Disney and YouTube TV: Who won the carriage war?

On Friday night, out of thin air, Disney and YouTube TV reached a deal to restore Disney-owned networks to the platform after a two-week blackout. It was a fitting end to a carriage dispute that many thought would be a formality prior to the Halloween deadline, before at least one industry consultant speculated a deal may never be reached as the battle dragged on.

So in classic Friday news dump style, the two sides finalized an agreement, about one day after the soft deadline of Disney’s quarterly earnings call.

At this point, readers are well aware of what was at stake. The dispute was written about ad nauseam. YouTube TV, with its unique status as the only pay TV distributor that is actually growing amid secular declines in the industry, wanted its rates to reflect that status. Disney, with its massive portfolio of valuable (and expensive) live sports rights, wanted rates that justified its investments, and wouldn’t trigger clauses in its other distribution contracts that would force it to give lower rates to other companies.

But, as many onlookers have learned throughout recent carriage disputes, there are other ways to drive value in these distribution agreements that aren’t directly tied to price. In the digital age, those finer details can actually be the very things that matter the most when all is set and done.

For Disney and YouTube TV, those battles were fought on two main fronts: ingestion and bundling.

Ingestion

Ingestion has been the term du jour during this recent spurt of carriage battles. In short, it’s the ability for a distributor, like YouTube TV, to integrate content from the content provider, like Disney, directly in its own platform.

Distributors want ingestion for a number of reasons. It creates a more seamless product because users don’t have to switch apps to access certain content. When users don’t need to switch apps, they spend more time on your app. And when they spend more time on your app, you’re able to collect more data from them.

Of course, content providers, many of whom have invested heavily in the creation of pure play streamers, don’t want this. They want users to spend time on their apps.

The concept is simple, but in reality there are many different ways ingestion can be implemented. For example, in YouTube TV’s recent carriage resolution with NBC, both companies were able to claim wins on ingestion. How? NBC created a new cable network, NBC Sports Network, that will air games which were previously exclusive to Peacock, and YouTube TV will carry that network. NBC also allowed Peacock to be purchased via YouTube Primetime Channels, which lets users purchase and watch Peacock directly within YouTube TV.

In an ideal world (for distributors), YouTube TV would’ve paid a wholesale price for Peacock, and all of its subscribers would gain access to the streaming service’s live and on-demand content directly within YouTube TV. In reality, NBC was able to negotiate that wholesale arrangement for just its sports content, while keeping its on-demand content library separated, albeit still within the Primetime Channels store.

Disney was able to negotiate an even more favorable agreement. Yes, all of ESPN’s content, including everything available on the new ESPN Unlimited app tier, will be available to all YouTube TV subscribers directly within the platform. But Disney was able to hold a firmer line than NBC when it comes to its vast on-demand content library. While Disney+ and Hulu will be available in select bundles with YouTube TV, the content will not be available within the YouTube TV app via Primetime Channels. In other words, users will still need to launch Disney+ or Hulu if they’d like to access that content.

So compared to its peers, Disney scored a slight win on the ingestion front. However, Disney’s most valuable content, at least in terms of the multichannel bundle, is still live sports. And YouTube TV subscribers will be able to watch everything under the ESPN umbrella within the YouTube TV app, which is a big win for the Google-owned platform.

Bundling

The other new-age wrinkle in the world of carriage disputes is bundling. More accurately put, the wrinkle is skinny bundling. Ironically, the idea of a skinny bundle is something traditional cable and satellite distributors have been angling for since the dawn of cord-cutting. Of course, they didn’t become a reality until earlier this year, when a lawsuit from Fubo torpedoed the Venu Sports joint venture between Disney, Fox, and Warner Bros. Discovery, which would’ve essentially allowed content providers to create skinny bundles to sell direct-to-consumer.

Now, the distributor has had its place solidified in the multichannel ecosystem, and genre-specific bundles are making their way to market. YouTube TV will be no different.

As part of its agreement with Disney, YouTube TV will be able to include Disney’s networks in genre-specific skinny bundles, the most valuable of which will be targeted at sports fans.

This is a clear win for YouTube TV, which will now be able to offer slimmed down packages, free of lesser-watched channels like Freeform and Nat Geo, for a more affordable price.

Who won?

Well, it’s not entirely straightforward. Disney, leveraging the strength of its content library, was able to secure better terms for ingestion than its peers, thereby protecting Disney+ and Hulu as standalone streaming services. However, YouTube TV was still able to secure integration for live sports, which is the most important content for its customers. That portion of the dispute can be graded a draw.

The ability for YouTube TV to bundle Disney’s networks into genre-specific packages is a certain win for the Google-owned platform, but one that was expected and not all that contentious. Disney had already agreed to similar terms with other distributors.

Ultimately, who won comes down to price, which is rarely ever reported outside of rough estimates. If Disney was able to secure rates that prevent the company from reducing the rates it gives to other major distributors, that’s a win for Disney. If YouTube TV was able to secure lower rates than traditional cable and satellite distributors (at least when the service passes those distributors by number of subscribers), that’s a win for YouTube TV.

Without knowing, it’s difficult to select one side or the other as a clear-cut winner. However, YouTube TV was able to secure multiple concessions that make its product more desirable for consumers. Having the entire ESPN live sports portfolio available natively inside the app is a huge quality-of-life increase for sports fans. Moreover, the ability to launch a sports-focused skinny bundle at a more competitive price will drive further value for YouTube TV. Both the ingestion and bundling parts of this deal position YouTube TV for the long-term, as Google looks to become the go-to destination for all video, regardless of what you’re watching.

So with the information publicly available, YouTube TV gets the slight edge as “winner” of this carriage battle. But to Disney’s credit, the company was able to protect some of its core assets in the process.