Streaming Adopts Cable's Playbook

Remember when the streaming platforms, led by Netflix, killed cable?  When viewers, voting with their impressions, made it clear they would gladly pay a monthly subscription fee to choose what and when they watched, and without all those evil ads? Ding dong, the overpriced, inconvenient witch is dead.

However, since then, Netflix, Amazon Prime Video, Max, and Disney+ have all incorporated elements of the “defeated” cable model to their offerings:

Dual Revenue Streams

Commercial-free platforms have one source of revenue: Subscriber fees.  These fees are more or less reliable and predictable, but they’re significantly limited.  The benefits of ad sales are many; here are a few.

Additional funds for content:  The acquisition and production of new projects gets more expensive, and additional seasons of established hits always come with increased costs.  Platforms that rely solely on subscriber fees must hope for new subscribers and/or increase the cost of a subscription.  This is less than ideal, as there are a finite number of potential subscribers and regardless of how high it is, there’s a ceiling.  And increasing the monthly subscription cost is risky and could lead to cancelations.



An ad-supported tier brings in new funds to pay for more content, and the tier’s lower cost can help lure new subscribers.

Monetization of impressions: Hits like Stranger Things and Squid Game may drive subscriptions, but for every series or film that enters meme culture, there are who-knows-how-many programs and movies that deliver a ton of impressions but don’t become part of the zeitgeist.  These titles, while popular with existing subscribers, don’t send new people scurrying to sign up.  In fact, they could become a financial drain as the bandwidth they use isn’t free.  Advertising allows the streamer to sell each and every impression, whether it comes from a hot new series or a forgotten 1990s romcom.

Additionally, the streamers can use all the data they’ve gathered (remember, they are tech companies first and foremost) to determine whose impressions are “better” and price them accordingly based on previous viewing habits and demographic info.

Happier Investors: Wall Street wants to see growth.  Constant growth regardless of context, irrespective of whatever is happening in the world.  Subscriptionssurpassedprojections during the pandemic, as viewers were largely confined to their homes.  The cloud surrounding that silver lining for streamers: the greatly accelerated growth made future increases more challenging.  Advertising revenue enhances the bottom line and keeps the stock price rising.

Viewers are fine with the ads:  People say they dislike them, but the addition of commercials hasn’t really affected viewing habits.  A recent study from Involved Media quantifies the common sense.  TV had ads for several decades before commercial-free SVODs came along.  The muscle memory of sitting through an ad break is still there, and younger viewers are no strangers to the concept either, having seen countless pre-roll and mid-roll ads on YouTube. 

Weekly Episode Releases

Netflix and Amazon came out of the gate making all episodes of a series immediately available, and moving away from that approach is proving to be tough—their viewers are trained to binge.  But platforms like Disney+ and Apple TV+ often hew to a one-a-week strategy, with a season’s first two episodes sometimes dropping simultaneously.   As with cable, this allows a series to stretch for two and a half months instead of being devoured whole over a weekend.  If consumers subscribe and unsubscribe for specific shows as they used to for The Sopranos and Game of Thrones (and it sure looks like they are) this will garner three months of subscription fees instead of just one.

And while viewers wait for the latest episode of "Severance" or "The Mandalorian" to drop, they have a week to check out all the other available content that the algorithm recommends (during which they’ll also see some more ads!).


Just like the cable providers, who encourage users to sign up for multi-network packages, some streaming platforms have announced plans to bundle their offerings. Disney and Warner Bros. Discovery intend to partner for a Hulu/Disney+/Max bundle.  They seem to realize exactly what the cable networks discovered years ago: With so many services available, it makes sense to put cutthroat competition aside and team up for shared success.  

Live Sports And Exclusive Specials

Like cable networks, streaming platforms are putting more and more emphasis on exclusive live sports:  MLB on Apple TV+, WWE on Netflix, Premiere League Football on Amazon Prime, and NFL on both Netflix and Prime.  These properties draw subscribers and differentiate the platforms from their competition.  And of course it all comes back to ad sales; you don’t invest $150 million to stream one postseason NFL game without counting on recouping it somehow, and advertising in any of these properties will come at a premium.

Netflix in particular seems to have taken a page from HBO’s playbook.  The pay-cable service made its name with comedy specials from the likes of George Carlin and other big names of the day.  Netflix has made itself the new home for comedy, with specials from Dave Chappelle and John Mulaney.  No longer content to rely exclusively on their algorithms to essentially create a different brand identity for each user, they are making themselves the destination for comedy. 

After crushing cable, why are streaming platforms -- to paraphrase noted media analyst Obi-Wan Kenobi -- becoming the very thing they swore to destroy?  Because the model just works and did for years.  If cable is in fact dying, it’s for a slew of reasons that have little to do with their core financial structure.  That’s a lesson the streamers are learning and applying more and more.

