Pt. 1 - The Leap of Linear/Broadcast to Streaming
Pt 2. - Less Consolidation of Participants
Pt 3. - Price Stabilization
Pt. 4 - The Reconsideration and Aggressive Support Of Theatrical Movies
Pt 5. - The Rest of the World
Like most of these categories, there is already some movement towards converting Linear Television to Streaming. The further we go down this road, the less important the semantic distinction between the 2 delivery methods.
The Broadcast schedules of the 3 biggest networks are already being next-dayed, in the tradition of Ol’ Hulu, on Streamers. ABC on Hulu, CBS on Paramount+, and NBC on Peacock.
As I write this, there is a showdown between the increasingly weak DirecTV and Disney for carriage of all the Disney-owned networks, broadcast and cable. DirecTV is publicly arguing that to survive, it needs to be able to offer cheaper bundles, which means paying cheaper re-transmission payments. Disney have thrived on being paid excessively for access to its channels, with one of the most powerful content line-ups in the game, led by ABC and ESPN… which is what the market had carried as a norm for a couple of decades now.
DirecTV is 100% right. The next growth step for Streaming requires, essentially, the end of cable/satellite… or at least it becoming a truly marginal segment of content delivery moving forward. Streaming needs the room to become more expensive for consumers and Cable/Satellite needs to become less expensive.
An Overly Brief/Overly Long History
Basic Cable started in the 70s as a highly regulated model in which cable companies fought for rights to lay cable in every municipality and even sections within municipalities. The cities and the federal government had the upper hand as they controlled the literal ability to lay the cable. As a result, there were rules developed and negotiated by each municipality - usually similar - as to what the boundaries were, leading to things like local cable access, local-interest programming, requirements to carry all broadcast channels on cable systems, and often, rules about what content could and could not be played on a basic-access channel.
But once the investment of the expense of installing the actual cable, there was consistent amount of monthly revenue from a set of consumers whose churn rates were relatively excellent. Aka, a gold mine. In time, cable companies flexed to get their deals changed, bit by bit, further to their advantage. The power shifted to the cable operators. Content providers fought to get and keep a place on the cable box so they could have a national footprint. The Superstations - TBS and WGN - became models of providing content with a national interest, making them "must-carry” without legally being must-carry. CNN happened out of Ted Turner’s Atlanta base, asserting itself as a 24-hour national news network to compete with the relatively stuffy and limited broadcast news divisions.
But then, in 1992, the United States Cable Television Consumer Protection and Competition Act flipped the table and started to allow the content providers to demand payment from the cable companies for the channels they carried. Goodbye must-carry (legal and otherwise) and hello to the retransmission fee era, where we still live - the center of this conflict - on our way to the DTC (Direct-To-Consumer) era.
This is where I stop and emphasize that this was the 3rd re-imagination of the television industry between 1970 and 2010. People don’t seem to appreciate how significant and how fact moving this all is.
Under retransmission, the payment by cable providers for content channels - always pushing that cost to consumers - changed the entire game. Companies like Disney and what is now NBCUniversal had a big interest in expanding their footprint on cable systems for duel reasons. 1. They could force the providers to pay more for their total package, which included undeniable must-carries, and 2. these added channels could provide advertising revenue, high or low, that cost more than producing the channels. Ambitions varied… some were mostly new-content-driven, some were outlets for library content. Powerful partnerships often shared the risk and reward.
Even pay-tv outlets, like HBO, expanded into multi-channel universes. Cinemax was there to take a few more dollars out of 10s of million of pockets every month. And then a multitude of HBO feed variations meant to make the monthly cost seem more like a bargain. Licensing content was so cheap and the libraries so vast that it seemed a waste to no take advantage.
And then, in January 2008, the 4th major variation of the theme announced itself, Netflix got into Streaming.
As we get into this part of the history, a reminder… every variation on this - really starting with Broadcast TV, which I am not even discussing - has all just been, for almost all Americans, about getting content into the home. We approach our personal histories like they are the first time anyone has had this experience. And yes, there are massive differences in these periods of television history. But we too often lose sight of the bottom line… it’s just about watching TV, dummy. And for the industry, it is now and always has been about leveraging more cash out of consumer pockets for receiving this content into our homes.
As thinkers, we get so caught up in the various horse races, we lose the undeniable greater perspective… the demand creates the innovation. not the other way around. We went from the TV itself being the most expensive consumer participation in this to a monthly bill for access to 30 channels, then 100, then 300, to an ever-increasing price for this very familiar home access because the industry had shifted and there seemed no choice, to Netflix saying, “You already pay $80 or more a month for content in your home and we can provide you with as much or more as your cable box for $10 a month, no ups and no extras.”
Netflix broke the old mold. They entered the streaming home delivery business free of the decades of encumbrances that all the Legacy companies carried and still carry. No content restrictions as such, though they decided on a boundary just the other side of NC-17 and not into traditional graphic pornography. No equipment that had to be bought to get access… or if you needed some, it would be under $50 one time (a Roku box or Fire or the more expensive AppleTV) and you would own the mechanism of access… ironically, just like buying a TV in the 50s or 60s. And unlike the cable provider side, no maintenance of equipment or charging for insurance of same or monthly fees for multiple televisions or 1080p hi-def.
Netflix didn’t replace the cable bundle, but a significant percentage of the public was willing to spend $10 more each month, given how deep in their were to cable (or by then, satellite, which for most consumers was just another variation with benefits and drawbacks to consider.
Then, Netflix really turned the corner when it added original programming to the mix.
It wasn’t instant… but 2 years and 2 months after launching House of Cards in February 2013, the company hit $80 a share, which was a new high and which they would never drop below again.
Disney+ was still 4.5 years from launch.
The key conundrum for what started to be called Legacy Media was much simpler than the press tended to offer. Their financial relationship to the now-heading-towards-defunct delivery system (Cable) is financially lucrative in a way that Streaming cannot match. Period.
I could pretend that there is a realistic statistic to offer the math of it all, but the truth is so complicated that I would be bullshitting you. But let’s put it like this.
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