Direct-to-Consumer Streaming: Impacts on Traditional Cable Models

Trends in streaming subscriber growth and preferences

Streaming subscriber growth is influenced by various factors, including seasonal impacts and strategic shifts. Paramount+ saw a 50% revenue increase year-over-year, while Disney anticipates streaming as a future growth driver. Netflix's ad-supported model is scaling, and Amazon aims for fewer ads than traditional TV, shaping subscriber preferences.

"This comparison reduced the Q2 growth rate by 250 basis points. D2C subscription revenue grew 12% in the quarter, with Paramount+ subscription revenue up 50% year-over-year. Paramount+ finished the quarter with 68.4 million subscribers which is 2.8 million lower than the end of Q1. Now 2 factors impacted subscriber growth this quarter." --- (PARA, earning call, 2024/Q2)

"We've said all along, our path to profitability will not be linear. And while we are anticipating a softer third quarter, due in large part to the seasonality of our India sports offerings, we fully expect streaming to be a growth driver for the Company in the future and we have prioritized the steps necessary to achieve this." --- (DIS, earning call, 2024/Q2)

"The rate of growth, it just happens to be growing off of a relatively small base because we're starting from only 18 months into ads so to have the kind of a primary revenue impact across a business that has been primarily subscription for a long-time that just takes some time. So we're scaling well through reach, through engagement, through growing inventory and that represents opportunity for us over a multiyear trajectory to have a big and increasing revenue and profit impact on the business." --- (NFLX, earning call, 2024/Q2)

"While ads have become the norm in streaming video, we aim to have meaningfully fewer ads than linear TV and other streaming TV providers." --- (AMZN, earning call, 2024/Q2)

"Subscriber growth benefited from the NFL and the Super Bowl. And finally, on the D2C segment, revenue grew 24% year-over-year in Q1, led by 51% growth in Paramount+ revenue and 26% global ARPU expansion." --- (PARA, earning call, 2024/Q1)

Pricing and content strategies: Streaming vs. cable

Streaming services are leveraging competitive pricing and innovative content bundling to attract customers, offering significant savings compared to traditional cable. Companies like Comcast and Disney are enhancing their content strategies and pricing leverage through premium service combinations and new features, positioning themselves favorably against cable models.

"So it's great savings, 30 plus percent savings for customers. And as important as it is, I think a compelling price point in aggregation of streaming services that are premier that we have, but it's the experience being able to combine these streaming services in a really elegant way that makes it super useful to find what you want, when you want through voice and all of that." --- (CMCSA, conference, 2024/05/21)

"Expenses associated with the acquisition, licensing and production of content (such as payroll, stock-based compensation, facilities, and other related personnel expenses, costs associated with obtaining rights to music included in our content, overall deals with talent, miscellaneous production related costs and participations and residuals), streaming delivery costs and other operations costs make up the remainder of cost of revenues." --- (NFLX, sec filing, 2024/Q1)

"We are committed to serving hockey fans and reaching new audiences with our robust content distribution strategy that brings viewers exciting NHL content to a multitude of streaming services." --- (AMZN, press release, 2024/04/25)

"Nothing that we would consider significant. We believe that as we add these new features like the channels that we're going to be adding later this year that and the success of our movie slate, and I'll get into that a little bit more, that the pricing leverage that we have is actually increased." --- (DIS, earning call, 2024/Q1)

"So, there are 2 ways that customers can get StreamSaver. And again, it's an exciting announcement in that there are 3 premium streaming services that are combined in a compelling package." --- (CMCSA, conference, 2024/05/21)

Shifts in advertising revenue from cable to streaming

Advertising revenue is increasingly shifting from traditional cable to streaming platforms, as highlighted by Google and Netflix's strategies to adapt their revenue models. YouTube is experiencing significant growth in brand advertising budgets, while Disney notes declines in cable-related advertising, underscoring the ongoing transition in the industry.

"from an ongoing shift in budgets from linear television to digital. As we look forward to the third quarter, we will be lapping the increasing strength in advertising revenues in the second half of 2023, in part from APAC based retailers." --- (GOOG, earning call, 2024/Q2)

"The decrease in impressions was due to lower average viewership. Higher international advertising revenue was attributable to an increase of 10% from higher rates, partially offset by a decrease of 3% from an unfavorable foreign exchange impact." --- (DIS, sec filing, 2024/Q2)

"Greg Peters: Yes. As we noted in the letter, we've evolved and we're going to continue to evolve developing our revenue model and adding things like advertising and our extra member feature, things that aren't directly connected to a number of members." --- (NFLX, earning call, 2024/Q1)

"CTV on YouTube is continuing to benefit from a combination of strong watch time growth, viewer and advertiser innovation and a shift in brand advertising budgets from linear TV to YouTube. Our largest advertisers" --- (GOOG, earning call, 2024/Q2)

"Revenues The decrease in Entertainment revenues was due to lower theatrical distribution revenue and, to a lesser extent, decreases in TV/VOD distribution, advertising and affiliate revenue." --- (DIS, sec filing, 2024/Q2)

Impact of streaming on traditional cable viewership

Streaming is significantly impacting traditional cable viewership by fragmenting audiences across platforms and enhancing ad customization through programmatic buying. As major events shift to streaming, advertisers are adapting, leading to a decline in traditional cable's reach and viewership.

