R.I.P. Cable TV: Why Hollywood Is Slowly Killing Its Biggest Moneymaker

As subscribers and viewers flee, media companies that once relied on cable TV are chasing streaming dollars instead.

July 21, 2020

Michael Schneider and Kate Aurthur

Francesco Muzzi for Variety

Earlier this year, people started noticing something peculiar about MTV’s schedule: The network had quietly morphed into an almost 24/7 offering of just one show. At one point in late June, “Ridiculousness” — a half-hour viral video-clip show hosted by famed skateboarder Rob Dyrdek — aired for 113 hours out of the network’s entire 168-hour lineup. Many took it as a sign that MTV, a pioneering force in reality television that only a few years ago had also made major investments in original scripted programming, had just given up.

Pundits had long predicted the death of broadcast TV, while basic cable feasted on a dual revenue stream of subscriber fees and advertising revenue. But that gravy train started going off the rails when the streaming services arrived. At first, Netflix was a friend, supplying yet another source of revenue and even acting as a marketing tool — helping to turn AMC’s “Breaking Bad” into a much bigger hit during its final season of originals on AMC, for example.

But as AMC soon learned, consumers began thinking of “Breaking Bad” as a Netflix show — and Netflix was using acquired library content to quickly change viewer habits. Last year, the streamer launched more original programming than the entire cable TV industry had a decade earlier.

Meanwhile, “cord cutting,” once pooh-poohed by the cable industry as a myth, has become a real threat: The number of pay-TV households peaked in 2010 at 105 million; now it’s down to approximately 82.9 million. And a study last year by eMarketer forecast that number to dip to 72.7 million by 2023. Now, it’s cable that’s on the ropes — and struggling for survival.

“I think it’s 10 years, and there’ll be a total change of the guard,” says former DirecTV/AT&T Audience Network programming chief Chris Long, who’s now a producer. “At some point, people will make that decision of ‘I can get everything I want [in streaming]. I no longer need to have 180 channels that I only watch 12 of.”

While a handful of lifestyle and older-skewing networks have managed to buck industry-wide declines, most general entertainment channels have suffered double-digit drops in ratings in recent years. According to Variety’s tally of the most-watched networks in 2019, Nick at Nite was down 24% among total viewers; AMC, down 22%; FX, down 21%; USA, down 19%; TBS, down 16%; and TNT, down 14%.

Until recently, it was cable that drove much of the entertainment industry’s bottom line. Those networks printed cash for the conglomerates, which is why the parent firms were so eager to build up their suite of channels. When Disney bought ABC in 1995, ESPN was the big prize. By 2001, cable distribution was so valuable that Disney paid a whopping $5.3 billion for the Fox Family Channel — rebranded first as ABC Family and now known as Freeform. When Viacom and CBS split in 2006, Viacom was seen as the better bet because of its channels.

Cable paid top dollar for movie packages and off-network broadcast shows, further enriching the ecosystem. As the cash grew, cable could afford pricey sports rights and original series, giving channels reasons to increase their subscriber fees. It was a growth cycle with no limit. Or so it seemed.

Lola Dupre for Variety

But even before the disruption of streaming, signs of trouble emerged. Distribution hit a wall as the domestic customer base was tapped out. That led to more clashes between multichannel video programming distributors (aka cable and satellite providers) and media conglomerates desperate to make up for losses by jacking up (or even holding steady on) those subscriber fees.

As the MVPDs and entertainment companies battled, they were distracted from coming up with a plan to fight the imminent OTT threat: First from Netflix, then from Amazon and now even from Apple. And so the declines continue — to what level, no one is quite sure.

“Where’s the future? Where are we going?” asks Mark Stern, the former president of original content at Syfy. “I think that where we’re headed is obviously into this on-demand, nonlinear space.”

Adds Henry Schleiff, group president of Discovery’s Travel Channel, Investigation Discovery, American Heroes Channel and Destination America: “I think [cable pioneer] John Malone’s initial dream back in the ’80s of a 500-channel universe, which we’ve long surpassed, has already come and gone. It was a great dream and a wonderful place to live in. I think the consolidation you’re seeing now is what you’ll see in the future.

The decline of cable isn’t a new story, but what has started to take hold is a change in narrative inside the industry. Rather than try to prop up what they all know to be a decaying linear business, cable executives are instead focusing on their still-healthy intellectual properties and the brands behind them.

Some of those cable brands are even aiming to carve out a space in the streaming world, like FX on Hulu, National Geographic on Disney Plus and the Turner team’s involvement in HBO Max.

“You’re just doing everything you can to run in place as a basic cable network,” says FX Networks CEO John Landgraf, explaining why creating an FX on Hulu portal, which includes original programming not aired on the linear channel, is necessary to grow the FX brand. “It allows us to maintain — even increase a little bit — our investment in our programming for our linear channels … but where all the growth from investment in the television industry is, is in streaming.”

Then there’s ViacomCBS, which has basically been telling people to stop thinking of it as a collection of channels and instead focus on the company as the steward of a wide variety of programs and IP. “I think more and more we look at each of those brands as content factories, as makers of content for a particular group or demographic or psychographic group that exists beyond the cable channel,” says CBS chief creative officer/Showtime Networks chairman and CEO David Nevins.

Read More:
https://variety.com/2020/tv/news/cable-tv-decline-streaming-cord-cutting-1234710007/