Fox’s YouTube Dispute Could Disrupt Viewers. Expect More Changes As TV Evolves.

Alphabet’s YouTube may have to remove Fox channels from YouTube TV as it struggles to come to an agreement with the entertainment company. (Jason Edelson / AFP / Getty Images)

Television drama is heating up both on and off the screen.

Fox stock was down on Tuesday after Alphabet’s YouTube announced that it may have to remove channels like Fox Business and Fox Sports from YouTube TV—a subscription offering that streams live TV—as it struggles to come to an agreement with the entertainment company.

The renewal date for YouTube and Fox’s partnership is approaching, YouTube said in a news release. However, “Fox is asking for payments that are far higher than what partners with comparable content offerings receive.” If the companies are unable to reach a new agreement by 5 p.m. Eastern time on Wednesday, Fox channels including Fox Sports, Business, and News will become unavailable on YouTube TV.

Fox shares declined 1.3% to $53.95 on Tuesday. The company said in a statement that while it “remains committed to reaching a fair agreement with Google’s YouTube TV, we are disappointed that Google continually exploits its outsized influence by proposing terms that are out of step with the marketplace.”

Fox and News Corp, the parent company of Barron’s publisher Dow Jones, share common ownership.

This announcement also comes at a crucial time in the media industry. New streamers are launching, entertainment companies are spinning off their cable networks, and media firms are trying to merge as broadcast consolidation steps into the spotlight.

New Streamers Launch

Fox’s Fox One and Walt Disney’s ESPN streaming platforms both launched last week, adding to the plethora of services available to customers as streaming accounts for the most time people spend watching TV.

These new subscription platforms give sports fans more choices to access as many live events as possible, especially if a Fox and YouTube TV deal takes several weeks to come to fruition. The NFL season is set to kick off on Sept. 4. That’s important, because live sporting events are a crucial asset in getting new subscribers to streaming platforms.

Break Ups and Mergers

There’s also been plenty of news when it comes to entertainment companies splitting up and merging.

One of the most talked about mergers in recent weeks was in the media space. Paramount Global became Paramount Skydance earlier this month following over a year of turbulence.

The Federal Communications Commission approved the merger in July. Critics pointed out that the deal was approved just weeks after Paramount and President Donald Trump settled a lawsuit that alleged CBS deceitfully edited a 60 Minutes interview with then-Vice President Kamala Harris.

Other changes in the media space include Comcast’s spinoff of most of its NBCUniversal cable network portfolio into a new publicly traded company called Versant. Versant will own USA Network, CNBC, and Oxygen, among other channels. Warner Bros. Discovery is also splitting itself up into two publicly-listed entertainment companies. One will be home to its movie studios and HBO Max streaming platform, while the other will include cable channels such as CNN and TNT.

These moves give investors an option to take a bet on an old school TV business, or a new school streaming venture that would compete with companies like Netflix.

Local Broadcast Consolidation

Big deals are also happening on a more local scale. Nexstar Media Group, which owns NewsNation and other local news channels, announced on Aug. 19 that it had entered into an agreement to acquire Tegna for $6.2 billion. The new company will be “better able to serve communities by ensuring the long-term vitality of local news and programming from trusted local sources and preserving the diversity of local voice and opinion,” Nexstar said in the news release.

The deal is subject to heavy regulatory scrutiny, though. The FCC has a longstanding rule that prevents broadcasters from reaching more than 39% of the total number of TV households in the country. According to Nexstar’s most recent annual filing, the company already reaches about 39% of all U.S. TV households. If the merger with Tegna is approved, Nexstar said it would reach 80% of national households.

The companies believe they will get the necessary government approval in order for a deal to get done, though. That would set an important precedent for potential future deals as smaller stations compete with large tech companies that don’t face the same regulations.

“The initiatives being pursued by the Trump administration offer local broadcasters the opportunity to expand reach, level the playing field, and compete more effectively with the Big Tech and legacy Big Media companies that have unchecked reach and vast financial resources,” Nexstar said.

New Street Research analyst Blair Levin wrote in a research note on Tuesday that “while we don’t know the details of the proposed FCC order increasing the national cap, we are highly confident that the FCC will justify that change by pointing to changes in the video market since Congress established the 39% cap in 2004.”

A possible change to this cap could be discussed as soon as the FCC’s next Open Commission Meeting on Sept. 30, Levin said.

“The FCC will likely define the product/geographic market as nationally delivered video content, which will include broadcast, cable channels and streaming services,” Levin added. “That definition will justify allowing broadcasters an increased national footprint, as doing so arguably will not diminish competition nor a diversity of voices.”

But even if more broadcasters consolidate to reach more homes, risks remain as streaming continues to take market share from traditional TV.

The takeaway is clear: The media space is experiencing crucial changes. Customers and investors should expect continued evolution in the TV world as traditional TV companies try to survive and streamers compete for the top viewing spot.

Write to Angela Palumbo at angela.palumbo@dowjones.com