TV In Transition

At some point in the next 24 to 36 months, we are likely to get to the tipping point between linear and cable, that point where more households are streaming-only than linear.

We’re not there yet, not even almost, as something like three-quarters of US households still have a pay TV subscription of some sort, either through an MVPD or vMVOD.

But we’re not too far away either, especially once consumers have had a chance to digest what the launch of so many new multibillion dollar streaming services (Flixes) means. 

As of early next year, there will be nine Flixes out there: Netflix, Amazon, Hulu, Disney+, AppleTV+, HBO Max, Peacock, Discovery+ and Paramount+.

Which means that there will be more and better programming on streaming, for considerably less money than pay TV.

About the money: even if you were going to subscribe to the premium, ad-free version of all nine Flixes, you’d only be paying around $95/month, which is considerably less than what you’d pay for the Super Deluxe Platinum Plus plan from your local MVPD. The one with all those additional hidden fees.

That $95 also includes all the FASTs, the free ad-supported streaming TV services which will essentially serve the same role that all those many cable networks once did: to supply a steady stream of linear-like channels showing older library content for those times you just want someone else to decide for you.

(And let’s be real: hardly anyone is going to subscribe to the premium ad-free version of all nine services, which means the actual price most households pay will be considerably less than $95.)

But let’s return to the Flixes for a minute here, especially those Flixes (Disney+, Hulu, Peacock, HBO Max, Discovery+ and Paramount+) that are associated with traditional linear networks.

Right now, they’ve all got a two-tier system going, where the really good shows, the ones they’re proud of, the ones they’re thinking “Emmy” about, are on their streaming service, and the stuff they're less excited about is relegated to linear.

And while that is a broad, sweeping and relatively unfair generalization, if you're a consumer or an advertiser, that’s how it can sometimes feel.

Now at some point, TPTB are going to wonder why they are still maintaining two separate slates of programming, why, if they’re trying to establish a brand on streaming that is hitching its wagon to the parent company’s reputation on linear, the only thing the two arms seem to have in common is the company name.

Worse still is the perception, spoken or unspoken, that the streaming audience is the premium audience, the younger, educated, affluent consumers that advertisers want to reach and the best creative talent wants to make programming for, while the audience on linear is the demographic that got left behind.

And then finally there’s Math: as audiences continue to move to streaming, the money the linear channels take in from carriage deals and advertising is going to dip to a point where it no longer makes sense to produce big budget dramas and sitcoms exclusively for linear.

That will be the Tipping Point for TV and it will be curious to see how the various networks all play it.

The logical play here would be to stop creating two completely separate slates of programming but rather, to have the same shows available in both places.

Now that would not mean a 1:1 match, because you want to make sure your subscribers feel they’re paying you cash money for a reason.

But let’s assume a world where all of the abovementioned companies have a three-tier model— a free service, an ad-supported subscription service and an ad-free subscription service.

Current seasons of sitcoms and dramas would live on the subscription streaming app (thus justifying the subscription price) and older seasons of these shows (or even episodes from earlier in the same season) would live on the free app and on the linear channel. The goal here would be a variation of the old Netflix/AMC “Breaking Bad” model: get viewers hooked on a show and then drive them to the subscription app to see the latest episodes.

Less production-intensive programming-- reality shows and other non-fiction— would still be aired as first run programming on linear and on all three tiers of the streaming app as well. This would create continuity between the two, and make the linear and streaming projects feel as if they were coming from the same brand.

The goal across all of these plays would be twofold: get viewers to subscribe to the network’s streaming app and keep viewers who are not ready to subscribe hooked on the free app, where the network can earn ad revenue and continue to try and upsell them while capturing their email addresses for better ad targeting.

The two outliers here are news and sports.

With the exception of Fox News, all of the major TV news services-- MSNBC, CNN, ABC News, CBS News and NBC News--are tied into one of the Flixes and so viewers would have access to them on whichever Flixes they subscribed too--likely on the free version of those apps too, as that would seem to be a smart way to attract viewers you could then try and upsell.

There’s also the question of whether viewers still want 24-hour news services. In the post-Trump/post-pandemic era, the value of those services to consumers of all ages may drop precipitously and younger viewers in particular may be more than happy to get their news online. 

There’s also the issue of what happens to local news, but here, an aggregation service like Haystack may be the solution, or the various Flixes and FASTs can create their own local news services that produce an hour or two of local news programming each day.

But here again, that may be something that consumers would rather find online.

Sports are trickier.

It’s a fairly safe bet that top level sports rights will shift to streaming as the audience there approaches or exceeds the 50% mark. If you’re VCBS, it’s likely the NFL will allow you to show games on linear and on Paramount+ because it gets them bigger audiences and more ad revenue, so why not, especially if the NFL can charge you for it.

What’s less clear is what happens to the RSNs.

Sinclair, which bought 19 RSNs from Fox, is likely regretting that decision as both Hulu Live TV and YouTube TV recently dropped those stations from their line-ups. RSN rights are expensive and they notoriously drive up the cost of a cable bundle to please a shrinking pool of users.

That means the teams and leagues may sell their broadcasts via their own standalone apps, or they may force whoever buys the top level rights package to also offer an RSN add-on to their subscribers, e.g,. the NBA sells league rights to Hulu, but in return, Hulu needs to offer an upgrade where Celtics fans fans can watch every game for an extra $9.99/month. 

Or something like that.

Regardless of how news and sports play out, viewers are going to start shifting to a streaming-only experience at a much more rapid pace, now that the offerings on streaming surpass those on linear and then some. (And I haven't even mentioned the delights of the considerably lower ad loads.)

How the various networks react to the industry reaching the tipping point where more viewing is happening on streaming and how they handle the viewers still on linear will play a large part in determining their future success.