Trial proceedings got underway this week for the Justice Department’s challenge to block the $85 billion AT&T-Time Warner merger, and one of the more interesting early developments involves Google.
On Monday, Judge Richard Leon indicated that an as-yet-unnamed Google executive may need to be added to the witness list. According to CNN, that executive gave a deposition explaining why Google’s virtual MVPD YouTube TV recently added Turner’s channels including TBS, TNT and CNN.
The DOJ is arguing that YouTube TV adding Turner’s channels after not having them in its initial product is proof that Time Warner content is valuable to distributors and could provide AT&T with leverage over its rivals. According to Variety, Daniel Petrocelli, the lead counsel for AT&T-Time Warner, acknowledged the concerns of AT&T’s rivals but warned that any idea that AT&T would withhold Time Warner content from other distributors is only speculation at this point.
YouTube TV is one of a few vMVPDs that have popped up in the past year or so to compete with more established players in the space like Dish Network’s Sling TV, AT&T’s DirecTV Now and PlayStation Vue. Until last month, YouTube TV had somewhat of an advantage in terms of pricing over competitors like Hulu with Live TV and FuboTV.
YouTube TV launched with a price of $35 per month, lower than the $40 per month Hulu charges and the $45 per month FuboTV charges. Of course, those different prices are reflective of those services' differing lineups. At $40, Hulu already packages in more than 50 channels (including Turner’s) as well as access to its on-demand service. At $45, FuboTV offers extensive access to sports channels including Big Ten Network, BeIn Sports, NBA TV and the NFL Network.
But in February, YouTube TV apparently ceded some ground in the vMVPD price war when it added Turner’s channels and subsequently raised its prices. Starting on March 13, YouTube TV jumped up to $40 per month. All customers that signed up before that date get to keep the $35 per month rate.
Last year in May, Turner CEO John Martin foreshadowed the arrival of Turner channels on YouTube TV and the potential financial impact. During an investor conference, Martin told the crowd that Google had politely passed on adding Turner channels to its new streaming TV skinny bundle.
“We said, ‘We would like you to carry us,’ and they said, ‘No,’” Martin said.
He didn’t take it personally, noting that YouTube TV had simply set a retail price and then exhausted the correlating content budget with other networks before it could add Turner.
But YouTube TV had a change of heart, possibly due to March Madness arriving this month on TBS, TNT and TruTV. And in the process, YouTube TV may have lent some credibility to the DOJ’s argument that Turner’s networks are must-have, even if it means relinquishing an early advantage in vMVPD pricing.