Disney vs. YouTube & Nielsen’s New Math

27:21They didn't necessarily love YouTube. and now the YouTube story is we're TV. We're the best part about your TV experience. Whether you want to watch a 90-minute podcast, whether you want to watch a 45-minute Mr. Beast video, whether you want to watch an NFL game, whether you want to watch live TV like CNBC or whatever it might be, we are the most joyous way to watch television and that means we'll get more CTV ad dollars, we'll get better brand deals, we'll have the higher number of subscribers coming in. But this is new. YouTube for a while was a cesspool and they were known to be a cesspool.

28:00And they kind of still are on the VOD side, but they've managed to move past that. And so when you ask, like, why is this important to them? I think they like being the company that people think of and associate with. Oh, I really enjoy watching TV with YouTube, whether it's YouTube TV or YouTube. And I think that is important for the Disney's and NBCU needs to keep in mind, because although they are going to be almost entirely reliant on the YouTube ecosystem over the next decade, there's no question whether it's the VOD side, whether it's the VMVBT side, whatever direction it takes, they're going to be more reliant on the dollars that come through it as their own pay TV businesses kind of decline and their streaming businesses kind of they're still struggling to figure it out a little bit.

28:44Knowing that it's important to YouTube to be the place that consumers love to watch TV, in part because of the content that these media partners upload directly to the VOD platform or license effectively sell to YouTube TV, gives you the advantage of saying like, you're going to give us the money that we deserve, in part because you're $3 trillion company, but in part because we know if you don't have us, people will just go elsewhere or they're just going to associate YouTube again as this negative thing in their mind that they have to go to. And that's not a place that they want to be. To your point, John, that turns them into a cable company.

29:24One of the reasons I love working with you, Julia, is I think that we complement each other very well. I started covering cable back in the mid-90s and I am a TV nerd. So my opinions, that's where all my opinions are rooted. You are somebody who knows the streaming world as well as anybody that I know, frankly. And that's how your opinions are rooted. So that's why this next question is going to be my favorite. It's predictions. How is this all going to end? And I'm going to start. And as that is a preamble, I still believe Monday Night Football and the NBA and the SEC are very powerful levers for ESPN.

30:13I can't imagine. I wouldn't be surprised if this posts on Wednesday and there's a resolution already by the time this posts. I wouldn't be surprised by that. But my prediction is it's going to be fixed before this coming weekend, because I just don't think I don't think YouTube. Let's say they get past this weekend. Then there's the next weekend. And then there's a weekend after that. I mean, these sports don't end. And so at some point they're going to have to say, like, OK, I'm tired of bleeding customers. I've got to come to it. And my prediction is because according to both sides, ESPN is giving them a rate that's in line with what the bigger distributors are getting.

31:02All the ingestion questions and everything, those have already sort of been answered. I mean, there's a standard rate that's already out there. I have to believe that they're going to be able to come to it this week. What's your prediction? You know, what's funny is I was at a party last night, a very like media party, and I was talking to an analyst and the question they asked was, what do you think ends first, Disney, YouTube or the government shutdown? And I was like, I wish I could say it was the government shutdown, but I think it's going to be Disney, YouTube. because I agree. Everything you're saying, John, I completely agree with.

31:40And the only thing I would add is that, and maybe I'm coming at this as a little too far, but I think Disney and all them need to go one step further because I think their content is so, so important to YouTube TV, especially right now, especially with the SEC and with Monday Night Football and Basketball back. Like it's the high time that people watch television. It's getting cold in parts of the I'd say it's people are staying home. Like this is when they watch TV. It's very important to YouTube TV for that reason. But Disney's content for everything you just said is also so important to YouTube.

32:15And so it's like you have to take this one step further because YouTube TV is going to get what they want. I imagine this. They're probably going to get some kind of skinny sports bundle. They're going to get some form of ingestion because in part NBC Universal set a precedent right with that NBC, like sports network thing they're launching, that's going to carry Peacock. Like they're kind of already there. And I suspect YouTube TV will point to that and say, like, you know, we're doing this with your partners. They know they want the skinny bundle in order to compete with the direct TV and the Fubos.

