• YouTube TV’s Performance Remains Shrouded in Mystery

    Over the past two days Alphabet released strong Q4 ’18 results and YouTube’s CEO Susan Wojcicki posted her annual letter to its creator community. There was plenty to learn from both, but one thing persisted for yet another quarter - YouTube TV’s performance remained shrouded in mystery. Since its initial launch nearly two years ago, in April, 2017, Alphabet and YouTube executives have been incredibly disciplined about not uttering a word (as best I know) about YouTube TV’s total subscribers, quarterly additions, profitability (or lack thereof) or product roadmap.

    Other virtual pay-TV operators like DirecTV Now, Sling TV and Hulu with Live TV regularly provide updates on their subscriber levels, quarterly additions, etc. But to assess YouTube TV’s performance, all we have to go by are various analysts’ educated guesses (“More than a million subscribers,” “Close to 3 million subscribers,” etc.) Nobody really knows.

    Wojcicki didn’t even mention YouTube TV in her letter, though since it was addressed to YouTube’s creators, its relevance may not be that high (though I’m guessing plenty of YouTube’s biggest creators are wondering about how their “channel” can appear on YouTube TV on a par with legacy TV brands with them getting paid a monthly subscriber fee too). On the earnings call, Alphabet executives briefly mentioned higher content acquisition costs associated with YouTube TV, the recent nationwide expansion of the service, and its “long run value for us because it brings our advertising products together including being able to serve it across TV.”

    But as far as any tangible numbers or performance, nothing was disclosed. Scanning the earnings call transcript, I don’t believe any analyst even asked about YouTube TV’s specific performance (maybe they know they won’t get a specific answer, so it’s not even worth using up their finite airtime). The fact remains Alphabet is such a massive company that irrespective of YouTube TV’s gains, they are not yet material and therefore don’t need to be disclosed.

    None of this is to suggest YouTube TV isn’t thriving, which I think it is. I’ve been an extremely delighted subscriber for a year. It is a superb product and is priced very fairly. Its unlimited DVR feature remains a crucial differentiator. The other night I seamlessly moved from watching the Patriots Invitational (oops, I mean the Super Bowl) on the big screen in our family room to using my iPad briefly while eating dinner at the kitchen table with my son. And then back. The CBS feed was pristine. I know many who have “cord-shifted” to YouTube TV recently and are similarly pleased. And of course many of us have seen YouTube TV’s big splash sponsorships of the past two World Series, the NBA playoffs and the Super Bowl pregame show, among others.

    Alphabet is following a PR strategy for YouTube TV akin to Teddy Roosevelt’s mantra “Speak softly and carry a big stick” Many in the industry are aware of YouTube TV’s growing success, and my hunch is that at some point (who knows when?) Alphabet is going to drop a bomb on the industry, announcing that YouTube TV has surpassed 2 million? 4 million? 6 million? subscribers, generating widespread media coverage. As other virtual pay-TV operators are resetting their strategies, YouTube TV appears to be gaining momentum.

    One thing is for certain - assuming Alphabet doesn’t schizophrenically pull the plug one day (always a chance to be sure) - YouTube TV has emerged as a highly strategic, and likely highly successful, initiative for Alphabet to eventually become a really big player in TV/brand advertising and in the pay-TV industry. Alphabet has the resources to play the long game here, subsidizing YouTube TV for years if it chooses to, which I believe it will.