Who has the upper hand in the battle between Google and Disney?
Disney channels, including ESPN and ABC, have been unavailable on YouTube TV since October 31, after Disney and Google’s premium TV service failed to reach a new licensing deal.
Disney has a market capitalization of $200 billion. But in Big Tech terms, it’s small fry. Google parent Alphabet has a market cap of more than $3 trillion.
The spat is a problem for Disney in a way that it isn’t for Google’s YouTube, said Rich Greenfield, partner and analyst at LightShed Partners. Greenfield said the drivers of investment interest in Google are search, AI, cloud, and maybe YouTube.
“No one is betting on the future of YouTube TV for their investment thesis in Google,” he told Business Insider.
He said that for Disney, the blackout means losing 15% of its subscriber base across ESPN and ABC.
“This is a real problem,” he said. “If this doesn’t get settled, this is financially really painful.”
YouTube TV is much more important to Disney than to Google, said Dan Salmon at NewStreet Research.
It’s true that Google’s business overall won’t feel a big impact from the outage. Looking more narrowly at the live TV business, though, shows Disney has some advantages of its own, analysts say.
“No Disney means no ESPN, which is a major loss for YouTube TV,” said Marisa Jones, an analyst at EMARKETER. YouTube has offered its subscribers $20 if the outage drags on.
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Google has talked up how serious it is about winning the living room and growing YouTube TV subscriptions. It recently shared numbers showing YouTube TV was the No. 4 pay-TV service in the US. Losing ESPN could hurt its growth prospects.
Disney also has its own YouTube TV rival in Hulu + Live TV, and a 70% stake in Fubo, another streaming TV service. It recently launched its stand-alone ESPN flagship streaming service.
“Disney has these alternative monetization channels that weren’t characteristics of the battles of yesteryear,” Guggenheim analyst Michael Morris said.
Guggenheim published US Apptopia data on Tuesday, showing an 88% increase in Fubo TV downloads from October 31 through Monday compared to the prior week, while Hulu downloads have increased by a more modest 33% compared to the prior week. ESPN downloads were up 5% on the same basis. It hasn’t been all bad for YouTube TV — the data showed that its downloads have also increased, up 25% compared to the prior week.
In general, neither company benefits from a prolonged disruption.
“The path of least resistance is to reach an agreement, and I think these two will reach one,” Morris said. “If YouTube is serious about YouTube TV — and it’s a major player in the bundled channels economy — it does matter to Google. So when they’re digging their heels in, it shows they do care and they’re going to try to use their negotiating leverage to get what they want.”
