Bad News, Cable. You’re Getting CUT!

Knowledge Nuggets:

• A study predicts that only 38% of homes will subscribe to pay TV in four years, with the rest moving to streaming.
• CNN and other cable networks, heavily reliant on pay TV, could face major challenges due to this trend.
• The shift to streaming may not be the expected windfall for content providers due to slowing growth and a change in market mentality.

A new study forecasts the demise of pay TV subscriptions, with predictions showing that only 38% of homes will still be subscribers in four years. This change threatens the survival of cable networks, like CNN, which are heavily reliant on pay TV subscriptions.

The current model allows networks to benefit financially from pay TV, regardless of their viewership numbers, as they receive funds from every cable bill, irrespective of whether their channel is watched or not. This system has allowed networks with comparatively low viewership to continue operations. CNN, for example, despite averaging only around 500,000 viewers during prime time, is able to stay afloat thanks to the revenues from pay TV subscriptions.

However, with cord-cutting practices becoming more common, the number of US pay-TV homes is projected to drop to 49.9 million by 2027, reducing pay TV’s presence to just 38% of households. As people move to streaming platforms, attracted by lower costs and reduced advertising, the funds that networks like CNN rely on may shrink significantly.

At the same time, the surge in subscription video-on-demand (SVOD) services such as Netflix, which had experienced remarkable growth during the COVID-19 pandemic, saw its momentum falter in 2022. Consequently, some OTT players had to reassess their aggressive growth strategies. Although global streaming video revenue is expected to rise from $116.5 billion in 2022 to $174.6 billion in 2027, many streaming services are currently operating at a loss.

The cable networks’ future could be uncertain in this changing landscape. While some, like Fox News and MSNBC, have managed to maintain their ratings, others may struggle to compete in an environment increasingly based on the merit of viewership numbers and quality content. As the pay TV model continues to decline, the future survival of these networks could become increasingly reliant on their ability to attract and retain viewership.

Clear Thoughts:

The changing landscape of the television industry paints a grim picture for traditional cable networks like CNN. The forthcoming death of pay TV as projected by the latest study puts the future of these networks in dire straits. This is because the pay TV model has, for years, provided an income cushion for networks, helping them stay afloat even when their viewership is low.

The future, however, seems to belong to streaming platforms, which offer consumers a cost-effective and less ad-laden alternative. However, the recent slowdown in the growth of subscription video-on-demand (SVOD) services indicates that this transition might not be as smooth as previously anticipated. Moreover, the increase in streaming video revenue may not directly translate into profits, with many streaming services still operating at a loss.

In this evolving landscape, the ultimate winners will be those who can deliver quality content and attract viewership based on merit. This applies to both traditional cable networks and streaming platforms. However, networks that have traditionally relied on the pay TV model face a significant hurdle. The decline in pay TV subscriptions threatens their financial viability, and their survival now hinges on their ability to deliver compelling content that can engage and retain viewers.

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