NBCUniversal and YouTube TV strike short-term deal to avoid blackout

Initially, on October 1, 2022, YouTube TV, owned by Alphabet, and NBCUniversal, owned by Comcast, reached a short-term contract extension. This preempted a programming blackout that would have kept YouTube TV subscribers from accessing NBC content. 

Although the agreement sidestepped immediate consequences, it speaks to the inevitable and wider clash between legacy media and streaming services. It represents a unique build-up and deep clash that transcends the cost of programming and pivots toward the future of television. It is less about television and more about viewing habits in a digital world.

NBCUniversal’s YouTube TV audience offers more than $10 million potential customers. NBCUniversal is bidding to keep exclusive content provided in its live television streaming services. This includes programming that NBC has marketed as live entertaining. This consists of the 2022 Super Bowl, also branded as live entertaining in the U.S. In addition to live entertainment revenue, YouTube TV customers expect NBCUniversal content. 

YouTube TV captures unique, modular, functional, customizable programming, marketed bundle-priced television services, and offers modular streaming television services. These customers expect to access NBCUniversal content to meet their intended viewing appointment. YouTube TV customers demonstrate the evolving supply and demand of streaming television.

Having an extensive distribution base is crucial for advertising revenue as well as maintaining the relevancy of its shows in a highly competitive entertainment sector. The financial and strategic implications for both companies of a potential blackout are considerable.  

Why the Deal Was Stalled  

The issues in the negotiations concerned carriage fees, which are the fees YouTube TV pays to NBCUniversal to access its programming. In the TV industry, carriage fee disputes are frequent, but YouTube TV is not a traditional cable provider. YouTube TV is one of the most extensive Internet-based live TV services. 

NBCUniversal contends that it historically provides YouTube TV with the same terms it offers other major distributors, which includes Amazon Prime Video Channels. 

However, YouTube TV likely is resisting this approach because it is concerned about the ensuing costs that it ultimately will have to pass to its subscribers. YouTube TV’s business model relies on the perception that it offers customers a cheaper alternative to cable.

Why a Short-Term Extension Was Chosen  

The two companies focused on a short-term extension instead of a long-term solution. This method managed to avert an immediate crisis while simultaneously providing both parties with the time necessary to work on negotiations. It signals a clear nothing on both sides to maintain a rapport with the viewers and the consumers.

For NBCUniversal, cutting off subscribers on YouTube TV would lower ratings, which is detrimental to advertising revenue. For YouTube TV, cutting off NBCUniversal’s channels would lead to increased subscriber churn, as viewers would move to rival services. By choosing an extension, both sides recognized that a walkout would result in mutual short-term losses.

This standoff reflects a much larger shift in the media industry. For decades, traditional broadcasters like NBC controlled access to television programming. This changed with the rise of YouTube TV, Netflix, and Hulu as audience television viewing shifted.

According to Nielsen, YouTube is the dominant platform and has surpassed Netflix and Disney in audience viewing. This change requires NBCUniversal to shift its methods of audience reach and rely less on traditional cable and satellite subscriptions. 

This change to TV contracts is substantially different since it is now with technology-based companies. This change further requires NBCUniversal to shift its expectations from traditional cable revenue.

Reports suggest that NBCUniversal would like Peacock, their in-house streaming service, to be included in the YouTube TV bundle, further confirming their streaming ambitions.

Your response indicates that current projections suggest that professional video services broadcasting over the Internet, especially those that have no subscription fees, may increase their profitability over time.

Concerns of YouTube TV subscribers losing NFL games, live news, and entertainment shows access were justified, given that live sports and major entertainment programs are the most valued content people pay for in television bundling services.

YouTube TV and NBCUniversal’s focus on customer satisfaction will continuously be high, especially in a world of diverse streaming services where customer loyalty remains volatile and easily transferable to a competitor.  

The Importance of the Situation Beyond a Single Agreement

The short-term deal, a mere extension of the previous agreement, consists of elements of other negotiating strategies, given the stakes. While streaming services are growing in popularity and usage, conventional television and premium content are still monetarily powerful.

While other negotiations in the industry consist of a high-stakes approach, positioning themselves for future negotiations and balancing relationships resulting from available content is more valuable. How content providers position themselves in the streaming wars will affect future direct negotiations.

Future Agreements

In the next few weeks, the two companies will continue working for a more sustainable agreement.

While extensions do nothing to address the core problems, they are a means to ensure no immediate wrongs occur to the agreement. With negotiations expected to continue, negotiated settlements should allow for new updates to flow, as well as new public negotiations.

A deal of this length is bound to have negotiated settlements. Compromise will revolve around fee discussions, potential promotion of Peacock to advertising tiers, and decision strategies around revenue sharing, which will satisfy both parties. The lack of a deal is unlikely, as both parties would suffer from the business fallout.  

Conclusion

The most recent arrangement between YouTube TV and NBCUniversal highlights the stalemate involving live programming. While it enables YouTube TV to pivot without a total blackout of programming, it does nothing to close the widening gap of control between advertising-first distribution and new subscription-first digital distribution.

More than the Channels in question, this negotiation is about the television business at large. The outcome of the talks will determine how sports, news, and entertainment will be accessed as more and more TV viewing is consumed via digital streaming. While consumers will be able to relieve immediate pressure, the larger battle of digital distribution control within the television business is just getting started.