The Shift from Cable to Streaming: Implications for the Media Landscape

Changing consumer preferences in media consumption

Changing consumer preferences are evident as broadband subscriptions rise, reflecting a shift towards internet-based services. Companies like Disney and Netflix emphasize the demand for high-quality, app-driven content, while also recognizing the ongoing relevance of traditional channels to reach diverse audiences.

"In Consumer Wireline, we added broadband subscribers for the fourth consecutive quarter, driven by consistent growth in AT&T Fiber and early success with AT&T Internet Air. Once again, this story is about growing both customers and profitability as our Consumer Wireline business delivered more than 7% EBITDA growth during the second quarter. This was driven by approximately 18% growth in fiber." --- (T, earning call, 2024/Q2)

"part, a good consumer proposition economically. But in today's consumer, used to both basically the Internet and app based experiences and ultimately AI driven experiences, wants much more than that." --- (DIS, conference, 2024/05/15)

"Greg Peters: Sure. I think it's also important to note that Netflix fulfills an important and differentiated need for both consumers who really want -- they want amazing spectacle movies and TV shows as well as an important need for creators who want partners that can share in the risk that's inherent in bringing those stories to life." --- (NFLX, earning call, 2024/Q2)

"Additionally, we're able to reach new broadband customers through our substantial mobile distribution channels. The key point here is that our proven ability to drive higher share in both mobility and broadband through converged service penetration is the true benefit of owning and operating both 5G and fiber networks at scale." --- (T, earning call, 2024/Q2)

"Our linear channels are deeply embedded in our direct-to-consumer strategy, as they continue to deliver high-quality content that reaches demographics not captured on streaming alone, allowing us to broaden our audiences and leverage our unmatched content engine across an expansive base." --- (DIS, earning call, 2024/Q2)

Financial performance and advertising revenue shifts

The shift from cable to streaming is driving significant changes in advertising revenue. Companies like Disney and Comcast report increased ad revenues due to higher impressions, while Netflix is evolving its revenue model to include advertising. Google highlights a broader transition in budgets from linear TV to digital platforms.

"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.Turning to subscriptions, platforms and devices." --- (GOOG, earning call, 2024/Q2)

"Revenues - Advertising Higher advertising revenue reflected an increase of 29% from higher impressions at Disney+ and Hulu, partially offset by a decrease of 10% from lower rates." --- (DIS, sec filing, 2024/Q3)

"Advertising revenue increased for the six months ended June 30, 2024 compared to the same period in 2023 driven by an increase in domestic political advertising, increased revenue from our advanced advertising business and the positive impact of foreign currency, partially offset by lower domestic nonpolitical advertising." --- (CMCSA, 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)

"rate at nearly a quarter of the cost. In addition to strengthening our ads products for customers, we continue to evolve our existing systems and products with improved models delivering further performance gains.In just six months, AI-driven improvements to quality, relevance, and language understanding have improved Broad Match performance by 10% for advertisers using Smart Bidding." --- (GOOG, earning call, 2024/Q2)

Content strategies in the streaming era

In the streaming era, companies are focusing on diverse content strategies. Netflix emphasizes technological advantages in content discovery and adapting to local markets, while Amazon combines original and licensed content to enhance viewer engagement. Disney highlights the challenge of balancing content refreshment with quality, underscoring the complexity of modern content strategies.

"The international angle is a really interesting angle, too. So as we now have 5 years of the streaming wars to observe, perhaps we, maybe this is me, have underappreciated the massive technology advantage you have in content discovery, recommendations, ease of use, efficiency of the network." --- (NFLX, conference, 2024/05/15)

"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)

"It's just shots on goal from all from all over the court. So how do you balance in streaming the need to continually refresh content versus your drive for quality, right?" --- (DIS, conference, 2024/05/15)

