YouTube TV reaches 50% of US population
YouTube TV announced it has launched in a further 14 markets, adding to the original five markets it previously supported. The new markets are Baltimore; Boston; Cincinnati and Columbus, Ohio; Jacksonville-Brunswick, Fla.; Las Vegas; Louisville; Memphis; Nashville; Pittsburgh; San Antonio; Seattle-Tacoma; Tampa-St. Petersburg-Sarasota; and West Palm Beach-Ft. Pierce, Fla.
The company says it will launch in further 17 markets in the coming weeks. With a total of 36 major metropolitan markets covered, its reach will increase 64% of the population.
New broadcaster affiliate agreements benefit YouTube TV
YouTube TV’s progress is remarkable considering the company promised it would not launch in any market that it could not deliver the top four local broadcast channels. Previously, negotiating the appropriate licenses was a Herculean task.
A licensor would have to go market-by-market negotiating with each independent affiliate separately. Also, it would have to negotiate with big affiliate groups such as Sinclair Broadcasting and Hearst Television. Then it would have to further negotiate with the big four networks to get their owned-and-operated station.
However, YouTube is the beneficiary of a new approach by the broadcasters. ABC, CBS, Fox, and NBC have reached an agreement with many of their affiliates to negotiate a deal on their behalf with licensors such as YouTube TV. Stations can opt-out of these agreements if they like, but looking at YouTube TV’s rapid progress, it appears most are choosing not to.
YouTube TV is certainly making a loss
YouTube TV channel bundle cost
The lowest cost of YouTube TV’s channel bundle
Being able to get the licensing done is one thing, but getting a good deal is quite another. The best license rate that YouTube TV could have expected to get from content providers is what traditional pay TV operators currently pay. Using estimates for those numbers, the 48 channels I receive from YouTube TV in San Francisco Bay Area would cost $34 a month.
However, YouTube is likely paying more than big operators like Comcast. Bob Iger, Disney’s CEO, mentioned that the license fees he sees from vMVPDs like YouTube TV are slightly higher than for regular operators. How much more is anyone’s guess, but even a 5% premium means YouTube is paying more in license fees than it is receiving in subscriptions.
YouTube TV can probably sustain these losses while subscriber numbers remain low. However, if the service takes off, things could get very ugly for the service.
About the estimates
Many of the channel license fees I obtained from SNL Kagan estimates for 2014. I corrected these numbers by applying a 35% increase. ESPN license fees increased from $6.04 in 2014 to $7.86 this year, a 30% increase. Comcast content license fees increased 35% between Q2 2014 and Q2 2016, while Dish’ increased 80%.
I also consulted the site whatyoupayforsports.com for current estimates of the license fees paid for major sports channels. I also used other SNL Kagan estimates for retransmission fees paid to owned-and-operated and affiliates of the major four broadcasters. These numbers gave an average cost for the four broadcasters ABC, CBS, Fox, and NBC.
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