I was shocked. While moderating at Realscreen Summit earlier this year, I asked my panel of cable TV execs if they thought any networks would go out of business anytime soon. The answer was sobering and, frankly, unexpected. One after another, the panelists predicted that two to four networks would go dark in the next year or two.
Dark, off the air, out of business, kaput.
If true, the predicted change means waving goodbye to our current system of TV and hello to an uncertain new world order.
Already we’ve seen networks disappear. They once showed enough promise that their parent companies invested in them and put them into your cable package and now they are gone. It’s happened with Pivot, a network aimed at millennials — precisely the demographic that is leading the charge against traditional TV. NBCUniversal shut down its Esquire Network, relegating it to a digital-only platform. And John Martin, Turner CEO, said recently, “There are too many shitty networks that have to go away” —presumably none of them Turner networks. Every week there are rumors about some network that is about to be axed or demoted to digital.
This is extraordinary for several reasons:
- It’s one thing to talk about change, another to see it happen. Everyone knows about Netflix, Amazon, Hulu, YouTube – they’re growing, of course, and everyone streams everything. Even now, though, the traditional TV industry winks and points to increasing revenues and reinvention, while cable customers keep cutting cords. And ESPN, once the cable crown jewel, has lost millions of subscribers, gone through two rounds of bulk layoffs, and is no longer the sure bet in the Disney empire. Something had to give – and now it’s here.
- The growth phase of our business is over. In the last 30 years, the cable model was built on the notion that smaller networks will ultimately get bigger and give birth to more programming and even newer networks (see ESPNU, MTV Classic, Discovery Life). At one time, they were all small – AMC ran old movies, TLC was an educational channel, History was a niche spin-off. They built themselves by investing in original programming that helped define their brands, attract viewers and grow profits. Distribution increased, and America went from being dominated by broadcast to being dominated by cable. Now digital streaming is threatening that dominance.
- The bundle built my house. Until recently, the networks’ savvy affiliate sales teams made deals with cable operators, saying in effect, ‘We’ll let you renew our network to stay on your system, but only if you agree to launch another of our channels.’ This bundle of networks offered subscribers more and more choices, and brought more affiliate and ad sales revenues to the parent networks. I benefited greatly as EVP/GM of Animal Planet, a spin-off of Discovery. As ratings and revenues grew, the bundle of profits basically paid for my nice house. In an insightful column, showing how ESPN is in decline, Bloomberg’s Joe Nocera notes: “What was the main flaw of the cable model? It was that consumers had to pay for channels they never watched. And now they don’t.” The laws of economics have kicked in, and that cable bundle is a whopping average of $100 per subscriber. Reacting to their customers, operators are now saying, ‘Maybe we don’t need so many networks after all.’ At least I still have my house.
- It’s different with streaming and digital networks. You already know that those YouTube stars – from Smosh to Miranda Sings – began as user-generated content that cost next to nothing to make. The production model is completely different from what we know, with lower production values… just like basic cable 30 years ago, when broadcasters dismissed it. At the premium services like Netflix, it’s more like pay cable – the HBO model – with subscriptions driven by big-ticket scripted series like The Crown and House of Cards.
- Production: Whistling in the dark? Program suppliers have lived on the notion that there is an increasing appetite for their work, with reason. Thanks to the streaming services, there are record amounts of original programming being produced. So why worry? Well, for starters, notice that much of the streaming expenditures are in scripted fiction, not factual or reality. That means producers of fact-based programming must still claw their way into the cable marketplace, which is getting tighter. And the maturing of the production community has also affected the market: The bigger companies are getting bigger – or bought by even larger umbrella organizations. Smaller companies are having a tougher time as the stakes are higher both for the suppliers and the networks they serve. The secondary networks aren’t buying much, and some are going out of business. Which is where we started this column.
Maybe we can learn from our media history. After all, radio didn’t die when TV came along. Broadcast TV didn’t go under when cable grew up. And cable won’t fold as digital grows. But – like the outdated media that came before – cable networks will have to adjust to a different world. And we’re finally seeing the first signs of what that world will look like.
Michael Cascio is president and CEO of M&C Media LLC, where he advises selected media and production partners, and produces documentaries. He is also a guest speaker and writer, whose recent article for the Sunday New York Times revealed how his experience as a backstage janitor prepared him for a career in television. At National Geographic, A&E, Animal Planet, and MSNBC, Cascio has won four Emmys, two Oscar nominations and a “Producer of the Year” award.
Michael not only welcomes your feedback, but also relishes further discussion. So, don’t be shy. Send your comments to MichaelC@MandCMedia.com.