Fox and YouTube TV Avert Blackout for Now, Extending Contract Talks
Introduction to the Dispute
Millions of YouTube TV customers were spared an interruption of Fox News, Fox sports and local coverage after the two entertainment companies reached a 11th-hour truce following weeks of negotiations.
The Agreement
The two sides agreed Wednesday to continue talks to resolve their differences over distribution deal terms, pausing the threat of a channel blackout days before the start of the college football and NFL seasons.
Background on the Negotiations
The announcement came minutes before the 2 p.m. Pacific deadline. Neither company wanted to let a contract squabble disrupt some of their viewers’ favorite shows.
Fox News has a popular lineup with “The Five,” “Special Report with Bret Baier” and “Hannity.” Without a deal, sports fans could have missed out on Friday night’s Auburn-Baylor football game, Saturday’s high-profile contest between Texas and Ohio State and three regional Major League Baseball games airing on Fox.
In addition, Fox’s NFL season kicks off on Sept. 7, giving the two sides added motivation to find a resolution.
Statements from the Companies
“We have reached a short-term extension with Fox to prevent disruption to YouTube TV subscribers as we continue to work on a new agreement,” YouTube said in a Wednesday afternoon blog post. “We are committed to advocating on behalf of our subscribers as we work toward a fair deal and will keep you updated on our progress.”
YouTube has about 10 million customers for its television service, making it the third largest pay-TV distributor in the U.S.
The Crux of the Dispute
The dispute hinged on programming fees YouTube TV pays for Fox News, the Fox broadcast network, Fox-owned stations, including KTTV Channel 11 in Los Angeles, Fox Business, FS1 and the Big 10 Network.
Rupert Murdoch’s company relies heavily on the strength of Fox News — which ranked as the nation’s top-rated linear network in July — and its broadcast network that boasts big-name sports to maintain its programming fees.
Shift in Economics
Distribution fee disputes have become increasingly common amid a shift in economics.
Programmers, including Fox, have long counted on distribution fees paid by TV distributors that sell the channel bundles to consumers. But that source of revenue is under threat as viewers migrate to Netflix, Disney+ and other streamers — shrinking the pool of pay-TV subscribers.
Demands and Counter-Demands
“Fox is asking for payments that are far higher than what partners with comparable content offerings receive,” YouTube said late Monday in a blog post when tensions ran high. “Our priority is to reach a deal that reflects the value of their content and is fair for both sides without passing on additional costs to our subscribers.”
For its part, Fox said it was “proposing a fair, comprehensive deal to continue our relationship with YouTube TV.” It accused Google of using its leverage to try to extract unfair terms.
Market Dynamics
YouTube TV has been gaining subscribers at a time when others are losing them, giving the tech company increased market muscle. YouTube’s popular bundle — it also offers the NFL Sunday Ticket package of out-of-market games — has cut into the business of legacy pay-TV providers.
Nielsen ranks YouTube, including its video service, as the largest television distributor in the U.S. by share of viewership. In a Tuesday report, Nielsen said that YouTube captured 13.4% of all TV viewing in July, the sixth consecutive month the company has claimed the top spot.
Walt Disney Co. came in second that month with 9.4% of the audience.
Financial Performance
Last year, YouTube generated $54.2 billion in revenue, second only to Disney, according to research firm MoffettNathanson. The analysts estimated that fast-growing YouTube TV would reach 10 million subscribers this year. That slightly trails Charter, which operates the Spectrum service, and Comcast.
Conclusion
The temporary extension between Fox and YouTube TV is a welcome relief for millions of subscribers who were at risk of losing access to their favorite channels. However, the underlying issues of distribution fees and the shift in viewer habits remain unresolved. The outcome of these negotiations will have significant implications for the future of television distribution and the economics of the entertainment industry.
FAQs
Q: What was the nature of the dispute between Fox and YouTube TV?
A: The dispute centered on programming fees that YouTube TV pays for Fox News, the Fox broadcast network, and other Fox-owned stations and channels.
Q: How many subscribers does YouTube TV have?
A: YouTube TV has about 10 million customers, making it the third largest pay-TV distributor in the U.S.
Q: What is the significance of the temporary extension?
A: The temporary extension prevents a channel blackout and allows both parties to continue negotiations, ensuring that subscribers can continue to access their favorite shows and sports events without interruption.
Q: What are the implications of the shift in viewer habits?
A: The shift in viewer habits, with more people migrating to streaming services, threatens the traditional revenue model of programmers like Fox, who rely on distribution fees from TV distributors.
