There’s really only one question worth asking about the future of the TV industry, It’s a question that will mean great success for those who guess correctly and years of struggle for those who guess wrong.
That question is how soon will the linear TV ecosystem collapse?
Some will say that traditional broadcast and cable linear TV will be history in as little as five years. Others will say ten or fifteen. And still others will scoff and say never.
There are legitimate arguments to be made for all of the aforementioned answers, so let’s review them.
We’ll call the Five Years or Sooner option the “Silicon Valley” option, as they’ve been predicting the “death of TV” for the past fifteen years or so and to this day I get comments and tweets telling me to give up the chase because “TV is dead.”
Only of course, TV didn’t die. It didn’t even almost die. It just reinvented itself as streaming.
All the same players are there: Discovery, Disney, Fox, NBCU, ViacomCBS and Warner Brothers. Yes, they’ve got some company, but old TV is still the major player in new TV.
But back to the five year thing.
You could argue that with nine major Flixes up and running, consumers are quickly going to figure out that there’s nothing on pay TV they can’t find on streaming for less money and without a two year contract. Especially since it now looks like all the major news and sports services are going to be migrating to streaming shortly, if they haven’t done so already.
As more and more people abandon linear TV, it will no longer be worthwhile, from a money in/revenue out perspective to create big budget comedy and drama programming for it, which will make it even less desirable to consumers and pretty soon it’s not going to be worth it for the networks to keep their linear channels going.
The “five to ten year option” is essentially a somewhat less exuberant version of the “five year option” that allows for the facts that nothing happens very quickly in the TV industry, and that the tastes and media habits of upper middle class industry professionals in Los Angeles and New York City are rarely good barometers for what the mass of Americans are up to.
And then there’s the “never” theory, which says that there will always be linear TV, that at most, slightly more than half the audience will shift to streaming, but no more, and as such, anyone wanting to reach the 30% to 40% of the audience that’s remained on cable will still need to advertise there, and that yes, there might be some innovation, especially around advertising, but cable and broadcast isn’t going anywhere, and besides, there are laws about it.
Why It Matters
Anything remotely resembling the rapid demise of broadcast is going to negatively impact the six major players who have their roots in traditional TV as they still make the majority of their money from the retrans and carriage fees they get from the MVPDs and the millions they get in ad revenue from linear. If that firehose dries up before they can start replicating a high level of revenue on streaming, then Century City, we have a problem.
There’s also the programming angle.
Right now, in 2021, we have essentially created a two-tier system where the Blue Team assumes that the only good shows are the ones on streaming (an assumption they see confirmed at the awards shows every year) while the Red Team assumes that the boring pretentious shows are all on streaming and anything they’d actually want to watch is still on linear.
For the networks, that means they are maintaining two largely unrelated slates of programming, one aimed at less sophisticated audiences, one aimed at more sophisticated audiences. (As noted last week, Discovery is the only network that is not choosing this curious path, and it’s given them a huge advantage.)
This bifurcation is going to make it extremely difficult to combine the two halves at some point or to introduce less “highbrow” (middlebrow?) programming on streaming a la Netflix in order to attract the network’s loyal linear viewers.
Which brings us back to the original question: how quickly does linear fall apart?
In many ways, it will be easier for the networks if linear does go away, allowing them to concentrate all their efforts on streaming. There’s much work to be done there around making it easy for advertisers to buy, sell and measure across multiple platforms, ad tech vendors and devices, and to figure out how the subscription revenue and ad revenue from streaming can replace the ad, retrans and carriage fee revenue from linear in a way that allows the various networks (and their shareholders) to thrive.
The advantage here will go to those companies who can hold on to the most subscribers, selling around 30% to 40% of them on the ad-free subscription model while keeping the rest on the ad-supported model with others tuning in regularly to the FAST, so that there’s a sizable ad base.
There’s one other option we haven’t considered: the major networks unilaterally abandon linear, moving all their programming to streaming lock, stock and barrel, selling off their O&Os and cancelling their affiliate agreements.
That will leave broadcast open to smaller, niche players who can use the lower distribution costs to reach a different kind of audience, one that’s hyperlocal, cost conscious, more open to experimentation and interactivity, or some combination of all three.
In many ways, this seems to be the most likely outcome for linear, as the larger networks have no financial incentive to keep linear going once the audience shrinks below a certain percentage, and yet it’s unlikely that entrepreneurs would not see potential value there, especially given the amount of pre-existing infrastructure around broadcast. (All those towers.)
Thus, it may come to be that broadcast TV dies and is reborn as something a whole lot cooler and more interesting.
(McLuhan pun intended.)