issues since launch. It will also include its own Google AI-powered recommendation engine, likely to be using technology from Google’s British AI subsidiary DeepMind.
The $9.99 a month ad-free subscription service YouTube Red, which launched towards the end of 2015, has not been reported as a huge success, so the company is bundling Red into the YouTube TV package for no extra cost, along with Google Play Music.
“There’s no question that people love TV, from live sports to breaking news to sitcoms and dramas. But the truth is, there are a lot of limitations in how to watch TV today. Unlike online video, people can’t watch TV when they want, on any screen and on their terms, without commitments. Consumers have made it clear that they want live TV without all the hassle. They don’t want to worry about their DVR filling up. They don’t want to miss a great game or their favorite show because they’re on the go. They tell us they want TV to be more like YouTube,” said the company in a statement.