CBS signs on for Google streaming service — and more networks are expected to follow

Google is closer to launching its own video streaming service, which would offer big-budget network TV programming without a cable or satellite subscription. 

According executives not authorized to comment, CBS, the most-watched broadcast network, has signed on to provide its programming to the new service. Expected to be called Unplugged, the service would make a small package of channels available to online users for a monthly fee.

The deal was first reported Wednesday by the Wall Street Journal. Google did not comment on the reported deal, and no terms of the agreement with CBS have been disclosed.

The Disney Co. and 21st Century Fox are also said to be close to making deals that will put their broadcast networks and some of their channels on the service, which aims to be a lower-priced alternative to the traditional cable and satellite subscription. Google is said to be planning the launch of Unplugged by the first quarter of 2017.

The service is likely to appeal to viewers 18 to 34 years old, who have been increasingly turning to online sources for video entertainment. The trend has cut into into traditional TV usage over the last five years and led to a decrease in cable and satellite subscriptions. Unplugged will be an opportunity for networks such as CBS, ABC and Fox to recover some of those viewers.

Such packages, known as skinny bundles, are considered a possible alternative to traditional packages that can run well over $100 a month. Google is reportedly looking to price a subscription to Unplugged at less than $35.

Unplugged subscribers will get a live linear feed of CBS’ broadcast signal and a small library of recent episodes of its shows that can be played on demand. The service is also expected to let users record shows for playback.

A person familiar with the agreement said it includes CBS telecasts of NFL games. That will give Unplugged a major advantage over CBS’ own streaming service, CBS All Access, which gives subscribers all of the network’s programs except NFL telecasts. CBS is counting on original programming, such as the new iteration of “Star Trek” and a spin-off of “The Good Wife,” to draw viewers to the service, which commands $5.99 a month from subscribers for an ad-supported version.

Michael Morris, an analyst for Guggenheim Partners, estimated CBS will get $3 per subscriber per month from Google for the use of its signal, with the payment going up to $4 later in the deal.

Such a fee would be significantly higher than the $1.50 to $2.50 per subscriber per month CBS currently gets from satellite and cable providers. Morris noted that the deal with Google will give CBS even more leverage in negotiations with those distributors down the road.

When word of Google’s plans first surfaced in May, the ability to make deals with content providers was considered a major obstacle. But in CBS, Google has secured an agreement with the most notoriously tough negotiator in the TV business.

CBS has long been a holdout from Hulu, the online video service whose backers are rivals Time Warner, Disney, Fox and Comcast.

The deal will also mark another major step by Google into the paid content business. Its YouTube unit generates billions of dollars in ad revenue each year as people flock to the service to watch music videos, video game reviews and get tips on applying make-up or renovating a home. That’s all mostly free to view.

Last year, it began putting some videos behind a paywall and stripping ads from them. Analysts doubt such content is enough on its own to propel masses of consumers to subscribe, and YouTube hasn’t released subscriber figures. But Netflix, HBO and other services have demonstrated that people will pay to watch bigger-budget productions online — the kinds of shows once only available through TV.

YouTube has said not all users want to watch ads and suggested it wants to give video makers more ways to generate revenue.

With ample cash reserves, Google has shown a willingness to make big bets on the future — from transportation infrastructure to Internet delivery — while eschewing short-term profits. Launching a service with major TV networks follows that strategy.

Hulu has said it's working on digital version of the cable TV bundles consumers are used to, and believes it will be a major competitor to whatever Google devises.

During a panel discussion at the Siemer Summit technology conference Wednesday in Los Angeles, Hulu Chief Financial Officer Elaine Paul said her service is “grabbing the dollars” that are freeing up in the media world as consumers ditch or slim down traditional cable subscriptions.

Time Warner joined the consortium this year because it ended up realizing — as other media companies already have — that Hulu "is a great offense" in the changing media game, Paul said.

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Meg James contributed reporting.

stephen.battaglio@latimes.com

Twitter: @SteveBattaglio

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