Negotiating for local broadcast affiliates has been a nightmare for vMVPDs. Recent moves by ABC, CBS, Fox, and NBC should make things easier. But it likely won’t help the profitability for services like YouTube TV.
YouTube TV expands availability
Last week, YouTube TV announced availability in 10 new markets. This brings to 15 the total number of regions with access to the virtual MVPD service. It is now available in Atlanta, Charlotte, Chicago, Dallas-Fort Worth, Detroit, Houston, Los Angeles, Miami-Fort Lauderdale, Minneapolis-Saint Paul, New York City, Orlando-Daytona Beach-Melbourne, Philadelphia, Phoenix, San Francisco Bay Area, and Washington DC.
YouTube TV may appear to be the laggard in availability among its peers. Subscribers can already access services like Sling TV and DirecTV Now nationally. So, why is YouTube TV so far behind? The service has committed to releasing only in markets where it can deliver the four primary national broadcasters: ABC, CBS, Fox, and NBC.
Until recently, getting all four of the channels carrying the big four broadcaster content was a Herculean task. A service provider would have to go market-by-market in many cases to negotiate with individual broadcast affiliates. It would also have to negotiate with bigger media conglomerates like Hearst and Sinclair to secure affiliate stations they own. And many stations and media conglomerates were in no mood to negotiate with online providers at all.
That was until earlier this year when the national broadcasters began to take a different approach.
National broadcasters look to bring local affiliates along online
In April of this year, ABC and NBC separately announced they had reach agreement with their affiliates to make it much easier for services like YouTube TV to include locals. Under the deals, ABC and NBC can negotiate on behalf of the affiliate with a virtual MVPD for the addition of the channel to the service. CBS followed suit with a similar deal in May.
Fox is taking a more aggressive stand with its affiliates that will not participate in such a joint bargaining agreement. It has created a national feed of its broadcast network which it is offering in 70 markets through Hulu Live where it has not reached an agreement with its local affiliate.
A better deal for vMVPD, affiliate
This couldn’t have come at a better time for YouTube TV. Only having to negotiate once with each national broadcaster saves the company a huge amount of time. Assuming it can come to reasonable terms, it should be able to move quicker with its national rollout.
It’s likely this is a better deal for the affiliates too. ABC, NBC, Fox, and CBS should be able to get a better overall deal with YouTube TV than they could on their own. The only issue for the affiliate is if it is happy with the split of the license revenue it gets under the deal. Many of Fox’ affiliates are not happy with this split, and that is why they have not signed on to the joint bargaining agreement.
Local channel costs still a problem
For vMVPDs like YouTube TV, the inclusion of local broadcast channels could be a Faustian bargain. Many surveys and studies show that consumers consistently list ABC, CBS, Fox, and NBC in their top 10 must-have channels, However, those very same broadcast channels are among the most expensive for vMVPDs to provide. That means at $35 a month for 40 channels including the big 4 broadcasters, YouTube TV isn’t making any money, and may well be losing money on each basic subscriber.
That said, provided YouTube is willing to stay the course, it should be able to move faster with its rollout than it has so far. Expect it to announce service in many more markets in the coming weeks and months.
Why it matters
Getting the big 4 broadcasters in each TV market has been virtually impossible for new entrants like virtual MVPDs.
New agreements between ABC, CBS, Fox, and NBC and their affiliates should make it much easier to negotiate the necessary licenses.
The cost of these channels in the vMVPD bundle will continue to be a big challenge at the prices many are charging consumers.