"As more major events move to streaming, sometimes as the sole distribution platform, publishers can serve a more customized ad experience to viewers, and that ability increases with the use of real-time programmatic capabilities." --- (CMCSA, press release, 2024/06/18)

"The ESPN tile definitely makes sense, but can you talk about efforts to boost viewership on the platform, including the revamp of the technology and maybe the UI that you referenced last quarter?" --- (DIS, earning call, 2024/Q2)

"As advertisers today try to uncover the most cost- and time-efficient ways to activate live event advertising in streaming environments, many are turning to programmatic buying, which can provide greater automation and increased spend efficiency than traditional approaches." --- (CMCSA, press release, 2024/09/12)

"Advertisers today can at times face difficulties reaching audiences as viewership fragments across devices and platforms." --- (CMCSA, press release, 2024/08/15)

"But what's very interesting to us is how significant the viewership is of sports viewers on Peacock of things other than sports. So, when you take a zoom out and think about the total picture of what we're trying to do, which is to bring our excellent TV media assets into the future, I think you can -- we view the NBA as an excellent piece in that puzzle and it will allow us to rebalance programming from other areas." --- (CMCSA, earning call, 2024/Q2)

Consumer behavior changes in media consumption

Consumer behavior in media consumption is shifting towards personalized and impactful experiences. Companies emphasize the need for customized user interfaces and understanding long-term consumer needs, while advancements in advertising enhance engagement. Economic factors, like inflation, also influence viewing choices, highlighting the complexity of modern media consumption.

"So, I think again, if you can tie in those things I talked about earlier and create big moments that really matter to consumers and that are very pervasive throughout the society or that group, you know, that that that audience cohort, it can be really impactful." --- (NFLX, conference, 2024/05/15)

"Long term, I think, my point of view long term is we ought not to lose sight of the customer And we ought not to lose sight of what consumer behavior would be absent what we've put in place in." --- (T, conference, 2024/05/21)

"This advancement leads to more efficient ad spending and higher customer engagement levels, transforming how ads are crafted and delivered." --- (AMZN, press release, 2024/06/13)

"the user, to serve the consumer, really. And it's some of it is really subtle but really important, which is that first screen experience needs to be really customized and dynamic and constantly changing." --- (DIS, conference, 2024/05/15)

"Just trying to get some color on customer behavior given some of the broader inflationary pressures." --- (AAPL, earning call, 2024/02/14)

Technological advancements driving streaming growth

Technological advancements are crucial for streaming growth, as highlighted by Netflix's profitability in streaming, Google's ongoing innovations in cloud services, and Apple's new features enhancing their platforms. These developments collectively drive the evolution and competitiveness of direct-to-consumer streaming against traditional cable models.

"Intricately detailed scenes like this are possible, thanks to our next generation Anvil engine supporting the latest advancements in metal, enabling us to leverage the full power of Apple Silicon with a gaming experience that delivers blistering frame rates and high resolutions." --- (AAPL, service launch event, 2024/06/10)

"Importantly, entertainment streaming was profitable for the quarter, and we remain on track to achieve profitability in our combined streaming businesses in Q4." --- (NFLX, press release, 2024/06/25)

"We continue to drive fundamental differentiation with new advances since Cloud Next." --- (GOOG, earning call, 2024/Q2)

"It's been an exciting day of announcements. We shared powerful new features and advancements to our 6 incredible platforms." --- (AAPL, event transcript, 2024/06/10)

"You can see that from the increases in our capital expenditures. This will fuel growth in cloud, help us push the frontiers of AI models, and enable innovation across our services, especially in Search." --- (GOOG, earning call, 2024/Q1)

Regulatory impacts on streaming and cable industries

Regulatory conditions are crucial for the streaming and cable industries, as AT&T emphasizes progress in navigating these challenges. An attractive regulatory environment supports infrastructure development, enabling companies to enhance service offerings and expand market reach, as seen with their successful Internet Air initiative.

"And so we're getting better every year at mining out those costs. We continue to make progress on the regulatory front." --- (T, earning call, 2024/Q2)

"This assumes similar build parameters and a regulatory environment that remains attractive to building infrastructure. We are also encouraged by early performance of AT&T Internet Air and our success in proactively migrating customers with legacy copper-based Internet connections onto this fixed wireless service. We now have AT&T Internet Air in parts of 137 markets with nearly 350,000 total consumer subscribers, including 139,000 added during the quarter." --- (T, earning call, 2024/Q2)