Data: Moffett Nathanson; Diagram: Tory Lysik/Axios Visuals
2022 has been one of the toughest years ever for traditional TV companies – and it’s only expected to get worse as the advertising market continues to slow and cable cutting accelerates.
Why it matters: The transition to streaming has devastated the business models of major media companies, sparked a new wave of consolidation and threatened the survival of smaller channels.
Game Status: Paramount, Warner Bros. Discovery, and NBCUniversal are all expected to sell or merge with other media companies over the next few years to give their businesses the scale they need to potentially compete with tech companies like Amazon, Netflix, and Google.
- Smaller TV companies are also scrambling to adapt. Lionsgate wants to spin off Starz. Paramount begins bundling Showtime with its primary streaming service. AMC Networks is laying off 20% of its workforce.
details: Most of the challenges TV giants face today result from the mistaken assumption that streaming would be able to easily offset linear TV losses.
- Paramount, Warner Bros. Discovery, Disney, and Comcast don’t expect their standalone streaming offerings to break even until at least 2024 or 2025.
- Meanwhile, not only is cable cutting accelerating faster than expected, but so is the decline in linear television usage in general, including broadcast.
- Digital “skinny bundles” like Sling TV or Hulu with Live TV aren’t growing enough to offset the decline in regular cable bundles.
- Today, about two-thirds of US households pay for a cable, satellite, or fiber TV subscription, compared to 79% in 2017 and 85% in 2007.
zoom in: Media giants are having a particularly tough time convincing Wall Street that their streaming bets will eventually pay off.
- Despite beating expectations for new subscribers, Disney stock plummeted to its lowest level in 21 years last quarter, thanks to mounting losses in its streaming division.
- The few firms that have chosen not to participate in the subscription streaming wars, like Fox Corp., have fared better with investors.
Data: YCharts; Diagram: Tory Lysik/Axios Visuals
Between the lines: The migration of the country’s biggest sports rights packages from linear TV networks to streaming will hasten the inevitable collapse of the cable bundle.
- The NFL announced last week that its coveted Sunday ticket rights package would be awarded to YouTube starting next season. It’s the second major NFL deal to move exclusively to a big tech company, following the NFL’s landmark Thursday Night Football deal with Amazon.
- Google will pay about $2 billion a year for the package, versus the roughly $1.5 billion DirecTV is currently paying to distribute the games. Amazon pays about $1 billion annually for Thursday night games, versus the reported $650 million a year that Fox previously paid.
The big picture: Today, most media giants are in limbo, desperate to harvest what’s left of their lucrative linear TV business while investing in their expensive new streaming services.
- Almost every streamer has introduced an ad-supported streaming tier to attract more subscribers as competition increases.
- Some companies, like Warner Bros. Discovery, are beginning to license more of their programming to other TV distributors after initially stockpiling their own content to enhance their own standalone services.
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