There's a lot of hostility in platform agnosticism these days. Roku (ROKU 2.66%) made waves on Monday when it sent out an email to those who use its app to watch Alphabet's (GOOG -1.31%) (GOOGL -1.42%) YouTube TV, warning viewers that the live TV streaming service could be gone from Roku TVs since negotiation talks had broken down between the two parties.
"We encourage you to contact Google and urge them to reach an agreement to continue offering YouTube TV on Roku and to follow standard industry practices pledging not to require access to sensitive search data or to manipulate your search results," the email concludes.
This is heavy rhetoric, and Roku is clearly just negotiating in public at this point. Who will win this fight? Who will lose? The answers may seem obvious, but let's break down the battlefield to see who has the most to lose and the most to gain.
If it's not clear by now, the real losers here would be YouTube TV viewers on Roku, and that could be bad news for both Google parent Alphabet and Roku itself. Accusing YouTube TV of wanting to "manipulate your search results" and accessing "sensitive search data" is the the kind of pot-stirring language that Google and other tech giants are facing on a larger political scale these days. These are punches that land, but let's not be so quick to raise Roku's hands for a knockout victory when this could still be a contested split decision.
It's worth noting that Roku sent this message only to YouTube TV users and not the much larger base of YouTube viewers on its platform. Is one Google platform really manipulating sensitive search results in a different way from the other? Singling out YouTube TV appears to be intentional because Roku would have a lot more to lose if it were at war with all of Google, including the iconic ad-supported YouTube service itself.
We don't know how many of Roku's 51.2 million users are routinely on YouTube or the premium YouTube TV apps, but we do know that the gap is wide globally. YouTube claims to reach more than 2 billion users worldwide. There were a little more than 3 million YouTube TV subscribers on that platform as of late last year.
Roku has prided itself on its agnosticism. As Alphabet's Google and other tech giants battle for your living room with streaming hubs that favor their proprietary services and premium content offerings, Roku plays nice with thousands of apps. This is the agnosticism that finds Roku now coming factory-installed in 38% of the smart TVs sold in this country, but Roku hasn't exactly been neutral these days. Last year it refused to add Peacock and HBO Max apps until their parents came to agreeable revenue-sharing terms with Roku. Now we're seeing it potentially lose YouTube TV, and that's not a good look for Roku or Google.
Google also stands to lose here, and not just because its name is being dragged through the mud. Consumers will have to make a choice between sticking with Roku and continuing to stay with YouTube TV by investing in a new dongle and ecosystem. The choice may seem clear to folks who spend an average of more than three hours a day on Roku, but what happens if Google decides to pull YouTube TV and YouTube? The value proposition will get dicey, and at the end of the day both platforms will suffer defections.
Obviously everybody else is a potential winner here. Media stocks and tech bellwethers in this game will be waiting with open nets below to catch falling subscribers. Shares of fuboTV (FUBO 2.82%) traded as high as 8% on Monday before closing with a better-than-5% gain. It's a small but fast-growing sports-centric live TV service. Other virtual multichannel video programming distributor (vMVPD) platforms competing with YouTube TV include Disney's (DIS 0.84%) Hulu + Live TV, Dish Network's (DISH 5.06%) Sling TV, and AT&T's (T -1.00%) AT&T TV.
We can't compare a vMVPD to cheaper and more popular streaming video services. A vMVPD is a live TV streaming service offering several dozen live channels. It's a proxy for the cable and satellite television service that cord-cutters are letting go, typically charging $65 a month or more for a platform with more than 100 live channels. YouTube TV isn't materially different from the many other options out there, and it's a lot easier to cut the virtual cord than the old-school one.
Roku's loss would also be a gain for the other dongle makers with streaming operating systems to promote. Google may see this as an opportunity to grow its Chromecast-installed user base, but folks shaking their heads at both combatants here may just settle for Apple's (AAPL 0.74%) Apple TV or Amazon's (AMZN 0.37%) Fire TV.
The strong likelihood here is that the two parties will make nice after playing mind games with Roku users of the YouTube TV app. Viewers tend to be collateral damage in these negotiations. However, it's always a good idea for investors to know where the exits are in case things don't play out.