The Future of the TV Business Looks So Much Worse Than 3 Years Ago

Seen any good TV lately? Better yet: See any good TV businesses lately?

It is no newsflash to report that linear television has been sinking into a financial quicksand pit as streamers hoard the best content for themselves, accelerating cord-cutting. Meanwhile, the same streaming services are either unprofitable or have far-slimmer profit margins than broadcast and cable. This is not exactly the financial future that media companies — and the analysts who study them — banked on.

In 2021, the media analysts at MoffettNathanson forecasted that, by 2024, linear TV would account for $78 billion of a total $149 billion in consumer-spend on video (which also includes box office and home video). If this was “The Price Is Right,” they’d be eliminated for going over — twice.

Squid Game Season 2
'THE BEAR,' from left: Gillian Jacobs, Abby Elliot, ‘Fishes', (Season 2, ep. 206, aired June 22, 2023). photo: Chuck Hodes / ©FX on Hulu / Courtesy Everett Collection

On July 22, 2024, they acknowledged they were high by 9 percent and 7 percent, respectively. An expected compound annual growth rate (CAGR) of 1.2 percent turned out to be just 0.3 percent. And don’t get them started on inflation: By that POV, Americans are already spending less than we did on our video entertainment just three years ago.

The problem of not compounding is confounding for the industry. The analysts now see our spend on video going from this slowed growth to an actual decline by 2028, which is the year MoffettNathanson (now) predicts linear TV will account for just half of all consumer-spend on video. (In 2013, linear television was 76 percent of the entire video-entertainment business — and those were better days for the box office and especially for home video. By 2028 it will make up half.)

Forget recent history for a moment here; let’s talk about history history. From 1965 to 2018, “through wars, recessions, stagflation and all, there was not a single year in which the U.S. consumer failed to spend more on video consumption than it had the previous year,” MoffettNathanson wrote. So much for that.

That doesn’t mean the video ecosystem has less revenue coming in than before — it’s just less on us, the consumer. Americans have spent a smaller slice of our discretionary income on video lately, but are spending more money these days on other recreational services — live entertainment and sports, theme parks, camping, membership clubs, and casino and lottery — than ever before.

Technological advancements that have helped pushed our cash toward the tangible world.

“There are numerous reasons why video stopped growing, including the massively increased
efficiency of content delivery enabled by the internet cutting out a decent portion of spending that
otherwise would have gone to pipes in the ground, boxes in the sky, and plastic discs in the mail,” the analysts, led by Robert Fishman, wrote in a memo to clients (obtained by IndieWire). “But that same development has enabled a proliferation of content options at ever decreasing prices, including the ultimate bargain of free.

One subsection of video is up — way up. Ad-supported streaming and FAST services have more than doubled their share of total TV time spent, from 7 percent in 2021 to 15 percent in 2024. In some ways, Netflix adding commercials can be considered both the cause and the effect of this streaming adjustment.

Advertising spend is migrating from linear to streaming, but not in the way Netflix would like (which is to say, to Netflix). It has instead primarily gone to free, UGC platforms like YouTube and TikTok. That pesky free strikes again.

Speaking of strikes — guess what really didn’t help the TV business?

IndieWire reported back in February that despite an initial surge of production following last year’s writers (WGA) and actors (SAG-AFTRA) strikes, there’s been a “significant decline” as it pertains to TV shows. Data from ProdPro tracks a total of 193 series in production in the first quarter of 2024, a 22 percent decline from 2023 and a 30 percent decline from 2022. FilmLA recently reported that as IATSE and the Teamsters negotiate their own deals, production has similarly slowed, with overall shoot days declining 16 percent from the first quarter of this year to the second.

Some of this is never coming back.

S&P Global in a Tuesday note to its clients (obtained by IndieWire) said the streaming services had “rationalized their content pipelines” amid the strikes. Spend growth will return, those analysts say, but “it will be lower overall.” And if Skydance/Paramount kicks off another wave of M&A activity, watch out. Consolidation is in direct opposition to industry growth.

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