2022 has been one of the toughest years yet for traditional TV companies. Things are expected to get worse as the advertising market continues to slow and cord cutting accelerates.
why it matters: The move to streaming is wreaking havoc on the business models of major media companies, sparking a new wave of consolidation and jeopardizing the viability of smaller channels.
state of play: Paramount, Warner Bros. Discovery and NBC Universal to sell or consolidate other media entities in the next few years to give their businesses the scale they need to compete with tech companies like Amazon, Netflix and Google is.
- Smaller TV companies are also scrambling to adjust. Lionsgate is considering a Starz spinoff. Paramount is starting to bundle Showtime with major streaming services. AMC Networks lays off his 20% of its workforce.
detail: Most of the challenges plaguing the TV giants today stem from the erroneous assumption that streaming can easily compensate for linear TV losses.
- Paramount, Warner Bros. Discovery, Disney and Comcast don’t expect standalone streaming services to go bankrupt until at least 2024 or 2025.
- In the meantime, not only will the cord cuts accelerate faster than expected, but the decline in general television viewing, including broadcasts, will also accelerate.
- Digital “skinny bundles” such as Sling TV and Hulu with Live TV haven’t grown enough to make up for the decline in regular cable packages.
- About two-thirds of U.S. households now pay for a cable, satellite or fiber TV subscription, down from 79% in 2017 and 85% in 2007.
zoom in: The media giant is having a particularly hard time convincing Wall Street that its bets on streaming will eventually pay off.
- Despite exceeding expectations for new subscribers, Disney’s stock plummeted to its lowest level in 21 years last quarter, thanks to wider losses in its streaming division.
- The few companies that chose not to join the subscription streaming wars, like Fox Corp., have done well among investors.
Line spacing: The migration of the nation’s largest sports rights package from linear TV networks to streaming will inevitably accelerate the collapse of the cable bundle.
- The NFL announced last week that the much-anticipated Sunday Ticket Rights Package will be awarded to YouTube beginning next season. This is his second major deal for the NFL to move exclusively to the big tech company, following the NFL’s landmark deal with Thursday Night Football with Amazon.
- From about $1.5 billion DirecTV is currently paying to distribute games, Google will pay about $2 billion annually for packages. Amazon is paying about $1 billion a year for Thursday night’s game, up from the $650 million a year previously reportedly paid by Fox.
big picture: Today, most media giants are desperately trying to reap what’s left of their profitable linear TV business while at the same time investing in expensive new streaming services.
- Nearly all streamers are introducing ad-supported streaming tiers to attract more subscribers as competition increases.
- Some companies, such as Warner Bros. Discovery, have begun licensing their programming to other TV distributors after hoarding their content to power their own standalone services.