The video giant’s pay TV effort is expanding
Over the last five years, major cable and satellite television providers in the US have lost millions of subscribers, and the trend shows no signs of slowing down. Network television has also seen its ratings slide — even for tentpole products like NFL games, which were once thought of as untouchable stalwarts of American culture. At the same time, the number of customers looking for high-speed internet access has boomed. Comcast, the biggest cable provider in the US, has taken to calling itself a broadband company.
As the worlds of internet video and traditional television collide, YouTube sees a big opportunity. Six months ago, it launched its own take on a pay TV service, a bundle of about 40 channels for $35 a month, spiced up with YouTube’s personalization, an unlimited DVR in the cloud, and some online originals thrown in for good measure. You could watch on a mobile device, computer, or throw it on your big screen with a Chromecast. Today, the company is rolling out a YouTube TV app that will work natively on living room hardware like smart TVs, streaming boxes, and game consoles.
“When we launched the service, we positioned it as a mobile-first product. A lot of that was about breaking the association with the DVR and set-top box, this hardware in the living room you have to rent that gets outdated really quickly. We were trying to get people to grok that this is TV that lives on your phone, a cloud DVR, all of the above,” says Christian Oestlien, product management director at YouTube TV. “What we saw in practice was that the majority of our watch time was in the living room, through Cast. And the number one request we get from consumers is more options, native options, for the living room.”
YouTube TV started out on Google’s living room hardware, the Chromecast. In the next few days it will be available in the app store for any Android TV and Xbox One devices. In the coming weeks, it will be rolling out to the Apple TV, Roku, and smart TVs from Samsung, Sony, and LG; the one notable exception is Amazon, where YouTube has no rollout plans to share. This is a continuation of an ongoing dispute between the two companies that saw YouTube programming pulled from the Echo Show.
A first look at YouTube TV.
The YouTube TV app built for actual television sets doesn’t cut any of the features you find on the mobile version, but it does add a bunch of new ones. Mobile didn’t feature an in-depth programming guide, but the living room experience has one, so you can see what’s playing a few hours in the future. There are also channel pages that show off top picks from network partners, and a “zapper” that lets you scroll through a transparent sidebar of channels while keeping your programming on in the background.
Because voice search is often the easiest option for customers in their living rooms, the team did some work to build structured search queries that are optimized for TV. If you say “show me the game from this weekend,” you’ll get big events like the World Series, and games from teams or leagues it knows you follow. You can also ask for things like “talk shows from last night.” When you enter the app, it presents you with a row of live programming, a row of shows you recently watched, and recommendations of things it thinks you might like. Those recommendations vary based on the day and time. You’ll see more news on a Monday at 6AM, movies on Friday evening, and sports on a Sunday afternoon. This “dayparting” is similar to Hulu’s recommendation system.
Why does YouTube care so much about the living room? While Google is an advertising giant, it knows that its original business, web ads for desktop browsers, is in decline. Mobile advertising is picking up the slack, as are video ads. But the big prize up for grabs is the huge pool of money — more than $70 billion in annual spending — that is migrating from traditional television broadcasters to tech upstarts and digital programming. YouTube wants to be the operating system you rely on for all your television needs, and that means finding a way to offer consumers two things that are still best on TV: live sports and news, especially of the local variety.
YouTube won’t give any hints about how many subscribers it has signed up so far. But it has dramatically expanded its footprint. At launch, the service was available in just five markets. Today, you can get YouTube TV in 50 markets, making it an option for roughly 68 percent of American households.
Internet-enabled pay TV packages from Dish (Sling TV), Sony, and others launched nationally before YouTube got in the game, but not all of them promise that every subscriber can find their local sports and news, because they haven’t done deals with all of the smaller affiliate stations. “We’ve taken a different approach to how we scale,” says Oestlien. “Rather than launch nationwide, we go market by market and make sure we have the four major networks live and fully available. Sports rights are tied into local broadcasts, and we think there is a lot to be said for live local news. The fires in the North Bay were covered on national news for two minutes every half an hour, but local news coverage was in depth, real time, and by far the best.”
Oestlien and his team have worked to forge partnerships at two levels. First, they did deals with companies like Tribune, Sinclair, and Tegna, which own large collections of local affiliate stations. They also went directly to local affiliates to iron out the details and work on infrastructure. To ensure YouTube TV would deliver a clean, lag-free image, the team installed fiber connections in many cities.
YouTube TV is an HTML 5 app, a design decision that came out of work done by Sarah Ali, YouTube’s head of living room products. Ali and her team built the standard YouTube app that runs on smart TVs, streaming boxes, and gaming consoles. “Several years ago, when we began thinking about devices, the first thing we did was take the YouTube API we give to developers and offer that to TV manufacturers,” says Ali. “They built experiences, and they were all very different, and they were often missing features and inconsistent.” To improve things, Ali and her team decided to build all the apps themselves. By relying on HTML 5, they could avoid having to rebuild their app for each operating system. It’s now available on over half a billion devices. You can even find the service on your Comcast “cable” box. “You choose the price you like. YouTube will be there,” says Ali.
The person overseeing Youtube’s product development these days is Neal Mohan, a longtime Google executive who previously headed up its DoubleClick division. He helped scale the company’s search and display ad business to tens of billions in revenue. Now he’s tasked with doing the same in video. All video advertising is pretty high value when compared with traditional search and display, but TV advertising is the juiciest prize. YouTube recently said that users watch over 1 billion hours of video on the service each day, and over 100 million on TV screens. Desktop viewing makes up another 30 percent, and mobile viewing is the biggest at 60 percent. So TV is still by far the little sibling, but it’s also the fastest growing: watch time in the living room climbed 70 percent in the last y
“The question we have wrestled with here is: what is television in the first place? Is it a certain piece of hardware? For most users that’s not a relevant question. It’s access to great video content you know and love. And then it turns out users want to access that when they are sitting on a couch in their family room with a big screen,” says Mohan. “So the initiatives we have are oriented around that. From that point, once you have the large screen, everything else is software. Television for us is not hardware. It’s software.”
Scaling via software can be efficient, but it requires hardware partners who are willing to play nice. Mohan acknowledged that it wouldn’t always be possible to put YouTube where consumers want it, although he wouldn’t discuss Amazon by name. But he argued that this is just the first step in a long campaign to conquer your living room. “This is a multi-year journey across multiple facets of the user experience,” he tells me
Until the launch of YouTube TV this year, the company was always at a disadvantage in the competition for your attention in the living room. “We’ve known for a while that one of the missing pieces in the YouTube story has been around live television,” says Mohan. Now that the company has a way to offer local sports and news, it’s focused on marrying what it does best to traditional TV content. “The presence of YouTube on many of these big screen devices has taught us a lot, and that gives us a leg up in terms of delivering a first-class experience to users,” he says.
True, YouTube can’t change the programming or advertising that comes from its content partners, but it can address the other big pain points consumers tend to have with streaming TV services: performance and usability. YouTube TV sits on top of the same world-class technology stack as traditional YouTube, a service that has clearly cracked the code on how to deliver a pleasurable experience to over 1.5 billion users a month. The key now, says Mohan, is to convince customers that paying for a bundle of channels is just another option inside the larger YouTube ecosystem. “Television is no longer a box that sits in the living room. It’s an app that lives on all your devices,” he says.