YouTube Unplugged could be a serious threat to the likes of Netflix and just a bunch more traffic for operators to carry.
YouTube Unplugged Online TV Service set for 2017. YouTube Unplugged is planned to be a paid subscription service that would offer customers a bundle of cable TV channels streamed over the Internet. YouTube Unplugged will be YouTube’s own over-the-top (OTT) cable service.
The cable industry is in the midst of a generational shift, and YouTube is the latest name trying to cash in on this moneymaking opportunity. YouTube is reportedly in the midst of developing its own Internet-based cable TV service, an area in which it has long expressed interest. The project, for which YouTube has already overhauled its technical architecture, is one of the online video giant’s biggest priorities and is slated to debut as soon as 2017.
YouTube, a unit of Alphabet Inc.’s main Google Internet business, is pursuing subscriptions for premium video to complement the largest ad-supported video site in the world. YouTube introduced its first paid subscription service, “Red”, last fall. YouTube Unplugged would bring more premium content onto YouTube’s web service and mobile apps, grabbing more viewing time and generating revenues that are non-advertising revenue.
However, investors in the search giant would do well to moderate their expectations. Google’s attempts to bring cable to YouTube appear far less likely to succeed given several recent developments within the cable industry.
If YouTube launches it will be after DISH Network Corp. and Sony Corp. have already introduced online TV services. Apple Inc. and Amazon.com Inc. are working on similar proposals.
“We aim to provide more choice to YouTube fans — more ways for them to engage with creators and each other, and more ways for them to get great content,” Sundar Pichai, Google’s chief executive officer, wrote in a letter to Alphabet shareholders last week. “We’ve started down this journey with specialized apps like YouTube Kids, as well as through our YouTube Red subscription service.”
YouTube has discussed different ways of packaging TV channels, the main package planned is a “skinny bundle” that needs to include the 4 U.S. broadcast networks and some popular cable channels. However, the price is not final because the broadcast networks expect a large share of the revenues per subscriber.
YouTube has also discussed offering a collection of less-watched TV channels and creating smaller groups of channels around themes. A YouTube Unplugged comedy bundle might include three or four TV channels such as Comedy Central, while a lifestyle bundle might include the Style Network.
With the number of subscribers in decline for cable channels such as Walt Disney Co.’s ESPN, Time Warner Inc.’s TNT and Viacom’s MTV, media companies are hoping skinny bundles can bring back customers, especially young ones. “There is a strong consumer demand for the skinny bundle of 15 channels to 30 channels,” Moonves said. “Many viewers would rather pay for only those channels they actually watch.”
However, the cable companies and networks such as Comcast, Twenty-First Century Fox, and Walt Disney are also creating and distributing their own skinny bundle services. In doing so, the networks and cable companies should be able to capture a greater percentage of the subscription revenue than if they simply licensed their content to third-party distributors such as YouTube Unplugged or Apple. Comcast, Twenty-First Century Fox, and Disney, their ownership of Hulu may make YouTube Unplugged a bit late.
With the coming changes to the set-top-box space likely to dismantle another key source of cable industry revenue, the cable companies and networks probably are in no mood to enable tech companies such as Alphabet and Apple to compete with them. So while You Tube appears intent on breaking into the cable market, the lack of cooperation from the cable industry could signal that the shift from cable to Internet-based TV services might not flow through to tech companies after all.