THB #463: The Future of Television

The Chicken and The Egg.

The question of taking “the next step,” which lingered for 5 years or so after Netflix launched their streaming service continues to be central to the future of every part of the television industry aside from (and in some ways, including) Netflix.

Here are 5 things I find myself wondering about as we start the new year…

1. THE CURRENT REVENUE STRUCTURE, inc AFFILIATES

Each of the 3 full-service-studio broadcast network owners (Paramount, Comcast, Disney) gets about $1 billion a year from their affiliates.

How do you replace that? You don’t.

Disney is clearing about $7 billion a year on Linear TV, including the cable nets (inc ESPN). Not completely coincidentally, that is about what the gross on retransmission fees each year.

How do you replace that? You don’t.

Disney does well with its owned-and-operated local broadcast stations.

How do you replace that? You don’t.

But at some point, they are all going to have to poop or the pot will evaperate under them, making the biggest possible mess.

Iger has said out loud at Disney that ESPN will convert, sooner than later, into a Streaming-first brand. Everyone is guessing at the math. How much will ESPN++ subscribers have to pay to make it work for Disney financially?

There is a seduction by the seeming simplicity of the Netflix model, in which they really have one significant source of revenues - subscriptions - and their proiftability is based on how much they spend against that amount.

Getting to that has not been easily in these first 4 years of streaming at legacy full-service media companies. But add all the other major revenue streams that the legacy companies are trying to convert and it gets very, very complicated.

Netflix won’t miss what it never had. Disney will.

Netflix’s last quarter revenue was $8.5 billion. Disney’s last quarter, filmed entertainment only, was $9.5 billion. But while Netflix’s revenue is pretty solid, Disney lives with the threat of losses in a shrinking linear business and a still-losing DTC segment.

Please understand that I am not suggesting that Disney is in trouble. I think that is wildly overstated by most media. But the transition must be made. Eventually. And it may include a haircut to the bottom line, at least in the the short term… we’re all just waiting to see when that short-term is launched.

2. SMALLER CABLE/vMVPD BUNDLES