"So we're being disciplined about how we scale that. So now obviously the job is to continue to grow that engagement to the place where it has a material impact on the business. And I think you've seen this trajectory with us before, whether it's been a new content genre like unscripted or film or maybe getting the content mix right for a particular country, you can think about Japan or India, which we're now in an amazing place through the hard work of our teams there." --- (NFLX, earning call, 2024/Q2)

"When combined with our original films and shows, partner streaming services, licensed content, and rent or buy titles, Prime Video continues to evolve into the best destination for streaming video." --- (AMZN, earning call, 2024/Q2)

Competitive dynamics between cable and streaming

The competitive dynamics between cable and streaming are intensifying, with companies like Comcast acknowledging increased competition from fixed wireless and fiber. Netflix also faces challenges in user engagement. Both sectors are adapting, with Comcast emphasizing its role in bridging linear and streaming, while advertisers target audiences across both platforms.

"Then as you shift towards the competition, the environment--let me back up, overall it’s a very intense, competitive environment that is very consistent the last several years, and so it’s picked up a bit, and when you have, again, three fixed wireless competitors coming in pretty much at the same time and you have the fiber level, about half of our footprint now has fiber competition of some form in it, it’s an intense competitive environment." --- (CMCSA, earning call, 2024/Q1)

"So beyond that, kind of the competitive intensity that's always been out there, we also anticipated some headwinds in our engagement because of paid sharing." --- (NFLX, earning call, 2024/Q2)

"We’re going to look at this significant transition that has been going on, will continue to go on between linear and streaming, and so that is something that we think we can play a unique role in, in terms of win-win opportunities between the content providers and distribution." --- (CMCSA, earning call, 2024/Q1)

"It's been on the connect side. So being positioned with segmentation, investing in the network, anticipating there's going to be more applications, more streaming, more consumption than ever, and we'll be in position." --- (CMCSA, conference, 2024/05/21)

"With Audience Addressable, advertisers can deliver impressions to their audiences across linear and streaming, including cable and broadband-only homes to reach cord cutters via any household streaming device, and then receive reliable and transparent reporting into how their campaigns performed against their KPIs." --- (CMCSA, press release, 2024/06/05)

Future outlook for the media landscape

The future outlook for the media landscape indicates a significant shift towards streaming, with companies like Netflix and Comcast adapting through innovative content strategies and new subscription models. The rise of FAST channels also highlights changing consumer preferences, emphasizing the need for traditional media to evolve in this competitive environment.

"So while it's highly revenue accretive, as you can see in our numbers and our reported growth - strong reported growth in Q1 and outlook for the year, that growth - as we spin-off into new paid memberships, they tend to spin-off into a mix of planned tiers that's a little bit of a lower-price view than what we see in our tenured members. And we're also" --- (NFLX, earning call, 2024/Q1)

"Inside and we'll have -- when it gets all announced, the detail that Mike described, we have probably more content than anybody and it's all, I think, at a value that we'll be able to, as one of the other questions asked, support and demonstrate. And one of our real advantages here is the way we're running the media business, and Mike created one group with our existing assets like NBC and our growing asset like Peacock, and putting that together is very appealing for the reach, for the consumer access, for the innovation that we'll have in the years ahead, and you'll see some of that innovation during the Olympics." --- (CMCSA, earning call, 2024/Q2)

"So I'd say the competitive landscape is still really intense. But I would say honestly, Michael, we don't spend too much time obsessing about it because there's frankly not much we can do about what they're doing." --- (NFLX, conference, 2024/05/15)

"Despite being a relative newcomer to the entertainment landscape, the findings reveal FAST is becoming a primary means of entertainment for today's consumers, with a third of American adults saying they regularly watch FAST channels during peak primetime hours." --- (CMCSA, press release, 2024/06/04)

"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, 2024/02/23)

Impact of technology on media consumption trends

Technological innovation is reshaping media consumption, with companies like Google and Amazon emphasizing agility and cloud capabilities to enhance user experiences. Netflix highlights the growth of ad revenue as a new revenue stream, indicating a shift in how content is monetized and consumed in the streaming era.

