We are well past the point of linear pay television’s days. Sure, there are plenty of linear free streaming services doing very well. Pluto TV has reached $1 billion in ad revenue, a service which Viacom paid $340 million to acquire. It succeeds because consumers can generally deal with advertisements on free services, and it serves the consumer who still wants a linear form of viewing, but not necessarily the high cost of traditional pay TV. It’s the same reason why antennas have made a comeback: consumers don’t see the same value in pay TV that once existed. And it’s easy to see why: simply, consumers have more choices than ever to consume content on their time. They don’t have to schedule their day around time slots, or set a DVR. They just open an app and watch. If you don’t want to take my word for it, watch any linear pay TV channel and see how long it takes for them to advertise their own streaming service.
An even better test is to see how many shows are advertised as watchable the next day on the streaming service. Or how many more commercials there are for exclusive shows only available on the streaming service. Take a look at Peacock’s original current and upcoming content listing and compare it to the NBCUniversal linear networks’ original current and upcoming content. You’ll find there is a clear investment in Peacock’s programming. And that’s just the entertainment side. Peacock also has plenty of news, and exclusive sports, including the very popular NFL games it shares with NBC. It sounds to me like Peacock is a clear priority.
And Peacock isn’t alone. The same is true for ViacomCBS with Paramount+ and Showtime compared to their linear networks. Same with WarnerMedia, and Discovery. And when you watch linear cable throughout the day, you’ll notice the day is filled with syndicated shows and movies, some even into primetime with little to no original shows. Broadcast networks try desperately to find hits, with the total viewers combined of all networks in a time slot equaling what used to be a single show’s viewership.
The point is viewing habits of consumers have irreversibly changed. Beyond advertising and program schedules shifting, cable subscription numbers reflect the falling viewership, with pay TV providers reporting less and less subscribers every quarter. What was once thought to be the answer to traditional pay TV services, known as MVPDs, the online pay TV services or vMVPDs, also report losses in subscribers. The trends are clear: pay linear television is in the decline.
Sports are a clear answer to keeping the remaining subscribers stuck with cable. Check the ratings of networks and cable and sports broadcasts are the clear winners. But those clear winners don’t come cheap. CBS, NBC, and Fox each paid $2 billion to keep their respective rights to the NFL. Even beyond football, if there’s a sport you want to keep an eye on, chances are you have to subscribe to cable to watch it. But that is beginning to erode. Many of the streaming services run by legacy companies allow for their rights to broadcasting to appear on streaming as well as linear. The regional sports networks are even trying to start up their own streaming services to ensure sports fans are still able to earn the media companies some cash.
Which brings us to the Comcast and YouTube TV carriage dispute. Comcast wants more money for their networks, in addition to a premium subscription of Peacock included in every base package of YouTube TV. If this were several years ago, a carriage fee increasing was just a way of life. But as noted, YouTube TV knows its industry is in a decline and are not interested in raising rates, and Comcast clearly knows their linear industry is in decline if Peacock is receiving the investment it is. The question is when will linear media companies recognize not only how ridiculous it is to ask for carriage fee increases when investment is clearly made more in streaming than in linear, but also increasing carriage fees will lead to a more unsustainable business for themselves. And when they do, will it be too late, or can they fix themselves before they completely lose their viewership?
At this point, I’m not sure if Comcast simply doesn’t care, or if they want to limit competition. Comcast may want to start their own vMVPD through their Xfinity brand. Or, they may make more with Direct to Consumer and want to own their audience’s experience. Once they get to a point where they lose contracts with MVPDs and vMVPDS, they can put whatever they want on Peacock and completely own the experience without the need to follow contractual obligations with linear first.
Comcast could at the last minute back down on their demands, and the NBCU networks could still remain on YouTube TV, where NBCU will still make a good amount of money from the nearly 4 million YouTube TV subscribers, including being a home for NBC’s 4K content that can’t be found on many providers, and where they probably make more money with the 4K add-on package. At some point, carriage fees will have to plateau or drop. The pay TV provider industry will find itself unsustainable, as many small MVPDs around the country have had to shut down and recommend customers to find TV service elsewhere.
While I understand the point of a business is to make as much money as possible, there comes a point where the legacy linear companies have to make a decision if rising carriage fees are worth losing customers. Viacom found themselves off several cable systems for several years starting in 2017 due to carriage fees, and only after the merger with CBS were they able to recover them. For several years, they could only be found on a select few vMVPDs, and were absent from many smaller MVPDs. That’s a lot of years of not receiving any carriage fees from millions of subscribers and hundreds of millions of dollars lost. Hopefully the rest of the industry figure it out soon.