Why Google doesn’t need Youtube TV to succeed

LightShed Partners Rich Greenfield joins Yahoo Finance to discuss which company will come out on top in the ‘age-old battle’ between distributor and programmers and NBC’s hardline approach to Youtube TV on adding a TV bundle including Peacock.

Video Transcript

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BRIAN CHEUNG: Welcome back to Yahoo Finance Live. A little bit of drama playing out in the media industry as NBCUniversal is now in a spat with Google's YouTube TV over an affiliation agreement that will expire tomorrow, with no signs yet on a new deal being inked. That could threaten the availability of NBCU on the YouTube TV platform.

So let's bring in Rich Greenfield at LightShed partners for more on this. Rich, what do you see as the major issue that's kind of standing between these two parties, and what do you ultimately think will be the outcome here?

RICH GREENFIELD: Look, these discussions are always complicated. It's never just about money. I mean, yes, it's always about money but it's more complicated. In this case, Peacock is playing a major role. NBCUniversal is obviously trying to make Peacock the success that Disney+, and Netflix, and even HBO Max has been to date. And I think you know, Peacock is certainly struggling in terms of subscriber adoption outside of the Comcast footprint where you essentially get it for free if you're a Comcast subscriber.

And so I think what Comcast is doing is saying, hey, just like a channel, so think of it as NBC, or Bravo, or USA Network. Hey, if you want to renew our deal, if you want Sunday Night Football, you've also got to jam in Peacock and pay us for all of your subscribers. So for the 4 million subscribers of YouTube TV, they're saying pay us for Peacock.

And Google's going wait, Peacock is an over-the-top service. It has nothing to do with the multichannel bundle. In fact, a lot of the programming that you watch inside of the bundle is on Peacock now. Sunday Night Football is on Peacock, next-day TV, just like Hulu is now on Peacock. And so I think Google is like you want us to pay twice for the same programming, and why would we put over-the-top programming that you can subscribe to individually without the big, fat, ugly bundle, why would we jam that on all of our subscribers? If people want to sign up for Peacock, it's a click away on their phone or connected TV.

And so this is a new wrinkle in what I would call this age-old battle between programmers and distributors. This is one we've probably never seen before, pay us for an over-the-top streaming service as part of the cable bundle. That's a new one.

JULIE HYMAN: And Rich, it's Julie here. As you said, it's age-old. We're used to seeing this back and forth, right? And people getting upset about not having access to the program if indeed there's a blackout. What it usually comes down to is power, right? Who holds the power in that dynamic. In this case, is YouTube going to win out because NBC needs them?

RICH GREENFIELD: Well, look, I think what's interesting, right, is I don't think there's any Google investor, I mean, I'm sure you've talked Google many times on this program over the last decade-plus, if not two decades, right? I don't think there's ever been a Google investor that says, oh, I care-- they care about YouTube but I don't think there's any Google investor that cares about YouTube TV. I mean, if YouTube TV literally shut down tomorrow, all 4 million subs disappeared tomorrow, my guess is Google investors would like not even know. They might even be happy because they probably don't look at it as a very profitable business.

So the reality is, Google doesn't need this. Are there reasons why YouTube TV is very helpful to YouTube? Absolutely. It helps bring advertisers into the overall YouTube funnel. Connected TV is a very big growth avenue for YouTube and obviously, this is a facilitator of that but you know, I think this is one of those interesting battles.

For my whole career we almost always look at this and say you know, distributor generally loses. They fight, they complain, but ultimately, they cave to the programmer because they can't live without in this case, the NFL. But this is sort of different, you can get the NFL on Peacock without even subscribing to you know, YouTube TV or you know, and not having NBC on YouTube TV, you can still very easily get access to the NFL game but more importantly, you know, I think the reality is Google doesn't have to budge here because Google will survive and be fine.

I think on the flip-side, Comcast NBC, this is 5% of their sub base now. I mean, that's a pretty big number. I mean, YouTube is the biggest virtual MVP, the virtual cable system in the country. It's sort of hard to imagine them losing 4 million subscribers, I'm sure some of them will go to Hulu Live maybe even some will go back to Comcast but subscriber losses are already a problem for the industry. And so my guess is what happens here is it, may not happen before Thursday night when you mentioned the deadline is but I would suspect over the course of the next month ultimately, Peacock moves out of this conversation and a deal gets done.

JULIE HYMAN: Rich, to take a step back for a minute, does YouTube still make sense as part of Alphabet, as part of Google?

RICH GREENFIELD: I mean, YouTube is an incredible business. I mean--

JULIE HYMAN: It is. But is it even being valued as part of Google? Is there any case to be made that it should be a standalone?

RICH GREENFIELD: Maybe. I guess the point is it leverages all of the knowledge and learnings and power of Google across all devices, all around the world. So you're basically saying you know if you didn't have all of the other data that goes into building the YouTube algorithm and the YouTube ad targeting, you know, I tend to believe that holistically putting it all together creates more value.

It is worth just considering for a second that you know, Roku with a, you know, a small fraction of YouTube revenues is a, you know, $50 billion-plus company. You just sort of think about what YouTube would be worth. I mean, YouTube is probably a half a trillion-dollar company on its own. It's just sort of staggering to think about.

And look, its low-20s percentage of time spent on connected TVs is YouTube. Like only thing bigger on connected TVs in the US is Netflix. But YouTube dwarfs Hulu. YouTube dwarfs Amazon Prime. YouTube dwarfs Disney+. On the TV, it's not just a phone-based app, YouTube is a dominant player in connected TVs. And I don't think investors give that enough credit at all.

BRIAN SOZZI: Rich, you mentioned Peacock is struggling. Do you think ultimately Peacock is the odd person out here and that streaming platform just won't make it?

RICH GREENFIELD: Look, again, Comcast is doing amazing. I mean, Comcast is crushing it from a broadband standpoint. I mean, they have an incredible broadband pipe, their subscriber numbers are you know, yes, they were a little softer this quarter than expected or they're going to be a little softer than expected in Q3 but it has been an incredible broadband story and investors are buying Comcast and Charter and all of these cable stocks for broadband. They're not buying it for Peacock. They're not buying it for NBC. I mean, in fact, if Comcast spun off NBC and got out of the NBC business the Comcast stock would soar. Like no investor even wants them in the content business, let alone spending in the Peacock business, I mean, that's just the reality.

Look, I think you're shaping up to where there's a few major players. Obviously, you've got Netflix, you've got Amazon Prime, you've got sort of the Disney bundle as they call it, you know if you think about Disney+, Hulu, and ESPN+ together. And then you have sort of the two ones that are closing in on being really meaningful, obviously, HBO Max, and Apple TV+. I think when you look at Paramount+ or Discovery+ or Peacock, they're still very much in the starting gate and overall watch time is you essentially de minimis.

BRIAN CHEUNG: All right. Well, I got to say that you've actually lit up our Yahoo Finance chat over here with which streaming services and video platforms are catching our Yahoo Finance newsroom's eyeballs. But Rich Greenfield, at LightShed Partners, thanks for all of that.