Why the "Real Streaming Wars" Are Google's to Lose

I’m not supposed to write about this. It’s the first rule of the industry. No one talks about how easily Google could win the “Real Streaming Wars.” Well, buckle up because Google has launched a lot of friggin’ products in the streaming space.

Google’s Streaming TV History

It all started with Google making arguably one of the best acquisitions in history when they acquired YouTube for $1.65 billion in 2006. But I’m getting ahead of myself. Google didn’t make YouTube its initial Streaming TV focus. Its first streaming product was Google TV.

Google TV

Google TV launched in 2010 as both a set-top-box with hardware and a SmartTV operating system (OS) powering “Sony Internet TVs.”

Wow. That QWERTY remote makes me miss my Blackberry. I’m surprised we haven’t seen more innovation in SmartTV remote hardware. I personally have used my iPhone as a remote for AppleTV and Fire TV Alexa voice control, but I still find myself smashing buttons on my Samsung clicker.

Anyway, Google TV hit a lot of snags during its rollout, including disputes with the major TV networks. The service enabled users to access content via the browser, but networks such as NBC, ABC, FOX, and CBS blocked it citing the inability to enforce geo-restrictions. But it was obvious the networks didn’t want to see billions in retransmission and carriage fees go away if streaming took off. Sound familiar? This was back in 2010 when Networks still had a lot of muscle, and Google TV was ultimately deprecated in 2014.

Chromecast

A year before Google TV was killed, Google released Chromecast. The first streaming hardware device built by Google. Chromecast launched in 2013, but the idea for it was first conceived by Google engineer Majd Bakar. Bakar saw that his wife would first look up what to watch on her laptop, then use a gaming device to play it, because searching on her TV was too difficult. This frustrating process led him to build a way to enable you to find the content you wanted to watch and project it to your Smart TV. Chromecast was the best-selling streaming device in the U.S. in 2014, shipping millions of units in its first year.

Bard Digression

If you are thinking to yourself “Why doesn’t Moffie just use ChatGPT or Bard to write these” believe me I’ve tried. I prompted Google's own Bard to provide a list of product launches and interesting stories about them. It made up an origin story for Chromecast saying it was originally conceived as a way to stream Google Maps to TVs and said YouTube TV was first called “YouTube Broadcast.”

When I called Bard out, it admitted it was wrong, and the Google Engineer’s account above was indeed the correct origin story. But for YouTube Broadcast it said, “The most likely explanation for the confusion is that the name YouTube Broadcast was used as a code name for YouTube TV during development.” I can’t find anything on the Internet that confirms this, so if you worked on YouTube TV, or know someone who did I would love to know if this is true. If not, Bard is lying to cover up being wrong. 

I keep giving these artificial intelligence-powered tools a chance, but editing their mistakes is more effort than it’s worth. And in some cases, they are up to no good, as I detailed here about AI ad tech grifting.

Android TV

Bard tangent over…for now. Android TV launched in 2014 and is closely tied to the popular Android OS for smartphones. As a result, Android TV was very successful early on, getting developers to adopt it since it’s similar to building smartphones. Google says its operating system now runs on more than 110 million devices. Android TV has the 2nd largest market share behind only Samsung internationally and Roku in the U.S.

Android Open Source vs. Android TV

Android TV expanded its market using a similar playbook as Android OS, which controls 71% of the global smartphone market. They open-sourced the technology with the Android Open Source Project (AOSP) and offered a managed service (Android TV). Open Source allows SmartTV manufacturers to fully customize their user experience, but you cannot offer the Google Play App Store or popular services such as Netflix without going through a rigorous certification process. Android TV, on the other hand, provides an app store and Netflix out-of-the-box, but your development cycle is fully reliant on Google.

Google TV 2.0

Google actually launched a traditional Netflix competitor back in 2011 called “Google Movies” which enabled users to rent or buy movies. Google Movies was rebranded to “Google Play Movies & TV” when it was integrated into the Google Play app store. In 2020, it was rebranded yet again to Google TV.

If you’re as confused as I’m you’re not alone. Google has a reputation for launching too many products and killing them vs. focusing on the great ones it already has. I asked Bard if Google lacks focus and it said “The criticism that Google lacks focus is a valid one.” I was secretly hoping it would say something gangster like “Google has a $1.5 trillion market cap and generates $285 billion in revenue per year, and you have a free newsletter, so whose strategy is working?” But I digress. Let’s finally get into the crown jewel of Google’s streaming arsenal.

YouTube

YouTube first launched in 2005 and was bought just a year later by Google. The idea that YouTube was mainly short-form, user-generated content and didn't compete with long-form, scripted television, and movies was wrong from the start.

