Baring a significant thaw in negotiations, the YouTube app will no longer be available for download on Roku starting on Dec. 9.
In the broader context of distribution battles in the video business, the standoff between Google and Roku is major. Roku is the most widely used connected TV platform in North America and served 56.4 million active user accounts as of the end of September.
And YouTube, long the most dominant force in mobile video, continues to emerge as a connected TV powerhouse. According to Nielsen, YouTube controlled 6% of all TV viewing in October, second only to Netflix (7%) in all of video streaming.
Back on Oct. 21, Roku posted a blog update on what was then a six-month-long standoff with Google, essentially notifying customers that there had been little progress.
Later that day, Google confirmed that if the impasse isn't fixed by Dec. 9, the YouTube app will no longer be available for download in Roku's Channel Store, although those Roku users who already have the YouTube app downloaded will still be able to use it.
Next TV requested updates from both Roku and Google on Thursday, Dec. 2. Roku didn't have one to offer. Google didn't immediately respond.
The conflict emerged back in April, when the YouTube TV app--which serves Google/Alphabet's virtual MVPD platform--was taken down from the Roku Channel Store after Roku's contract to support the app expired.
Again, those Roku users who already had the YouTube TV app downloaded could still use it to access the No. 1 vMVPD service with over 4 million subscribers. But there have been complications, most notably a Roku OS update two weeks ago that temporarily disrupted access to YouTube TV and a number of other apps. When those things happen, often an easy solve is to visit the Channel Store and download a fresh, updated version of the app. But that's not a solution for YouTube TV users on Roku right now.
Google also developed a workaround, integrating YouTube TV functionality into the flagship YouTube app. But now that Roku's deal to support the YouTube app is almost up, that solution could be compromised for many, as well.
So What's Roku's Beef?
Roku has stressed from the beginning that the issue isn't about money. Calling Google an "unchecked monopolist," Roku accuses Google of trying to use its market position to gain unfair advantages on the Roku platform in terms of search.
"Google continues to interfere with Roku’s independent search results, requiring that we preference YouTube over other content providers," Roku said in its Oct. 22 blog post, in which it reminded readers that Google is under investigation from the U.S. Justice Department, as well as the attorney generals of 30 U.S. States.
Roku also said, "Google discriminates against Roku by demanding search, voice, and data features that they do not insist on from other streaming platforms."
It was also on that day that someone leaked a private Google email to Roku in which the tech giant declared, “YouTube Position: A dedicated shelf for YT search results is a must.”
And Google's Problema?
In terms of communications strategy, Google has been more or less merely reactive to Roku's PR offensives. But it's been widely reported at this point that Google is digging its heels in regard to forcing Roku to support the AV1 codec, a technology that makes delivery of 4K video much more efficient.
Both Google and Netflix have been in on the ground floor of AV1's development. Netflix said last month that when AV1 is used to stream 4K video, "noticeable drops in quality were reduced by as much as 38%." That means Netflix doesn't have to adjust down the users bandwidth to keep the video from buffering. Netflix has begun using AV1 in select PlayStation 4 and Android TV devices.
As for Google, it wants to quickly establish wide AV1 support for YouTube. And Google has reportedly told manufacturing partners that make Android TV and Google TV smart TVs and other devices to start producing hardware that enables AV1.
Roku, however, is reportedly not down with the AV1 program. Roku has achieved its dominant platform proliferation by providing smart TV makers including TCL and Hisense a cost-efficient means of integrating the Roku operating systems into TV sets that undercut pricier Korean and Japanese rivals on the shelves, virtual and otherwise, of Walmart, Amazon and Best Buy.
Anything that ups the cost of making Roku hardware, especially right now amid a crippling global supply chain crisis, is bad for business.
Notably, at an investor conference back in May, Roku CFO Steven Louden accused Google of trying to “require us to do certain things on the device side that would increase our cost basis and hence, erode our [bill of materials] cost advantage that we have from Google products like Chromecast and like Android TV.”
Chess not Checkers
In fits and starts over the last decade, Google has dabbled with trying to control the living room TV. But it now seems focused on making Android TV (and the current "Google TV" rebrand of that platform) stick. And if that means disrupting a better positioned rival's business model? Well, you don't get 30 attorney generals to beef with you for nothin'.
"We believe Google’s lack of success in the TV ecosystem is set to change radically in the next 6-12 months," Lightshed Partners analyst Richard Greenfield wrote back in July.
Android TV is firmly established in Europe, with pay TV operators making the "operator tier" of the OS their platform of choice for next-generation thin-client set-tops that deliver a wide-array of popular OTT services.
Here in the U.S., TCL just expanded its selection of Android TV-powered smart TVs. Indeed, Android TV- and Google TV-powered sets from TCL and Hisense are some of the most affordable smart TV buys on the market right now.
For its part, Roku reported -15% margins on its hardware business for the third quarter, with chip-supply issues forcing the company to sell its devices as a loss in order to sustain growth of its platform, active users and advertising revenue. Is now a good time to upgrade its hardware base to AV1?
Of course, when a Valley Goliath like Google/Alphabet with a $1.9 trillion market cap faces off against a "David" like Roku and its relatively puny $30 billion market capitalization, its consumers who will suffer, and in ways that aren't always obvious.
For example, Roku's increasingly popular and profitable AVOD platform, the Roku Channel, is now widely available across platforms far beyond Roku. But you won't find Roku Channel--and its burgeoning original content selection that this week includes streaming reboot Zoey's Extraordinary Christmas--on Android TV or Google TV.
Indeed, Merry Christmas and happy holidays. We'll update this story with more details about the Google vs. Roku conflict as they develop.
