- June 8, 2021
- Posted by: Stratford Team
- Category: Tech
There has been an enormous amount of focus in the media world over the last 18 months about how TV and movie entertainment are moving to streaming services. While Netflix has become a staple of television service in some 70 million American households, the addition of Disney+, Hulu, HBO Max, Peacock, Apple TV+, Paramount+, and Amazon Prime has created a veritable buffet of entertainment choice for consumers. The recent merger announcement of Discovery with Time Warner, bringing together Discovery+ with HBO Max, has further underscored that the future of TV lies in streaming entertainment services.
Sports programming has gotten into the game. ESPN, which has been slow out of the gates into streaming, has recently signed renewal deals for substantial amounts of professional sports programming that give it flexibility to air those offerings on the ESPN+ streaming service. In addition, Amazon recently agreed to pay the NFL $10 billion just to air Thursday Night Football on its streaming service over the next ten years.
As entertainment and sports programming migrate to the streaming world, the cable and satellite bundles of channels are losing subscribers at an accelerating rate with viewers cutting the cord — or in the case of younger viewers, never subscribing to cable or satellite to begin with. So, while the streaming wars heat up, and legacy television channels lose both viewing audience and subscribers, no one is really focused on what this means for television news.
To understand the impending crisis for television news, one needs to understand the economics of the current television system. Television channels today not only derive advertising revenue from attracting an audience, but crucially important to their economics are the fees paid by cable and satellite operators for carrying those channels. For instance, CNN, CNBC, MSNBC, and Fox News get paid very substantial fees across every cable and satellite household in the United States of which today. Today, that means subscriber fees are paid to news channels covering over 75 million, down from close to 100 million at one point not long ago. The news channels get paid across every single one of those households even though only a small minority of households watch each of those channels. That creates a very substantial revenue base supporting the big TV news franchises — regardless of how many viewers the channel actually has, it is getting paid across all cable and satellite homes.
Similarly, local television stations, which are the backbone of local TV news are paid what are called “retransmission consent fees” from cable and satellite operators, which are very substantial payments for the right to carry those stations. Those stations also are paid across all the cable and satellite homes in a given local market, regardless of what percentage of those homes actually watch any given channel. Because of this unique payment system for legacy broadcast and cable channels, many consider this payment system to be the best possible economic model the television industry could have.
As we move away from consumers getting a bundle of cable or channels to an environment where consumers take a few streaming services that they pay directly for, the whole concept of collecting money across all homes goes away.
Entertainment content is making this transition, even though many industry analysts doubt that all entertainment streaming services will make it. Sports programming is beginning to make this transition as well. But there is a huge question mark about how news will be supported in this new streaming world. Any one news channel transitioning to a live streaming service would have to charge a very substantial fee to each home to make up for the cable and satellite carriage it is losing. News viewers may be the last ones to abandon the pay-TV bundle, but inevitably as the reach of that bundle shrinks, those fees will shrink along with it.
Complicating the picture further, there is substantial additional competition for television news, with Roku and Amazon both providing ample streaming news services. They do not have the star power or depth of content of the better-known TV brands, but do provide a reasonable news menu for those who are not political junkies or news channel brand loyalists.
TV news began as public service programming that broadcasters had to carry as a condition of getting a license from the FCC. The television news business eventually turned profitable, but it will soon face an existential crisis as to how to remain so.
There are some possibilities for preserving the economics of news channels and local news, beyond sending each channel out on its own to try to get sufficient direct-to-consumer streaming revenue from loyal viewers.
One possibility is to create a large bundle of national and local news, made available through a single packager. This is what Apple is doing with magazines and newspapers, offering scores of popular magazines and newspapers digitally for a monthly fee at $9.99 with Apple News+, but so far it has been underwhelming in terms of its adoption. And traditional media companies are going to be extremely wary of enhancing Apple’s power in the media marketplace as they increasingly compete in streaming entertainment.
Another possibility would be to find a more Switzerland-like player to act as a neutral distributor. News channels and stations are all in this predicament together — if they can’t get subscription fees from all cable and satellite households, they’d at least like to get fees from all news households, even those that don’t represent loyal viewership of their particular brand.
Certain companies may be able to go it alone better than others. Comcast and NBCUniversal have a broad array of assets including CNBC, the leading business news channel; MSNBC, the leading source of progressive-oriented political news; Sky News, the leading international news channel; NBC News Now, a streaming service; news offerings from digital streaming service Peacock; and a multitude of local stations and regional news channels. Providing a separate news bundle to households who otherwise subscribe to Peacock could drive broad uptake of news content while also driving enhanced distribution of the broader entertainment streaming service.
Fox is putting a lot of shoulder behind Fox Nation, a subscription news channel intended to satisfy the insatiable appetite among that news audience for right-wing, often extreme commentary. There may be a model here for Fox, but my guess is it is not a sufficient one to make up for the substantial financial decline the Fox News Channel will suffer with significantly diminished cable/satellite subscriber fee support.
The center of any democracy is a well-informed citizenry and a robust marketplace of ideas where quality news content can survive and thrive. Right now, there is no obvious answer to saving TV news as pay-TV subscribership declines, but let’s not allow quality television news to become collateral damage in the entertainment streaming wars.
Tom Rogers is Executive Chairman of Engine Media, Inc. He was the first President of NBC Cable.
Disclosure: Comcast-owned NBCUniversal is the parent company of CNBC.