The week of YouTube's launch, Saturday Night Live ran a skit, "Lazy Sunday" by The Lonely Island. The video was uploaded to YouTube and went viral. Racking up millions of views before it was temporarily taken down after NBC threatened to sue over copyright concerns. Just a few months later, NBCUniversal and YouTube reached an agreement. This started a symbiotic relationship between Hollywood and YouTube where studios inked deals with YouTube to legally carry their content. In return, they now had a way to increase distribution, promote new content, and enjoy a small but growing advertising revenue share on the Internet.

YouTube Comes After Television

The symbiotic relationship Hollywood Studios enjoyed with YouTube started becoming parasitic when YouTube began looking for other growth opportunities. This is what big tech companies do. In order to maintain high stock prices they must grow at all costs, so now it was time to consume Hollywood.

YouTube Red (Premium)

YouTube’s first foray into long-form video was the launch of YouTube Red in 2015. YouTube Red offered advertising-free streaming, access to original programming, and background and offline video playback on mobile devices. YouTube tried to differentiate the product with “Youtube Originals” where they funded budgets for popular creators to launch original shows. The original strategy didn’t pan out for YouTube, and they ultimately closed the division. YouTube rebranded the service in 2018 as YouTube Premium.

YouTube TV

YouTube took direct aim at Hollywood and the major studios when it launched YouTube TV in 2017. The service was aimed at signing up cord-cutters and carried national broadcast networks and cable channels including NBC, AMC, and Disney. YouTube TV hasn’t done anything special since its launch. It’s just methodically inked deals with all of the Major Networks and now covers 98% of U.S. households.

This steady approach to building YouTube TV may be paying off. They went on offense in a major way in December 2022 when they announced a seven-year, $2 billion annual deal for NFL Sunday Ticket. Google more than likely overpaid. DirecTV spent $1.5 billion per year and lost $500 million each season on a similar deal.

But sports is the holy grail of Television and the NFL is its cornerstone. As a trillion-dollar company, Google is fine overpaying, if that means pulling forward the future where they dominate streaming. In Q1, 2023 this blueprint started to take shape. U.S. linear, cable, and satellite TV providers turned in their worst subscriber losses ever — collectively shedding 2.3 million customers. On the other hand, YouTube TV was the only pay TV provider to add subscribers instead of losing them. The service now has 6.3 million paying customers which makes it nearly half the size of market leader Comcast at 15.5 million.

YouTube's CTV Revenue is Growing Quickly

YouTube’s U.S. CTV ad revenues will reach $2.89 billion this year, nearly doubling the 2020 figure. YouTube is second only to Hulu in CTV ad revenues and is forecasted to pass the market leader by 2025. But that’s just the beginning. This year, YouTube will surpass Netflix in viewing time among U.S. adults with CTV accounting for 44% of total time on YouTube.

Also, Streaming TV passed linear and cable in terms of total watch time in 2022 and continues to build its lead. Streaming is also forecasted to pass linear and cable in total ad spend by the end of the decade.

YouTube’s Dominance

In the early 2000s and again during COVID, legitimate concerns arose that YouTube's vast amount of bandwidth consumption could actually break the Internet. Just marvel at its dominance today:

• 2.5 billion monthly active users

• Over one billion hours of video streamed per day

• $29 billion in revenue in 2022

• 2nd most visited website in the world behind Google search

• 2nd largest social media platform behind Facebook

The scale that YouTube operates at is difficult to fathom. YouTube is best positioned to continue to attract the most eyeballs and the lion’s share of ad dollars which puts Google in the best position to win the “Real Streaming Wars.”

How Google Could Lose

1. Today, Google finds its search business under existential threat. Search, arguably the greatest revenue engine of all time, faces serious competition from OpenAI and ChatGPT. So much so that Google co-founder Sergey Brin is reportedly out of retirement and regularly working on AI models at Google. I would not knock Google for focusing more on protecting its much larger search business vs. winning the streaming wars.

2. The Justice Department is also suing Google for antitrust, but the lawsuit is mainly focused on its monopoly power in digital advertising. Besides, the DOJ has not been very successful recently with its big tech lawsuits, so I just chalk this one up to a minor distraction.

3. No, just like any great superpower. Google’s worst enemy is itself. As I previously mentioned, Google is notorious for launching too many products and not focusing. The main way Google loses the “Real Streaming Wars” is by not putting YouTube at the center of its strategy. My advice for Google’s CEO Sundar Pichai: Kill Chromecast, deprecate Google TV and go all in on YouTube. YouTube OS + YouTube TV = YouTube wins.

I’ll be back next week with my take on Apple and Amazon’s TV history and whether or not either of them are serious contenders to win the “Real Streaming Wars.”

Cheers,

🤙 Moffie