32:46And they'll say that it's competitive thing, which I get. But Disney shouldn't lose sight of the fact that they have the advantage in the content. They have the advantage of the content right now and they have the advantage across YouTube TV and YouTube. And so when this comes up again, because it will. That's all. In three years. I mean, if they do a three year deal, it will happen three years from now. It's like at that point, the business is going to look so different that in order to really hammer home how vital these differentiated media companies and their assets are going to be in a YouTube centric universe, you have to consider YouTube on top of YouTube TV, even though it doesn't feel like it is associated with the carriage dispute as a sole thing.

33:31It is what Google cares about. It is what Neil Mohan cares about. And so that's where you have to attack on top of YouTube TV. Because again, we're just talking about a YouTube-centric world and YouTube TV is part of it, but it is not it. Let's dive into that for a quick second. Let's say they take McAfee off of YouTube and you can only see him on TikTok or wherever, Who knows where? YouTube has billions of hours of content. Does that affect YouTube.com? It doesn't necessarily affect overall share of viewing. And I also don't think it would be like McAfee being taken away because he has his own stuff.

34:07He just licenses to ESPN. I think it affects the fact that Disney has whitelisted advertising. They bring in strong brand deals. They are the type of content that YouTube likes to point to having so that they don't get questions about all the, for lack of a better term, jittier content. It is the thing that they point to and say, we love our brand partners. Neil Malhun says this all the time. We love our brand partners. We're reliant on our brand partners. Our brand partners are reliant on us. And so I don't think that Disney, by the way, should like yank their channels. In no way would they do that.

34:44But if you're going to have a blackout, have a full-size blackout. Okay, we're not going to go here. college football, college game day, they streamed on the ESPN app, but they also put it on X under McAfee's channel. It's got like 2 million, 3 million views. And keeping in mind that a view on X is far different from a view on YouTube and neither are comparable to an average viewer by Nielsen standards. The fact that people are like, I'll watch it here. I don't care. Like, that's fine. That type of stuff does affect YouTube where it's the consumer change of, oh, I don't have to go to YouTube for this.

35:16I can go elsewhere for it. That type of fundamental behavior that YouTube has spent two decades trying to train, they don't want to lose and they especially don't want to lose it to high profile events like sports. And so I think if Disney were to say we're going to go black on YouTube, we'll just private our channels for 10 days, like however long the blackout lasts, you know, three, four days, it's just going to show the ideological stance you're taking, which is we understand that your business, YouTube and is the dominant business in this industry. But we understand that we are a core component of it.

35:50And so we deserve to be respected as such. The game day strategy that ESPN employed, I was so fascinated by that because, again, in terms of is the leverage changing? Was this a fact that ESPN needs to get game day in front of a lot of people because they sell a lot of advertising around game day? Or is this a fact of like, let's be honest, The pregame show is a Barker channel for the content that comes on later in the day. And it's just a way to nag and remind the YouTube TV customers, you are not getting this content. I suspect it's a little bit of both, probably more of the latter, using it as a Barker and a needle to YouTube.

36:29Let's stick with YouTube when we come back. I do want to talk about their sports strategy because I have no idea what it is.

36:42Heat up your 4th of July at The Home Depot with our wide variety of grills under$300 and make every gathering one to remember. Give your outdoor space a glow up. Whatever your budget is, the savings on seasonal plants starting at$5. With the grill fired up and your backyard set to perfection, you'll be able to invite friends and family over to kick off the party. Start celebrating with low prices guaranteed at The Home Depot. Prices may vary by store. Exclusions apply. See Home Depot.com slash price match for details. We are live from Fetty's house. Guests are gathering around the TV, even with a big storm outside.

37:18Are we worried about the feet? Nope, they have Xfinity Wi-Fi. Get reliable fiber-powered gig Wi-Fi with Peacock included to stream the beautiful game this summer. Xfinity, imagine that. Restrictions apply. New gig internet customers only. Actual speeds vary. Offer for Peacock Premium with ads currently at$10.99 a month value and limited to Xfinity internet members with newer upgraded gig speed or faster service. Activation required to access content. Peacock must be activated within the first 90 days. Management of existing subscriptions may be required to avoid multiple subscriptions and duplicate charges.

