Read this excellent article from the NY Times: Big change coming, driven by YouTube, in the the disruption resistant TV broadcast industry.


Rob Davis

YouTube Unveils Subscription Television Service


FEB. 28, 2017

YouTube Unveils Subscription Television Service

SAN FRANCISCO — It’s hard to imagine from watching the first video posted on YouTube — a 19-second clip from 2005 of one of the company’s founders standing in front of the elephant cage at the San Diego Zoo — that the service one day could alter the media landscape.

By popularizing video watching over the internet, YouTube, which Google bought in 2006, started the ball rolling on so-called cord-cutting, the practice of consumers’ abandoning cable and satellite television subscriptions for web-based video services. YouTube’s latest move, announced Tuesday, highlights how far it has come as well as the challenges in trying to replace cable and satellite TV.

The company said it planned to introduce a new subscription service called YouTube TV in the next “few months,” offering more than 40 channels including all four major networks, Disney Channel, FX and ESPN, for $35 a month. The subscription includes the ability to store an unlimited number of programs on a cloud-based digital video recorder for up to six accounts.

“YouTube TV represents an effort to evolve television,” said Susan Wojcicki, YouTube’s chief executive.

Once vilified by media companies as a magnet for pirated video, YouTube is now embraced by Hollywood and other content creators. Almost every movie trailer or music video is released onto YouTube; all major sports leagues upload highlights there; and networks supplement traditional programming with videos that can be shared, like the talk show host James Corden’s “Carpool Karaoke” series.

But YouTube is now wading into the complex web of broadcast television, which has tripped up other technology companies seeking to break the grip of pay TV providers.

It’s an arduous and tedious process that demands securing deals with media conglomerates hoping to bundle its popular channels with less attractive offerings. It also requires ironing out agreements with the big four networks — NBC, ABC, CBS and Fox — and local affiliates that carry that network programming.

It appears that YouTube is grappling with both of those issues. It did not announce a specific start date, and the company said it would roll out the service first in markets where it had secured rights from local affiliates. It also did not identify those markets. And YouTube TV is missing some popular channels, like Time Warner’s HBO, CNN, TBS and TNT; Viacom’s Comedy Central and MTV; and Scripps Networks Interactive’s HGTV and Food Network.

YouTube’s incomplete lineup demonstrates how difficult it is to offer consumers what they want in a TV service while undercutting the prices offered by cable and satellite companies, said Jan Dawson, who runs the technology research firm Jackdaw.

“It highlights how resistant to disruption the TV broadcast industry is,” he said.

YouTube is joining a range of services targeting consumers who want to give up cable or satellite TV without losing access to live television. In the last few years, companies have unveiled competing services like Sony’s PlayStation Vue, AT&T’s DirecTV Now and Dish Network’s Sling TV. That does not include monthly subscription offerings like Netflix, Hulu and or video services from premium TV networks like HBO and Showtime.

One appeal of so-called over-the-top services is that they theoretically offer consumers choice in selecting the channels they watch at a more affordable price than the traditional bundles offered by pay TV services.

However, the ability to cherry-pick channels is limited and the cost of an internet TV service adds up quickly. Most internet TV services offer a basic package of channels and then require consumers to pay extra for tiers of additional channels — similar in practice to pay TV offerings. In addition, there is the additional cost of paying for an internet connection — something that cable and satellite TV companies bundle with the cost of television.

One advantage for YouTube is that it is already the place where many young consumers who have never paid for a cable or satellite TV subscription get their content. On Monday, YouTube announced in a blog post that its viewers were watching more than one billion hours of videos a day.

The huge audience flocking to YouTube, acquired by Google for $1.65 billion, makes the service one of the most valuable properties of Google’s parent company, Alphabet. While Alphabet does not disclose YouTube’s revenue or earnings, the potential to turn that audience into dollars through advertising or subscriptions represents a major opportunity.

The research firm eMarketer estimated that YouTube generated $5.6 billion in advertising revenue for Google last year and projected 20 percent growth in 2017.

YouTube has also started offering an advertising-free subscription version, YouTube Red, that also includes access to the company’s original programming — mainly programs and movies from the service’s internet-famous stars.

A version of this article appears in print on March 1, 2017, on Page B2 of the New York edition with the headline: YouTube to Seek Cord-Cutters With Subscription TV Service. Order Reprints| Today’s Paper|Subscribe

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