5 reasons why YouTube beat Apple to a skinny TV bundle deal with the networks

5 reasons why YouTube beat Apple to a skinny TV bundle deal with the networks

Yesterday, Google debuted YouTube TV, giving wannabe cord-cutters a reason to finally do so.

The obstacle for over-the-top television (OTT) has been the lack of news, sports and live TV.  Now, with YouTube TV, subscribers get live TV streaming of 44 channels, including ABC, CBS, FOX, NBC, ESPN, plus two add-on channels.

YouTube beat Apple to the streaming TV punch, delivering a cable TV-like skinny bundle at a lower price of  $35 per month. Apple has long been rumored to be interested in the disrupting the TV market, though it was reported that Apple walked away from negations about a year ago.

Here’s how YouTube/Google was able to beat Apple:

1. Google is an infrastructure company and can deliver TV to ISPs; Apple cannot

Outside of the Google Fiber markets, YouTube will be riding the rails of other ISPs who will no longer deliver TV via antiquated set-top boxes. Cable network ISPs could be the big loser with this development as consumers cancel the TV part of their subscriptions, but the ISPs will continue to broadcast the internet to YouTube households.

Apple is not an infrastructure company like Google. Google delivers 5 billion low-latency videos per day, in an average month eight out of ten 18- to 49-year-olds watch YouTube, and the daily number of mobile YouTube videos is over 1 billion per day, according to Fortunelord.

That is a pretty good sales pitch to the TV networks, but more important, Google has the technical talent and the infrastructure to host, broadcast and partner with many networks to deliver video to consumers through the edge network ISPs. It had to build this infrastructure to deliver its diverse ecosystem of products. 

Apple, with its myopic shopkeeper focus on making big margins on iPhones, has built limited infrastructure only for its Apple customers' benefit. Apple does not have an attractive ecosystem or capable infrastructure to ride on the rails of the ISPs.

2. Unique features built on Google’s technology assets that will improve the TV viewer’s experience

YouTube, using Google’s assets, will deliver two unique features. Using Google’s massive infrastructure, it will provide unlimited DVR storage so that consumers never have to decide to delete a recorded show. Google’s search and machine learning expertise will be applied to help consumers find what they want to watch. And using Google’s expertise in machine learning, YouTube TV will make accurate recommendations from available content for what the user might want to watch. Say goodbye to the ugly remote and its terrible user interface.

3. Chromecast is the leading TV streaming device; Apple TV trails in fourth place

With Chromecast, in a way Google is a TV network. It shipped 30 million Chromecast devices as of last summer. It is likely that there are now more than 40 million displays connected with Chromecasts. Video streams can be directed to the Chromecast from a variety of platforms, including iOS, Android, Windows and MacOS. Google’s offering will be available on all screens in consumer homes.

Apple TV works only with Apple devices and computers. It adds up to a much smaller market for the TV networks, producing less revenue. eMarketer forecasts robust growth for all the industry streaming device makers except Apple.

connected tv users by device

And Apple does not place in the streaming video business while YouTube leads.

ott video services

4. Google Analytics can bring advertising accountability and prediction to TV advertising

Google is first and foremost an advertising company. The company’s analytic tools granularly measure the ROI of its ads, its advertising network’s ads, mobile ads, and traffic and campaign responses on many websites.

This is different in TV land. There is a saying in the advertising business: “Half the ads work, and the other half does not. The problem is we just do not know which half works.” TV ad buyers have really only had static data from Nielsen based on polling TV viewers and coarse-grained ad targeting from the cable service providers to choose which ads to run, as well as when and where. It is not very scientific. Google analytics can, with some work, determine how effective an ad was in a single household. More important, with their trove of search data and machine learning, the best ad can be predicted and shown to a household or individual user at a specific time.

Right now, the major role of the big advertising firms is buying large blocks of TV advertising and selling it to their clients with only foggy accountability. Madison Avenue and Apple cannot help networks increase the value of the advertising minutes that they sell. Google can. With precise ad targeting, they might even be able to help the networks increase their profitability per minute of advertising, helping them reduce the total amount of adverting per hour, thus keeping TV views glued to their screens.

5. Hollywood does not respect Apple TV 

Earlier this month Apple hired Tim Twerdahl from Amazon’s Fire TV unit to revive the struggling Apple TV business, which explains why the networks did not want Apple as partner. 

In an interview with E-Commerce Times, Michael Jude, program manager at Frost and Sullivan, explained some of Apple’s Apple TV woes

  • “Apple's entry into home video was completely botched."
  • "It waited until the market had been pretty much defined by others, then came in with an overpriced product with substandard content."
  • “Consumers shied away from Apple TV because it fell far behind its rivals in terms of a value proposition. It then attempted to sell video content through the iTunes model, which didn't work well.”
  • "Consumers will accept a high price if they get a premium level of content. That means Apple will need to provide live-streaming video from the usual sources, plus invest in unique content that users want."

In the same E-Commerce Times story, Tim Mulligan, senior analyst at Midia, said: "The networks were wary of having an iTunes for TV proposition on their hands."

Though Apple is an icon of product design, Hollywood has as not forgotten how their record label brethren were capsized by pirated music and with iTunes, how Apple capitalized on their decline. TV executives do not want to follow the same path as the record labels. 

The big losers in this development are Apple, the cable TV networks and potentially Madison Avenue.

Copyright © 2017 IDG Communications, Inc.

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