"I wanted to know if you could talk a little bit about both the opportunities and the challenges of operating at scale in a time like this where there's a lot of technology innovation going on and how you see the elements of trying to strike a balance towards moving the organization forward while still continuing to both invest for growth as well as balance margins. Thanks so much." --- (GOOG, earning call, 2024/Q1)

"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)

"And so we're really helping customers understand how they can move more quickly, how they can get their workloads in the cloud because the agility you gain, the ability to adopt new technologies much more quickly and take advantage of all the new technologies out there is so much easier when you're running in the cloud than if you're having to buy your own gear and run it in your own data centers and run that way." --- (AMZN, conference, 2024/09/09)

"Do you think that technology could have more of a potential impact on the content creation or discovery side?" --- (NFLX, earning call, 2024/Q2)

"We really listen to where are the problems, where are the technologies and things that are not working today, where are the pain points you have out there today and how can we help go innovate to help you move faster and help every single one of our customers just focus on the things that make them interesting and unique as opposed to what we call undifferentiated heavy lifting, which is pieces of the technology stack that really don't differentiate your company as opposed to the IP and things you build on top of it." --- (AMZN, conference, 2024/09/09)

Regulatory challenges facing cable and streaming services

Regulatory challenges significantly impact the shift from cable to streaming. As AT&T notes, favorable regulations are crucial for infrastructure development and customer migration. Recent FCC reclassifications and net neutrality rules further complicate the landscape, highlighting the ongoing regulatory hurdles both sectors face.

"So, you know, my fundamental point of view is once the economics and the regulatory structure starts to move out of the way, the customer is going to go that direction." --- (T, conference, 2024/05/21)

"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/Q1)

"In 2015, the FCC reclassified such services as telecommunications services subject to broader regulation by the FCC and imposed 'net neutrality rules.' Since then, the FCC has twice reversed course, most recently again reclassifying such services as telecommunications services subject to broader regulation by the FCC in an order adopted on April 25, 2024, and scheduled to take effect on July 22, 2024." --- (T, sec filing, 2024/Q2)

"In 2015, the FCC reclassified such services as telecommunications services subject to broader regulation by the FCC and imposed 'net neutrality rules.' Since then, the FCC has twice reversed course, most recently again reclassifying such services as telecommunications services subject to broader regulation by the FCC on April 25, 2024, in a yet-to-be released order." --- (T, sec filing, 2024/Q1)

"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)

Viewer engagement and retention strategies in streaming

Streaming services are focusing on viewer engagement and retention through strategic partnerships, content offerings, and adapting to audience fragmentation. Companies like Netflix and Disney emphasize the importance of capturing attention and fostering passionate viewing to enhance profitability and maintain subscriber loyalty.

"And when we have signals from our members, this is the amount of acquisition that we've got going on, engagement, what our retention and churn looks like, then we find the right moment to ask our members to pay a bit more to keep that flywheel spinning." --- (NFLX, earning call, 2024/Q2)

""We are thrilled to partner with Prime Video and bring Fubo Sports Network to its millions of engaged viewers in Canada," said Ben Grad, senior vice president, strategic partnerships and operations, Fubo." --- (AMZN/Fubo, press release, 2024/08/16)

"and Hulu and ESPN, you increase engagement to an extraordinary level. That is probably in terms of all the things we have to do to turn it into a profitable business, is the first and biggest step." --- (DIS, conference, 2024/05/15)

"I think that type of engagement is differentially important to both our members and to our business, because in a world of audience fragmentation and so many entertainment choices, I think what's really rare are 3 things: attention, the ability to bring mass audiences together, and thirdly, really passionate viewing. And I" --- (NFLX, conference, 2024/05/15)

"And it also will help us in terms of overall engagement with our bundle. As I look ahead, I think ESPN is going to make a pivot toward digital, but without abandoning linear." --- (DIS, earning call, 2024/Q2)