The final stretch
S07E07: Game of Streams (The final stretch)
In a recent interview, Disney CEO Bob Iger stated that: "Disruption of traditional TV business happened at a greater extent than I was aware," indicating that Disney will sell the channels, stations, and cable TV networks and they "may not be core to Disney".
Traditional TV distribution and especially cable TV has historically been a very profitable business, during the peak TV days and before Netflix disrupted the business, cable TV had profit margins of nearly 40 percent among the six largest US cable companies.
These days are counted, and the number of traditional TV subscribers continues to drop. In the latest report, Comcast reported a loss of 543,000 subscribers during the quarter to 14.98M. During the same quarter, Charter’s video customers decreased by 200,000 to 14.7M subscribers.
Traditional TV packages and distribution is on the final stretch.
The trend toward streaming is clearer than ever. The Nielsen Gauge provides a monthly macroanalysis of audience viewing behaviors across key television delivery platforms, including broadcast, streaming, cable, and other sources. In September 2021 the share of streaming was 27.7% and in June 2023 this figure was 37.7%.
To fight back against the cord-cutting trend, Charter Communications split its existing TV package, into two packages. One which will include RSNs and other higher-cost sports channels like league-owned channels; and one which will not have those higher-cost sports channels.
Disney has held early conversations to find a new strategic partner for ESPN, to transition the sports network to streaming. A partner that according to Bob Iger "comes to the table with value that enables ESPN to make a transition to a direct-to-consumer offering".
Sports has long been the reason to keep the traditional TV packages. By separating sports from the traditional TV packages and the effort to find a partner to take ESPN towards a direct-to-consumer product, traditional TV packages and distribution is on the final stretch.
On the other side
At the same time, sports are serving as a propeller of growth for streaming. But with the extremely high content costs, especially for sports content rights, the missing lucrative distribution fees, and relatively high costs for delivery the streaming services are far from the same profit margins for the traditional TV distribution. Except for Netflix and a few others, the streaming services struggle to make a profit at all.?
As an example, Comcast reported that Peacock now has 24 million subscribers, up from 22 million last quarter and 13 million a year ago. Still, Peacock continues to lose money, reporting a loss of $651 million in the quarter, compared to a loss of $704 million last quarter, and $444 million a year ago.
Another example is Viaplay, a Swedish video streaming service with a focus on premium sports, series, films, and documentaries. They have lately announced big financial problems resulting in layoffs of more than 25% of its staff as it pulls out of the large parts of the international expansion and focuses on the Nordic and Dutch markets.
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In the latest annual report from Viaplay, you could read that they have future payment commitments in respect of contractual program or sports rights in the coming three years of more than 38 billion SEK, or 3.26 billion euro. With these content costs it is understandable that we see financial problems if the subscriber count and revenues don’t compensate these figures.
Disney, Comcast, and Viaplay are not unique when it comes to streaming services that struggle to reach profitability. To make streaming services profitable changes need to happen. The streaming industry needs to adapt to the new economic environment compared to traditional TV.
In the future, we will have fewer streaming services, more reasonable content costs, and more cost-efficient technology platforms.
We will see declining content investments and costs, especially around the extremely expensive content rights for sports. I believe we have seen the peak in sports content rights and future deals will see lower and fewer bids. The market needs to adapt, and we will see new business models and cooperation between leagues and streaming services.
In general, will see increased consolidation through cooperation, mergers, and acquisition. The tech giants will continue to invest in streaming, and local broadcasters and streaming services need to cooperate and consolidate to be able to compete.
And finally, we will see efforts in more efficient content production and distribution workflows. When it comes to content distribution workflows, we have already seen big improvements in the last years and content production improvements will need to follow.
In the future, we will have fewer streaming services, more reasonable content costs, and more cost-efficient technology platforms.
To watch out for the coming months…
The build-up for the annual trade show International Broadcasting Convention, more commonly known as IBC, has started more intense and aggressive than ever before. The expectations of the show in September are higher than in many years. I expect that the trends will follow the path of the streaming services market with consolidation and efficiency as the guiding stars.
Watch out for some interesting product announcements around more efficient content production workflows and continued consolidation of tech vendors.
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.
Follow me on Twitter (@svensson00) and LinkedIn for regular updates and news.
Media Solution Specialist at Eyevinn Technology
1 年https://www.ft.com/content/7d62671b-b3c2-4235-a461-5b14279511e7
CTO, OnIP.tv - Denmark
1 年Jeg har v?ret i branchen siden 1987 og set alle tiltag som er sket. Den opdeling som stadig findes er negativ for hele branchen. Pirateri af alt indhold, film, sport, underholdning. Det vil aldrig stoppe, f?r man tager fat om problemet. Jeg tror de samme personer som s?lger rettigheder “lovligt” tjener sorte penge p? Pirat marked. Det g?r de, fordi de selv har v?ret med til at producere elektronik som modtager signaler fra “Free to Air” DVB-C/T2/S2 og IP. Jeg har lavet en l?sning som jeg gerne s?lger sammen med den/det firma som kan se denne l?sning som den meste sikre p? markedet. Hvis jeg i Danmark vil se EPL, kan jeg kun k?be en mulighed fra Viaplay til en dyr pris, men finder jeg en leverand?r p? internettet, er det helt andre priser. Og hvordan kan jeg det? JO, som skrevet f?r, signalerne st?r ?ben og kan “stj?les” og ?ndres til IP. Start med at lukke hullet, ikke noget med 1 abonnent til 4 kort/CAM som kan ses via satellit med et “footprint” p? st?rrelse af hele USA eller Europa. G?r noget selv i egen baghave, f?r man peger finger af andre. Live udsendelser skal ses med mindst forsinkelse og direkte. Det st?rste problem er gr?dighed for penge, var prisen ens for alle uanset bop?l, s? ville ingen bruge en Pirat l?sning.
Making Content Relevant
1 年Ai Automated production of live sport events will disrupt the traditional way of production. It is simply not working anymore facing the enormous investments in media sport rights
Streaming Media Expert: Industry Analyst, Writer and Consultant. Chairman of the NAB Show Streaming Summit ([email protected])
1 年Some of this sounds great for consumers, like lower costs, but that's not backed up by any data or events taking place in the market. It's the opposite: - "I believe we have seen the peak in sports content rights and?future deals will see lower and fewer bids." Based on the numbers we have seen put out on sports licensing costs, (not verified), the opposite would be true. Many of the deals already done are more than 5 year deals and some are in the 7-10 year range. Many of the largest sports licensing deals won't be re-bid for many, many years. And the numbers leaking out (if accurate) on upcoming licenses like the NBA and soon the WWE, will go for a higher price. We might see fewer bids, but that doesn't equate to lower licensing costs. - "In the future, we will have fewer streaming services, more?reasonable content costs." Based on what? Costs never go down for consumers. Disney, WBD and others have all outlined how they will get to profitability, but when that happens, they won't lower prices to their streaming platforms. Nothing in the market points to anything but the above taking place.
Associate Vice President - Strategic Accounts at Robosoft Technologies
1 年Agreed! Distribution model is here to stay, next step for the industry is to identify the right content strategy and the partnership models that could enable profitability. Reduction in the cost of content will certainly be a by-product across sports as well as entertainment. Looking forward to IBC and learning the view-points of industry experts.