Why has the Disney, nee ESPN, standoff with YouTube TV gone on so long, now around two weeks, with ominous comments from the Mouse’s CFO today suggesting the blackout could go longer (writing this almost surely means the sides will settle shortly!).
This is already one of the longest blackouts stemming from a contract dispute between a pay TV distributor –YouTube TV – and a content company, Disney. There are a few reasons why YouTube TV subscribers have been shut out from watching Monday Night Football and SEC football–not to mention the local ABC affiliate and even National Geographic channel. Obviously money is the primary concern, but there are others too.
First off, YouTube TV is a division of Alphabet, the corporate name for Google. While YouTube TV with its 10 million subs may be a big deal in the pay TV business, it is not the major money center for Google, not by a longshot. This is not to say YouTube TV is playing hardball because of this, but the pressing need for a deal may be a little different than for those pay TV distributors whose primary business is just that.
“There’s a real question about, in my mind, where this fits in, and Google’s priority structure,” said Patrick Crakes, a media analyst. “Everybody keeps thinking, this is some kind of crown jewel right within our business. Because to us, it is.”
For Disney, the negotiation must be looked at in the context of a post-Venu world, Crakes continued. By that he means, look to the 2024 unraveling of the planned sports streamer app that Disney, Fox and Warner Bros. Discovery tried unsuccessfully to launch. Venu was viewed by the trio as the solution to losing sports fans to the digital universe. Now Disney has pivoted to a multi-faceted approach from a digital pay TV outlet like YouTube TV to its own direct to consumer app launched a few months ago.
“Disney is evolving itself,” Crakes said. “Now, finally, right after the failure of Venu, and part of that was investing in the biggest and best sports across multiple different platforms, and offering some of the stuff outside of it so it can be rebundled as well, but trying to get as many distribution points open as possible, with the understanding that the main one remains pay TV, and the most important new one is YouTube TV.”
YouTube TV is what’s known as a vMVPD, a virtual multi video programming distributor. The traditional distributors – Comcast, Charter and so forth – are plain old MVPDs, carried on linear. What’s interesting here is that Disney has not told YouTube TV to take it or leave it. The new direct to consumer ESPN app could be seen as leverage, a way for YouTube TV subs to get their ESPN fix without the parties agreeing to a deal.
But that is not happening, at least in great numbers (as an aside whenever you see the estimates for what Disney is losing in sub fees, remember some of that is offset by Hulu+ and ESPN the App gaining subs out of this). Company officials on the earnings call today said the primary source of new subs to the ESPN app are cord nevers, or people who never bought a bundled channel package, whether digitally or on linear. The supposed elimination of the middleman MVPD and vMVPD is not happening, at least not yet
“For a long time people told you… it was going to be direct to the consumer, cut out the middle man,” Crakes said. “Middle man’s never been bigger.” And next year Disney is scheduled to close its purchase of Fubo, adding another vMVPD into the entertainment conglomerate’s platform mix.
About Daniel Kaplan
Daniel Kaplan has been covering the business of sports for more than two decades. A proud founding reporter of SportsBusiness Journal, he spent the last four years at The Athletic.