Back to the future

S07E10: Game of Streams (Back to the future)

Linear television, curated television channels, and bundling of those into channel packages are losing more and more viewers every quarter. Not as fast as many predicted years ago, but still losing viewers at an increasing pace. The business case for linear channel packages has historically been good for the industry in total. The viewers paid a fee to the distributors for access to all channels. Content creators get paid for access to programming as well as money from advertising. And maybe most importantly, it had scale. As this was the only way to access video content, most viewers paid for a channel package.

Then came the internet and Netflix. Netflix used the internet to distribute premium content in a new distributive way. You could, for a relatively small fee, get access to a catalog of premium content whenever you wanted and wherever you wanted. As an early adopter, they gained subscribers rapidly. Until they reached a threshold with their initial business model. But by adding advertised funded options and putting tighter measures for what they call “paid sharing”, they are back to subscriber growth again.

Many other streaming services have taken the same route, a mix between subscription fees and advertising. But in difference to Netflix, they don’t (yet) have the scale to make a profit and we will see a consolidation of the industry so that we will end up with fewer services with a larger scale that will be able to make a profit while still producing premium content in a large scale.

FAST, the savior?

Many believe that FAST, Free Ad Supported Television, will be the savior and the next generation of linear television. We now see FAST services with hundreds of linear channels of various quality. All are free for the user and monetized by advertising.

I see two main reasons why FAST might not be the savior that many believe. First, it will be hard to generate enough money only on advertising to be able to create the catalog of content that the viewers expect. Remember that traditional linear television was a mix of subscription fees and advertising.

But maybe more importantly, FAST doesn’t solve another main reason why people leave the linear channel packages… User Experience. The younger generations reject the linear channel packages not only because of cost or lack of interesting content. Instead, they are used to a better user experience than what traditional TV has been able to provide. TikTok, SNAP, Fortnite, and Roblox provide engagement, flexibility, and inclusion. In some sense, some of them still provide a sort of linear feed but are better adapted to the viewer and more engaging.

YouTube might be the service that will be able to combine the need for premium content, the experience that the viewers expect, and scale enough to make a profit. With their background in User Generated Content, their strong device platform with the addition of premium content including sports could be the path to success and the next generation linear channel package.

In the challenging times we face in the television industry I see too many followers that try to jump on the same wagons, but too late. Instead, try to see further and create engagement and flexibility for your viewers, with a sustainable business model.

To watch out for the coming months…?

Having spent a week in San Francisco attending technical conferences my reflection is that we have more alignment than ever on the technical side of the industry, although far from perfect. It seems that the engineers realize quicker than the businesspeople the value of cooperation and openness.

I hope that we’ll see the same trend reflected also on the business and that cooperation might actually be a good way to reach success and profitability.

Magnus Svensson is a Media Solution Specialist and partner at Eyevinn Technology. Eyevinn Technology is the leading independent consulting company specializing in video technology and media distribution.

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