In the past, TV networks have suffered when it comes to lower national and local TV advertising. But much of this was based on an existing broadcast and cable TV ecosystem.
Now big changes have arrived -- thanks to new, demanding and costly streaming businesses that need a lot of attention from legacy media companies. Could they be in a big squeeze going forward?
Tom Rogers, executive chairman of Engine Gaming & Media and founder of CNBC, says that new digital-first companies like Netflix -- even with their current softness when it comes to new subscriber growth -- could be in a better position.
Speaking on CNBC on Wednesday, Rogers said:
“Netflix doesn't have to manage a declining business. It can only look forward and build streaming. And all the other big [traditional media] companies now in streaming have to figure out how to manage that decline. That decline is real and significant. They are really coming from a world that is hard to recreate.”
Decades ago, traditional broadcasters also were in the process of making a major transition --- adding cable to their broadcast holdings. But in comparison to streaming, Rogers says the model was far superior from the start -- largely because of cable TV network carriage fees.
“Maybe only 20% of 25% households watched a network but you get paid across 100% of them. Moving into streaming from that model, you are in a much worse business model. You get paid only across those homes that will watch you and pay for you... It's much easier to [have] churn.”
This is not to say that Netflix and other digital-first businesses won't have challenges going forward. For Netflix, he says: “They are going to monetize the third of their subscribers that are not now paying. That's their challenge.” To a lesser extent, new advertising revenue will also help.
Already some major companies are preparing for the worst.
Warner Bros. Discovery is reportedly looking to trim down its advertising sales force by a massive 30% -- nearly 1,000 staffers. While this comes as part of expected synergistic savings due to the newly merged operations of WarnerMedia and Discovery, it also feels like a response to the challenge of harder financial times to come for media and other related industries.
The bigger media picture is changing. Get ready to adjust your set.