Streaming is cooling a bit (thanks to 8% price inflation!). All the while, linear TV continues to get hit from lower advertising and distribution revenues.
The treading water continues in this market.
Craig Moffett, senior research analyst and co-founder of MoffettNathanson Research, notes the rubber-meets-the-road moment based on this: Collectively, all legacy TV-media companies' linear TV revenue is four times the size of their streaming business -- $86.3 billion versus $22.6 billion.
Complicating this comparison, he says “streaming is descendant -- not necessarily declining, but the bloom is assuredly off the rose -- it’s time to pay attention.” So do legacy TV companies sacrifice one to build the other?
At the same time, carriage and affiliate revenues from TV providers are sinking. Subscribers are down 6% overall when looking at traditional and virtual pay TV providers, and down 10% when looking at core legacy business -- cable, satellite, and telco.
Worse still, he believes these providers realized some time ago that the writing was on the wall for legacy, linear TV: There’s no real way to save this major part of their business. (Insert your "treading water" reference here.)
In the second quarter of 2022, MoffettNathanson says, total affiliate fees (from cable networks) and retransmission revenues (from TV stations) witnessed new lows -- 1% growth. This comes from a combination of flat growth (affiliate fees) and a still robust 8% growth (although declining) from retransmission fees.
This is not good news for legacy TV network-based media companies -- stuck in the middle of some tough business transitions.
For one, sports programming -- the remaining big successful piece of linear TV, especially the NFL -- is slowly moving to streaming.
Big TV networks that have the NFL are allowed to simultaneously run games on their streaming services; Amazon Prime Video just started an exclusive deal for the NFL’s “Thursday Night Football.”
Good news -- in the near term -- for NFL TV networks is this: A year ago, May 2021, the NFL struck an 11-year $100 billion deal with linear TV networks (and including Amazon).
Still, new streaming growth isn’t stopping with the NFL. The NBA will be strongly looking at the direct to consumer business in its next round of contracts. Will ESPN/TNT continue to up the ante?
From a more pressing financial perspective, cable TV regional sports networks (RSN), are increasingly being pushed aside from distributors. They essentially need to be almost exclusively in streaming to survive.
The deal is always following the consumers -- hopefully to get a little ahead of the curve. Moffett says “it isn’t so much demand as it is supply, and where else that supply can be found.”
Hard decisions will be made. Look for floaties.