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Alphabet Inc Takes One More Step Toward Becoming a TV Powerhouse


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Notch another win for Alphabet Inc (NASDAQ: GOOG , NASDAQ: GOOGL ) - and by extension for owners of Alphabet stock - in the streaming TV space.

How so? On Thursday, Major League Baseball announced it had extended and deepened its agreement with Alphabet property YouTube. Not only will MLB Network's television channel now be included as part of Alphabet's YouTube TV cable-television package, the YouTube TV logo and the World Series logo will be appearing side by side through 2019's championship games.

Moreover, Major League Baseball's existing streaming service, MLB.TV, can be added to a YouTube TV subscription for an extra fee, giving viewers access to all Major League Baseball games played in any given season.

Other digital/streaming television packages like SlingTV, DirecTV and Vue, from Sony Corp (ADR) (NYSE: SNE ),  also offer MLB Network , any of which are intuitively better-positioned to become the preferred alternative to traditional cable television service. For whatever reason though, YouTube TV is emerging as one of the respectable go-to solutions for cord cutters.

That solution just became a little more compelling.

A Still-Fragmented Market for the Taking

The cord-cutting movement is nothing new. But, surprisingly enough, it's still accelerating. Last year, more consumers cut the cord than ever before . Even more surprising is how the alternatives to traditional cable television haven't defined one overarching player as the proverbial category-killer.

Yes, Netflix, Inc. (NASDAQ: NFLX ) is the undisputed king of over-the-top-television , boasting a presence in 75% of the households that subscribe to any streaming service .

It's not a true alternative to cable, though. Indeed, it's un-alternative, in that you won't find any of the same shows on Netflix you'll currently find on cable television - and certainly not the live sports programming. In fact, Netflix has largely eschewed the idea of adding that dimension to the mix , even as competitors have embraced it.

Case in point: Hulu, which is co-owned by Walt Disney Co (NYSE: DIS ), Twenty-First Century Fox Inc (NASDAQ: FOXA ) and Comcast Corporation (NASDAQ: CMCSA ), still offers Netflix-like access to programming that's already been used elsewhere along with several originals.

For $40 a month (which seems to be the going rate for all comparable providers), Hulu Live subscribers can tap into all the major network broadcasts plus the niceties like Cartoon Network, TBS, Lifetime and others.

PlayStation Vue and SlingTV are in the same vein as Hulu Live.

Here's the curious part: As robust and recognizable as those products may be, YouTube (the free, ad-supported YouTube) is still an amazing draw, setting the stage for growth of Alphabet's subscription-based cable service YouTube TV. Those consumers may just need a nudge.

Turning Up the Heat

It's an idea some current and would-be owners of Alphabet stock may dismiss, knowing how modestly sized this venture has remained thus far. Late last year, the platform only boasted about 300,000 subscribers , trailing SlingTV and DirecTV by a country mile.

What investors must understand is that Alphabet isn't in a hurry.

Unlike Hulu Live and other platforms like it, YouTube TV still isn't available in many locales. As of the end of last year, it was only offered in 84 markets . It was only in February that TNT and TBS were added to the mix . At the same time, YouTube promised to bring more NBA and MLB programming to the service.

As for why Alphabet is taking its time walking down the path others have rushed to reach the end of, YouTube's Susan Wojcicki's recent comments to attendees at the Code Media Conference may offer some insight on the matter.

She explained , "You don't just start the ground running by spending billions of dollars. You have to start with a subscription, a number of users. And then from there, you can build it up."

The message was a jab at Apple Inc. (NASDAQ: AAPL ) and Facebook, Inc. (NASDAQ: FB ), both of which have committed large budgets to the creation of their own content as part of the development of their own streaming services.

Wojcicki's point was also more about YouTube Red than YouTube TV itself. The overarching mindset is still evident, though. That is, YouTube TV is a business right now, and reckless spending doesn't necessarily make a lot of sense.

The irony is that YouTube TV may well get the growth it's seeking sooner than anybody expects. Late last year a Parks Associates survey determined that the nascent YouTube Red was consumers' seventh-favorite over-the-top subscription service. Not bad for a newcomer that's not even really trying.

The kicker: Yes, Netflix, Prime from Amazon.com, Inc. (NASDAQ: AMZN ) and then Hulu claimed the first, second and third spots, respectively. In the fourth spot in terms of streaming television share, though, was MLB.TV. Yes, the same MLB.TV that will soon be annexed into YouTube TV.

The service could be a much bigger draw in the very near future, as cord-cutting marches on and YouTube grows its markets and offerings and continues to convert existing YouTube viewers.

Bottom Line for Alphabet Stock

Truth be told, as well as YouTube TV might do in the foreseeable future, it's not apt to make Alphabet stock worth notably more anytime soon. Alphabet's bread and butter is still the ad revenue associated with its search business, and even under the YouTube umbrella, the free/ad-supported content is the heavy hitter.

Still, YouTube TV is a developmental product current and would-be Alphabet stock holders may want to keep in mind as a long-term game-changer. The global pay-TV market is worth more than $200 billion per year , and most of the entrenched legacy players are still doing it rather badly.

As of this writing, James Brumley did not hold a position in any of the aforementioned securities. You can follow him on Twitter, at @jbrumley .

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The post Alphabet Inc Takes One More Step Toward Becoming a TV Powerhouse appeared first on InvestorPlace .



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.



This article appears in: Investing , Stocks
Referenced Symbols: GOOG , GOOGL , SNE , NFLX , DIS



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