37:41Third-party build subscriptions continue until canceled.

38:11after premium sports. They have packages that look a lot like TV packages, but they're okay with that because it brings people into the Amazon walled garden, so to speak, in order to watch the NFL and the NBA and go over to England and you have the Premier League and things like that. Apple TV, who knows what they're doing? They say they want it from end to end and they do have MLS from end to end. They have F1 from end to end in the United States, but then they don't have it anywhere else. So it's not really end to end, but they do come out and say that they want to control and own everything.

38:54YouTube, they've been kicking the tires. They've been part of a lot of these negotiations. They haven't really, other than Sunday ticket, they really haven't stepped up in terms of nabbing a rights deal. If you were to say what their strategy is as it comes to sports, is there one? Is it forming? How would you answer that question? I think they're still in the experimental crawl space. So if we think about Netflix's crawl, walk, run. They're kind of in that crawl space. I think the interesting thing about YouTube, and I've watched this play out, I know you've watched this play out, I'm sure Neil Mohan has watched this play out, is that they don't really need to be in it.

39:42You think about leagues like Bundesliga saying we're going to give 20 games experimentally to a couple of YouTubers and they can stream them on YouTube. YouTube doesn't have to do anything with that. They get the games. They're like, great, we'll put those games in our top select tier, which is their top advertising tier. We'll make strong money off those games and we don't have to bid anything on it. And I think you're seeing that happen with some rugby. And these are like smaller leagues, Bundesliga being the biggest one, smaller leagues where players and leagues are kind of talking to YouTubers and they're saying maybe we move over here in some capacity.

40:14If you're YouTube and you're like, people are doing this anyways, maybe we just wait out and see what we don't have access to. So the NFL being a good one, that is really high value that we think we can sell strong ads on or that we think we can then simulcast this with our top creators to really bring this in and bring in strong ad dollars and brand deals for this game. Maybe we compete in that space a little bit, but they don't have to do any of it. And I think that goes back to what I was saying earlier about if you look at just the amount of sports content that people watch on YouTube, I think the recent stat that Mohan gave was 35 to 40 billion hours of sports viewed last year.

40:55And it was like up 30 % year over year on TV sets. Now it's just YouTube. Like people don't need to watch live sports on YouTube. They're watching all these other sports on YouTube. They're watching sports content. They're watching whatever it might be. And so I think unlike, you know, the traditional media companies, even the Amazons and the Apples where they're saying this will bring people into our ecosystem and we don't have anything like this. And this is really how we're going to sell subscriptions and potentially place ad dollars and do all that. Like YouTube doesn't have to. They can, but they're like, why would we if the YouTubers are doing it themselves and people are already watching more sports content on YouTube than anywhere else?

41:33And so I think their strategy right now is, OK, well, what do we need within sports and why do we need it? And the only answer that I can think of is that we often overestimate how many people, especially in the United States, use their TV sets for YouTube. And I know it's a crazy thing to say because we see the Nielsen gauge every month where YouTube's growing on TV sets and we see that they have the largest share of viewing time. But they don't have significant audience in certain age demos who are opening up YouTube all the time. And so the argument about having sports exclusively on YouTube is that it does force people to open the app.

42:15It does force people to think about YouTube as a passive viewing experience. It does encourage people then to spend more time on the app and watch other creators and shoulder content. And so that's the only reason I could see them potentially doing it is if they really wanted to move much faster and much further into the CTV space. And they would do so using sports. But unlike every other company who has an incentive for being in sports, that incentive is pure sub growth, pure engagement or pure advertising play. YouTube doesn't need help with any of that. So they had the Brazil NFL game from earlier this year.

42:49And of course, immediately afterwards, the NFL said they were thrilled. And I think Neil Mohan said he was thrilled and everybody was happy. What's the real story? My question isn't necessarily, were they happy? What did they learn from that? How were they looking at that? Were they looking at sheer numbers? Were they looking at it from a tech standpoint? Like, let's make sure that we can do this. What's your impression of that? It was experimental in terms of how will people watch on YouTube versus how will they watch it elsewhere? where so the the key distinction was the simulcasting streams that what youtube calls watch with it was the different creators like i this creator named i show speed who has 45 46 million subscribers very well known for his live stream so he's someone who already has an audience built on his live streams the question that youtube had was if we can splinter this game or access to these games across, say, 10 to 12 creators.

