In addition to CBS’ broadcast feed, the multiyear deal provides CBS-owned Pop and CBS Sports Network to Unplugged. The terms do not include The CW, which CBS co-owns with Warner Bros.
Unplugged is expected to launch early next year and cost $40 a month or less. It will include some videos from Google’s YouTube Red.
The CBS agreement could be important as Unplugged prepares to compete with several cable-like streaming services including DirecTV Now, a new offering from Hulu, and Dish Network’s Sling TV. Apple is still looking for ways to enter the field.
Disney, Fox, Comcast’s NBCUniversal and Time Warner own Hulu. CBS has its own subscription streaming service: CBS All Access.
The Wall Street Journal was first to report the CBS-Google pact.
The major networks air television’s most popular programming, and are considered must-haves for services that hope to compete with cable and satellite — as well as each other.
The challenge is to assemble enough popular programming without running up the cost. Most if not all of the major network owners have so-called Most Favored Nations deals with large pay TV providers that guarantee them the lowest price for popular channels.
CBS’ agreement with Google has “a higher rate card …than it currently receives from other” pay TV services, Stifel research’s Benjamin Mogil says.
He adds that Showtime isn’t part of the deal, and it doesn’t give Google more stacking rights — opportunities to watch previous episodes of a series on VOD — than CBS offers cable and satellite.
Google is probably paying CBS about $3.00 per subscriber per month at first, growing to $4.00 over time, Guggenheim Partners’ Michael Morris estimates.
“This is above our estimate of traditional retransmission rates (currently in the $1.50-$2.00/monthly range, ramping toward $2.50), and still below the company’s wholesale price on CBS All Access ($5.99/month),” he says. The online initiatives “will provide incremental leverage in future fee negotiations with traditional distributors.”
CBS chief Les Moonves told an investor gathering last month that the industry is “still in the first inning” of figuring out online video services that might provide an alternative to traditional pay TV. Still, he believes “there’s a great deal of growth there” and he’s “very optimistic about all of them.”