By Mark Jamison

Alphabet Inc. recently announced its YouTube video-sharing service would
leave the streaming platform Roku on December 9 after a long public dispute
between the two tech leaders. Some members of Congress have noticed and are using it as an opportunity to promote their
Big Tech antitrust legislation, claiming Alphabet’s move is proof of market
power.

That’s a great rhetorical argument, but it’s false:
Alphabet’s move is normal for these situations.

Roku is a leader in video streaming devices, providing about 37 percent of viewing time in North America
— down from 49 percent in 2016 — and 30 percent of viewing
time worldwide. It is the world’s fourth largest smart TV streaming device provider behind
Tizen, WebOS, and Sony.

Consumers use Roku’s devices to access numerous video
services, including Alphabet’s. In addition to providing the world’s leading
search engine Google (used by over 75 percent of Americans), Alphabet owns the
leading video-sharing platform YouTube, used by 90 percent of US adults. Its subscription video
service — YouTube TV — is much less successful, ranking 11th in the US and providing only 1 percent of the industry services.

The dispute between Alphabet and Roku has been raging for years. Publicly, the dispute has sunk to he-said-she-said
and name-calling, with the companies publicly disagreeing on what they disagree
about. But on one issue — whether Alphabet asked Roku to give it preference in
search results — a leaked Alphabet email shows that the company did indeed ask for preferential
treatment in 2019, after saying it never did.

The dispute involves YouTube TV and YouTube. Roku pulled the YouTube TV app from its channel store in April 2020. Alphabet sidestepped the action by adding YouTube TV to the YouTube app, which was still in the Roku store at the time. Roku called this “predatory,” which normally means that the action is intended to eliminate competitors, and called Alphabet an “unchecked monopolist.” Roku did not explain how a service that makes up only 1 percent of the industry output constitutes a monopoly that drives out rivals. Roku features 15 channels on its website as of the time of this writing, none of which are YouTube.

Roku’s squabble with Alphabet is occurring in the context of
other Roku battles with content providers. It fought with Fox in 2019 and 2020, at first pulling the Fox app from the channel store, then reaching a
deal right before the 2020 Super Bowl. Later in 2020, Comcast announced it was removing its channels from Roku in a
dispute over Comcast’s new Peacock streaming service. The companies likewise
reached a deal at the last minute. Also in 2020, Roku engaged in an eight-month
standoff with HBO before reaching an agreement. It’s worth
noting that Amazon’s Fire TV has also been without some Comcast and HBO channels
because of device-content disputes.

Implicit in Roku’s name-calling against Alphabet is an
understanding that YouTube is a valuable service. But that does not imply
YouTube has market power. Launched in 2005, YouTube was uniquely valuable, as
evidenced by its reaching
20 million active users within one year. Competitors have arisen, but YouTube
remains highly popular. With 2.3 billion users worldwide, YouTube ranks second only to Facebook in the social media category.
YouTube is second to Pinterest in terms of customer satisfaction, but
it rates 6 percent higher in customer satisfaction than its fast-growing rival
TikTok. The company whose product is technically most similar to
YouTube is Vimeo, but it is much smaller than YouTube and does not show up in
most analyses of social media markets. IBISWorld considers YouTube’s leading competitors to be Netflix,
Amazon, and Disney, all of which are on Roku. Of these, IBISWorld says Netflix
is the largest in the US and YouTube is the second largest.

There is nothing in the market data to suggest that YouTube
has market power. The service is large, but there are numerous, diverse rivals,
some of which are growing rapidly, and users appear quite happy with YouTube.
These facts imply that YouTube competes on the merits of its service. And if
Alphabet had market power, it is unlikely that Roku would have unilaterally
removed YouTube TV from its channel store and not listed Alphabet services in
its featured channels.

What’s to be made of Alphabet’s announcement and Roku’s squabbles? Each is a useful, successful platform that seeks to get as much value as it can from its relationships. Sometimes these negotiations are messy, but they are normal and say nothing about market power.

(Disclosure statement: Mark Jamison provided consulting for Google in 2012 regarding whether Google should be considered a public utility.)

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