43:48And if we can sell specific ads and brand deals to those channels, not just because of the NFL, but specifically those creators in the NFL, can we actually monetize having an NFL game three or four different ways while encouraging people to think of YouTube as a place to watch longer form television, to tune in for passive viewing? So for them, the number of people who are going to watch, by the way a game on a friday evening uh between two teams it was like fine right it was the chargers i think the chargers and the chiefs it's fine it was whatever um it was patrick mahomes and and and travis kelsey is married to the most famous person in the world patrick mahomes patrick but but i say it's a i say by the way as as a saints fan who's going like one in 17 this season.

44:39So like, but the game itself, I think was less interesting to YouTube than what they could do with it from a tech standpoint and from a creator standpoint that would get advertisers really excited. I think the lesson for Roger Goodell and you tell me, because, you know, Goodell in the NFL much more than I do. I think the lesson for him was just because you put something on a platform that is universally available and accessible does not mean you create new fans. It's not going to mint new fans because they have access to this thing. The people who tuned into that game, people are going to tune into football.

45:12Yeah. I don't think the NFL looked at that as, as we want to create new fans. I mean, the NFL, uh, shortest way for growth in terms of media rights for the NFL is to establish an international package of games. Uh, and, and, uh, once they establish that international package of games, there are companies like YouTube or Netflix or even Apple TV that span borders. So if they were to sell that to a package of international games to, say, ESPN, ESPN only has it for the US. Then they would have to sort of go out and sell it territory by territory. And this is a way to get these big, huge streaming companies involved, spending upwards of a billion, billion five, I mean, who knows what, on these packages and it's a very easy way to get in.

46:04So for, for the NFL, this to me is so much less about, well, you said experiment is it was an experiment, but it's less about creating fans. And it's more about trying to get YouTube and Neil Mohan hooked on the NFL. Like, look at this engagement you got because what, what creates more engagement than, than a live NFL game. And I don't think it worked. Like, I don't know if Neil Mohan walked away from that thinking we need more NFL games. That's what I was wondering, because you mentioned all the creators that the numbers that I saw were less than if they weren't watching along the side, like if they just kind of went on and did their own thing almost, it seemed.

46:43Yeah, iShowSpeed, he was one I was most curious about because of all the ones who were live streaming. He was the one with a built-in live stream audience. The rest of them were tangential sports creators, but who are not known for live streams. so I was like that audience might tune into the VOD after or whatever the edited version of that video becomes but I show speed I was like you know he his audience expects this and I think he averaged throughout that game I'm gonna get the numbers wrong but like let's say that the let's say his normal average was 80 ,000 I think in that game he averaged like you know 82 ,000 it was not a substantial amount of people more people who were tuning into it and I think like that's the takeaway if I'm you know Mohan I have about sports which is I could spend a hundred million dollars whatever this game's gonna cost me like I could spend it or I could not and it's not gonna hurt me and by the way the NFL and the teams and ESPN or whoever has that game are just gonna upload the best clips to YouTube anyways and I thought about this and it sounds it's gonna sound um totally unrelated, but it is 100 % related with when Jimmy Kimmel returned and people were like, wow, look at the numbers he has on YouTube.

47:57And that's what he touted. He's like, look at my numbers on YouTube. And it was that moment where we had this huge debate about, you know, ABC and Jimmy Kimmel and people watching him on TV and linear ratings. And Neil Bohan's like, they're watching him on YouTube. Like, we don't even have to do anything. They just upload it. Like, and it's fine. And we don't have to even be in conversations with Disney about any of that because it's there and people are going to watch it the next day, like with 15, 16 million viewers. And I think that's the big thing for Neil Mohan, which is we don't have to do anything.

