One of the more interesting trends we uncovered in our TV[R]EV special report on the FASTs (free ad-supported streaming TV services) is the notion that as the traditional pay TV bundle continues to wither, the FASTs are becoming home not just to the sort of content that was on cable TV, but to the actual cable channels themselves.
The prevailing thought was was that as cord-cutting picked up, the MVPDs would respond by eliminating many smaller channels from their bundles, and that those channels would be best served by striking deals with the FASTs (as many of them already have) and porting their operations to the FASTs, where they would still collect ad revenue.
The idea itself is pretty straightforward: the business model behind the vast majority of cable TV channels (remember, there are hundreds, not just the couple dozen you can name off the top of your head) is to make money by showing popular reruns and selling advertising based on the number of people who watch those reruns.
The FASTs have a similar business model with several built-in advantages: they can run hundreds of linear-like channels grouped around content categories (“Detective Series”) or even a single show (“The Office”) and they can target ads on those channels to very specific audiences so that advertisers can reach the exact demos and geographies they want to hit.
The wrinkle however, is that it’s not just the business model that is migrating, but the actual channels themselves–many cable channels have already struck deals with the various FASTs to stand up a branded streaming “channel” on the FAST.
It’s a case where everyone wins: the FASTs win when viewers recognize the cable channel and its brand, which helps create stickiness, and the cable channels win because they now have a second outlet to monetize programming they have purchased the rights to.
Many of the executives we spoke with (off the record) felt that right now, the cable networks were just feeding the FASTs series that had minimal restrictions on their usage, but that as contracts with rights-holders and MVPDs were renegotiated, they would begin porting their full libraries, including original series, if that was a part of their offering. (Not all cable networks have originals.)
The executives we spoke with were split on whether the loss of carriage fee revenue (the money the cable companies pay cable networks for the right to carry them) would allow the networks to make this new business model work.
Our take is that it will be a little of both: bigger networks with more unique programming options may be able to earn enough ad revenue on the FASTs to stay in business, but it’s likely that some of the less popular cable networks will not.
The Value Of Comfort Food TV
On a macro level, this migration speaks to the ultimate role of the FASTs in the new TV ecosystem: they will be the home of lean-back “comfort food” TV, the place you go when you don’t want to think too much about what you’re watching and where you watch shows you already know you like.
This is a much bigger deal than many in the industry acknowledge: for consumers, every new streaming series is a gamble, potentially an hour wasted, or nine more hours that will need to be watched in a schedule that is already too full.
To learn the ramifications of this migration, and pretty much everything else you’ve ever wanted to know about the FASTs from advertising to measurement to content strategy, along with our predictions for the future of FASTS, get a copy of our Special Report “TV In The FAST Lane”