Linear TV Is Deteriorating Faster Than Anyone Expected
By Movieguide® Contributor
2024’s Q2 reports revealed that linear TV is in dire straits as multiple studios posted abysmal losses related to the business.
“The cable networks just are in this horrific, perennial, never-ending decline,” said Bank of America’s Jessica Reif Ehrlich. “It’s been more abysmal, I think, than almost anyone expected, even just two years ago, when the handwriting was on the wall, we still thought it would be at a slower pace than it’s actually been.”
In the past week, Warner Bros. Discovery (WBD) revealed a $9 billion loss from linear TV while Paramount Global took a $6 billion loss from its cable endeavors. The situation was so bad for Paramount that it announced it was shutting down its TV studio — though CBS remains open and is taking Paramount Television’s successful shows, such as REACHER.
This rapid deterioration is coming from a dual decrease in revenue as cable loses subscribers as well as advertising dollars at the same time, largely fueled by the introduction of ad-supported viewing on every major streaming site since the beginning of 2023.
“Cord cutting has been a headwind for this linear television business over the past couple of years, and we’re seeing no real signs of improvement, but the bigger recent challenge around U.S. liner advertising has taken the pressure up a different level, because now you have both of your revenue streams working against you,” explained Robert Fishman, a senior analyst at Moffett Nathanson.
“So it’s forcing these linear cable networks to really try to figure out what the future of them looks like from a cash perspective, given the challenges that they’re facing from the broader ecosystem, and what that does to their top line. So they’re being forced to essentially cut back on expenses to help alleviate, or try to alleviate some of that pressure.”
Linear TV’s saving grace thus far — live sports — is also on the brink of going digital with the Disney-Fox-WBD bundle, Venu, which is launching this fall. With a $42.99 price tag to view 14 live sports channels, this could prove to be the final nail in the coffin and take away TV’s last support.
Experts, however, believe linear TV will never truly die even if it is relegated to a minor form of entertainment similar to radio. The landscape of the business, however, is predicted to undergo a radical transformation that ends with the medium being conglomerated under one or two companies that control all of linear TV.
Under the current pressures that the industry is facing, experts believe this model is the only way linear TV companies could turn a profit in the long run.
“If you combine a lot of the cable networks, I think you get rid of corporate overhead. You can get rid of duplicative advertising functions, distribution, there’s a lot of costs by combining. A roll up could be run for cash,” Reif Ehrlich said.
“I think all the companies are going to look to explore different possibilities, but it remains to be seen what appetite within the marketplace there is for some of these smaller cable networks and willingness and at what price outside investors want to look at valuing these assets,” Fishman added.
Movieguide® previously reported:
As Americans continue to shift away from cable and broadcast TV, advertisers are cutting back on their linear TV ad spending and putting more towards reaching consumers through digital media.
2024 is predicted to be the first year advertisers spend more money on digital media — including social media ads and ads on streaming services — than on linear TV. This represents a marked shift in the industry which began in 2020. In that year, marketers put only 29% of their money towards digital media, spending the other 71% on linear TV. This year, digital media is predicted to take in 52% of the money spent on ads, topping linear TV’s 48%.
The rise in digital media ad spending comes as consumers continue to spend more and more time on social media and streaming. The latter has provided the marketing industry with more opportunities within the past year and a half as every major streamer has introduced an ad-supported subscription tier.
Streaming and social media also offer marketers more bang for their buck as they can target consumers more specifically. A recent study found that ads shown on YouTube provide double the recall with consumers than any other platform, including TV, because of its superior targeting.
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