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By Tiernan Ray
William Blairs Ralph Schackert this morning reiterates an Outperform rating on shares of Alphabet (GOOGL), after the companys YouTube business yesterday announced a long-awaited subscription bundle for $35 a month, called YouTube TV, including the four major broadcast networks, CBS, FOX, NBC and ABC, plus ESPN (but without Viacom (VIAB) properties such as Comedy Central and without Turner properties such as CNN.)
Schackert is a bull on over-the-top video like YouTubes, and he expects a warm reception from TV advertisers, based on conversations hes had:
During our discussions with ad agencies and other industry participants over the past couple of years, we have heard repeatedly that advertisers were looking forward to YouTube launching its own OTT service as it creates the opportunity for much better targeting and measurement than a linear TV environment as well as the opportunity to reach a younger audience. We also heard from agencies that YouTube needed more premium content to become a must buy, and we believe that having a cable-like subscription offering will increase the likelihood of attracting premium content to its current YouTube Red offering. Further, the new platform will also increase the opportunity for YouTube to partner with other premium content producers and potentially invest in more of its own original content down the road, in our view (we note that all YouTube Red original series and movies are included with a YouTube TV subscription).
Schackert notes that this new offering is unlikely to be a material driver for Alphabet, but he also points out TV advertising is a $185 billion annual market, and pay TV is $275 billion, therefore, both are very attractive markets for youtube to chip away at over the longer term.
Alphabet shares yesterday closed down $4.74, or half a percent, at $844.93.
Source: http://blogs.barrons.com/techtraderdaily/2017/03/01/alphabet-warm-advertising-reception-for-youtube-tv-expected-by-william-blair/
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