4 comments about "Streaming Adopts Cable's Playbook".
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  1. Kevin Killion from Stone House Systems, Inc., June 7, 2024 at 2:37 p.m.

    "[V]iewers ... made it clear they [wished] to choose .. when they watched..."

    Broadcast/cable viewers were *ALWAYS* able to do that with their DVRs.  I bought our family our first TiVo in 2000 and in the subsequent 24 years virtually ***ALL*** of our TV viewing has been via that box.  We watch on the days and times we want. For us, broadcast and cable were never "linear".  You aren't expected to immediately read a newspaper when it appears on your doorstep, or a magazine when it's dropped in your mailbox.  TV is no different.

  2. Ed Papazian from Media Dynamics Inc, June 7, 2024 at 5:20 p.m.

    If cable is dead, how can it be capturing 30% of all viewing? Yes, that's less than before, but that's what happens when you have competition. Broadcast TV once had a 98% share of audience, but cable cut that way back---yet broadccast TV is till with us---so much so that 15-20% of all TV homes still get it the old fashioned way--via over-the-air reception, while others pay for it via cable or satellite delivery.

    As for the streaming services being "tech" companies, which means that they know excatly what products and brands every user buys---I assume---I tend to doubt that. In fact most of the $10-12 billion that conventional TV advertisers will be investing on AVODs and FASTs shortly are being bought the same old way--based on guaranteed 18-49/25-54 GRP delivery with Nielsen supplying the needed data. In addition time buyers are now driving streaming CPMs down to levels more comparable with linear with the threat that they will walk if the CPMs don't become more reasonable

    Finally, only a small part of the Netflix viewing experience consist of binge viewing. The average Netflix viewer---that's viewer, not household---watches about a two hours of its content every other day. Which is fine and this activity genrates a 7% share of all viewing for Netflix because of the large number of subscribers involved. But---think about it----if most Netflix viewing was binge viewing---episode after episode of a particular series----shouldn't the average viewer be spending  at least 4-6 hours a day watching Netflix content?

    No disrespect intended, and I have no brief--for or against streaming or cable or broadcast TV---but I find it difficult to swallow statements like streaming killed cable, as well as the highly theoretical claims about better targeting via streaming. Yes, under certain conditions this is probably possible---but only when the buys go down on a brand by brand basis---not the upfront way---which is where most of streamings' national ad dollars are coming from right now.

  3. Carl Mayer from Active International replied, June 11, 2024 at 11:25 a.m.

    Thanks for your comment, Ed. You make some great points, and I agree with you that Linear TV is by no means dead. I meant to convey that in the article, and often used “scare quotes” around words like that. When I didn’t, it was because I assumed they were implied. If I was unclear, then that’s on me.

    Traditional TV has definitely been diminished, and as you mentioned much of that is a function of newer technologies providing more options. Additionally, I would posit that a lot of the wounds have been self-inflicted. Cable networks now save the “good stuff” for their streaming platforms and load their linear schedules with episodes of acquired sitcoms that are already syndicated and infinite blocks of reality programming. Then when the desired audience doesn’t show up, the execs throw up their hands and say, “See?  Streaming is killing us!”

    I also appreciate your point about the targeting of streaming, and that it’s being “better” is “highly theoretical.”  I also tend to agree with you here. I think it is undeniable that streaming can be far more specific in its targeting, but that doesn’t necessarily make it better. 

    Let’s say a film studio’s marketing team has decided a film will appeal to Men 18-34. With streaming/CTV ads, they’ll be able to target that audience and virtually exclude all others. But the movie may have also resonated with some other demo(s). In those cases, broader would be “better,” since it would have appealed to an audience that wasn’t even considered. Especially for film releases, where there is a brief window and little time to refine the targeting.                

    So more specific? Yes. Better? Not always.

    Thanks again for reading and commenting.

  4. Ed Papazian from Media Dynamics Inc, June 11, 2024 at 12:32 p.m.

    Thanks for your reply, Carl. I hope that some of my more emphatic comments weren't taken personally as that was not intended.

    I agree that much of the hurt that linear TV now feels was self-inflicted. I saw the same thing when cable first appeared. Then, the broadcast networks---people I knew well and had a high regard for----- were scoffing at cable for its tiny average minute ratings. And later, their successors made the collosal blunder of allowing their producer "partners" to license quality off-network dramas and sitcoms----all hits---to Netflix--which used them to erode their ratings. The facination with being big continued when the networks finally woke up and launched their streaming ventures---each one attempting to beat Netflix by vastly overspending on"original fare" produced by their Hollywood "partners". We know how that tured out.

    One thing, though. Having devled fairly deeply into the superior targeting claim I tend to doubt that streaming buys can really send commercials only to men aged 18-34---or any other demo--- because they don't really know who in the household is watching---even if they can identify the home by head of house demos or fine regional splits. Invariably you are forced to profile---rather than target---- and this means that you get to  lots of people who are not wanted.

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