For more than 20 years, running a cable TV channel in the USA was a one of the most profitable forms of business in the media sector.
Todd Juenger (Media Analyst at Sanford Bernstein) found that companies like Disney, Fox, ViacomCBS, NBCUniversal, Discovery and AMC Networks delivered returns in the area of thirty to forty percent on invested capital.
“We looked at the S&P 500 trying to find companies that consistently delivered returns like that and it was less than 10 — basically no other sectors could claim that kind of return,” Juenger told Variety in a rare interview.
Streamers disrupt the broadcast landscape
However, once high-speed internet leveled the playing fields, and smartphones and tablets came equipped with bigger and higher-definition screens, newcomers like Netflix and Amazon didn’t need to go through cable businesses like Comcast or DirecTV to get their content onto viewers' phones, tablets and laptops. It was a double-whammy that fundamentally changed viewer habits.
It was no longer necessary to sit down in front of a TV to consume content. You could watch it anywhere, anytime.
Broadcasters used to decide when and how viewers would consume TV series, view commercials or catch the news, sport and weather.
Streaming not only delivered content on-demand, but in your pocket. The viewer decided when, what and how to view content.
This will continue to impact not just media distribution, but media production. The 30-second classic TV commercial is already a dinosaur. Entire seasons are offered to binge-watchers, instead of via episodic release. Because more viewers are consuming content while they commute or during work-breaks, shorter duration content is being offered (10 - 15 minute episodes/newsbytes).
These changes are having a cumulative effect on the entire industry. Marshall McLuhan's famous statement that the media is the message is as true now as it was in 1964.
Netflix, with 167m subscribers, is now the biggest streaming service in the world. Amazon Prime Video has more than 150m subscribers, and newcomer Disney+ has already accumulated more than 54m subscribers, with a growth of 20m since March 2020. Apple TV+ is another significant newcomer but Apple execs have yet to release viewer numbers.
The old behemoths are finally getting the message, and for the staff who work there, it's not a pretty picture. Fewer resources are needed to run a streaming operation than a traditional broadcast network, and the bigger companies are merging their broadcast and streaming services - so the first casualty is staff.
NBCUniversal lays off 3,000 staff
In the USA, NBCUniversal is a case in point:
NBCUniversal has begun the process of laying off around 3,000 staff as it restructures into a streaming business. NBCU CEO Jeff Shell advised investors that the company was combining its TV and streaming divisions into one, under Mark Lazarus. The company recently launched SVOD / AVOD service Peacock. Lazarus will continue to head up NBC Sports Group, and will also run Peacock.
NBCU’s news channels have been collapsed into one division under Cesar Conde, who was recently appointed as chairman of NBCU News Group. Conde was previously chairman of NBCU’s Telemundo Enterprises, which includes NBC News, CNBC and MSNBC. Both Lazarus and Conde report to Jeff Shell.
IBC reports 43% drop in revenue
It's not much different in Europe: British terrestrial broadcaster ITV reported a revenue drop of £300m ($395m) or 17% on last year to £1.45bn, and advertising income fell 21% over the first six months.
The impact of Covid-19 on advertising spending in the second quarter saw a 43% drop in revenue. Ad revenue fell 23% in July, but CEO Carolyn McCall said advertisers “are returning”.
Global production division ITV Studios posted a 17% drop in revenue to £630m, with most shows put on hiatus during the lockdown period. McCall said in a subsequent interview that about 70% the two hundred-odd shows in production have now returned to filming.
Streaming is the new normal. While traditional broadcast will continue to have a place, it's likely that it will be reduced to essential public broadcaster services.
Breaking news and live sports, once the exclusive preserve of terrestrial and satellite providers, are moving rapidly into the SVOD (subscription video-on-demand) model of streaming. There is therefore little incentive for subscribers to stay with satellite providers, particularly if they are paying a subscription fee.
This change signals the last nail in the coffin for the feasibility of traditional terrestrial and satellite TV. They will need to hybridise to survive.
Is the Streaming Honeymoon already over? Will the streaming wars produce a new media oligopoly? Media observer Paris Marx thinks so: "We’re headed toward a future where entertainment is further monopolized by a small number of massive global conglomerates with streaming platforms filled with content they own, making it harder and harder for small companies and perspectives that aren’t so easy to commercialize to have a shot.
"Right now, we’re in a sweet spot where competition between the conglomerates is providing some of those opportunities, but history shows us it will not last — and it may already be ending."
Erin Schiffer, CEO of the Patriarch Organization consultancy firm, says the “golden age of streaming” is already over.
Netflix is already starting to behave more like Mr Hyde than Dr Jeckyll. The streamer is being criticised for making decisions based on an opaque algorithm, disproportionately canceling series created by women, and for its recent business calculation to cancel series after just two or three seasons to avoid bonuses and salary increases. The appetite for antitrust appears to be growing, with both Elizabeth Warren and Bernie Sanders calling for action to address media consolidation.
Antitrust action and the development of cooperative alternatives would completely upend the streaming wars. By Gordon Greaves