48:28We like having the YouTube TV side. We like potentially being in the sports conversation. I think potential conversations around something like NBA League Pass or Sunday Ticket, where it's a little bit more subscription focused and kind of niche. I think he's more interested in understanding owning that relationship. But he doesn't need to own anything in sports or anything in entertainment because people are just putting stuff on the platform anyways. Another aspect of that, you referenced just the international and those international numbers. And I don't, again, like you, I don't have them in front of me, but they were much, much smaller than I was expecting them to be.

49:06I mean, it was, it was generally a U S audience watching an NFL game that happened to be played in Brazil. You would I think that YouTube would have, for an international audience just from Brazil, would have had a couple million signing up for it. You and I talked about this. This was months. This was before even the NFL game happened on YouTube. And I remember saying to you, we were talking in a pitch meeting, so some behind-the-scenes stuff here at Puck. We're in a pitch meeting. And I said to you, I'm really excited about Amazon and the NBA. And I said to you, the reason I'm excited, and it was the same reason I was excited about YouTube and the NFL, is they can finally prove this thing about the international audiences.

49:45Like, actually, if the only thing hurting the international audience is, you know, it's more difficult to get access to a game, maybe to your point, ESPN has to partner with like another cable network or a broadcaster. Like they have to figure out how they're going to do that internationally. If the only issue was accessibility and availability to younger consumers, then the games themselves should have had higher international numbers. And I haven't seen anything on Amazon yet, of course, so I'm not speaking to that. But to the point about YouTube and international numbers and your point, John, about them being small, that was I wasn't surprised.

50:16I was like, yeah, there may be an audience here and there may not be. And I think like, again, Friday night game, the hours suck for the European side. Like there's a ton happening that is different from the Netflix games on Christmas Day. But I looked at those numbers and I thought you can put something like on YouTube. It does not mean that people are going to necessarily tune in because it's on YouTube. Julia, if I don't end this podcast here, we're going to go on for another hour. I'm sorry. This is, by the way, when Julia mentioned our pitch meetings, this is exactly how it goes. We just start talking.

50:53I appreciate you stepping in and doing it. I love what you're doing with Dylan on the grill room. It used to be Dylan Byers' grill room, and now it's Dylan Byers and Julie Alexander's grill room. How are you handling interviews? Are you going to be doing it one by one, one-on-one or one-on-two? We've been doing joint so far, and we're trying to decide if we're going to add a second interview to the week. But I think I really like, as a fan of the grill room, listening to Dylan interview. I think he's a masterful. He's like listening to you or listening to Matt Bell and our colleagues, you know, you guys are just so masterful at it.

51:32And I love listening to him. So I kind of hope that it's just going to be Dylan most of the time with gas. And I come in if it makes sense to because I love yapping with him, but I love listening to him interview. Yeah, well, download the grill room. Excellent podcast from Dylan Byers and Julia. And Julia, thanks a ton. And I will see you in the next pitch meeting. Thanks for having me.

51:58All right. My main takeaway from this is that YouTube TV and ESPN are going to get a deal done. It's going to be in the next couple of days, maybe a week, but they are going to get a deal done. But one caveat that you should know, I have been wrong about this at every turn. I thought that they were going to do an extension. I thought that they were going to get something done before Monday Night Football. I thought they were going to get something done immediately after Monday Night Football. None of that happened. So they're both dug in right now. But the tide of games from ESPN, it has the NBA, it has the SEC, it has Monday Night Football.

52:43That keeps coming every single week. And at some point, YouTube's going to have to say, we're going to get this deal done if they want to stay in the distribution business. So I want to thank Julia Alexander for taking the time to come on The Varsity. More importantly, though, I want to thank you for listening to The Varsity, an Odyssey podcast in partnership with Puck. I also want to thank the executive editors from Puck. That's Gobby Grossman, Ben Landy, John Kelly, and the great team from Odyssey, Bob Tabador and Patrick Antonetti. If you like this podcast, make sure to sign up for my newsletter, also called The Varsity.

53:19Head over to puck.news and use the code word The Varsity, all one word, for a 20 % discount. And I will see you on Sunday.

53:54and support every step of the way. Shop up to 45 % off site-wide right now during the 4th of July VIP access sale at blinds.com.