It Used To Be Easy!

Ah, the golden days when the TV business was as straightforward as broadcasting content across terrestrial channels, with families gathered around the TV set in their living rooms! Viewers were happy to turn on a single, trusty device that delivered a variety of content at any time. Sure, it was not always what you wanted to watch, but it was certainly hassle-free!

Today, watching video content is a vastly different experience, with OTT and VOD services allowing people to watch content anytime, anywhere on the device of their choice. Consequently, driven by consumer demand, the business of producing and delivering said content has become highly complex, often inefficient.

Welcome to the fragmented media landscape!

Premature Predictions

You would expect that, with the roaring success of VOD streaming, we would quickly see the demise of linear media… Analysts started to talk about the “death of linear TV” back in 2007, just as Netflix announced the launch of its streaming VOD services. And yet, fifteen years later, good ol’ linear TV is still highly consumed: combine cable and broadcast together and the linear TV share is still remarkably dominant with 56% of the US TV market.

And new OTT linear TV experiences, such as Free Ad-supported Streaming TV (FAST) are becoming increasingly popular – how so?

The Numbers Don’t Tell the Full Story

Going off just numbers, it looks like OTT is consuming everything in its path:

• In just 10 years, the OTT global revenue went from $6.1B (2010) to $99.69B (2020) and is estimated to hit $167.4B by 2025.

• And that other loudly clamored data point, if you still trust Nielsen’s ratings: US streaming audiences eclipsed cable TV’s for the first time in July 2022, reaching 34.8% of the audience as opposed to 34.4% for cable. Broadcast TV, i.e. free-to-air, is further behind at 21.6%.

And yet, what we keep hearing from our customers is that OTT and VOD services have not yet reached the revenue-making power of linear TV. Ah, the paradox!

As we know, statistical data can be manipulated to support any story. Netflix’ founder and former CEO likes to say that linear TV will be dead in “5 to 10 years” from now. Of course, free streaming TV is one of Netflix’ main competitors! And yet, he had to announce a record loss of subscribers during the first half of 2022.

Where did the promise of a nonlinear media future stumble? For starters, a profusion of Subscription Video-On-Demand (SVOD) and Advertising Video-On-Demand (AVOD) services mushroomed during the pandemic, with a “me-too” gluttony that has made TV viewers increasingly frustrated. In the US, consumers now pay an average of four subscriptions per household to watch the content they like.

Content production has exploded with varying degrees of quality and success: as of May 2022, there are more than 817,000 unique program titles across US linear TV and streaming services, up from 646,000 in December 2019.

Too many services, too much choice, too many subscriptions to pay just to watch something mildly satisfying. Who has not sat in front of their connected TV scrolling for what feels like hours to try and choose what to watch, sometimes even walking away in frustration?

Subscriber fatigue and overchoice are settling in, so the lean-back experience of turning on your TV (whether broadcast or its online equivalent) and enjoying a stream of good content for free becomes more attractive sometimes… once again.

The Staying Power of Linear Media

Scaremongers who kept predicting the death of linear TV: eat your words. Not only does it live despite audiences becoming more distributed and shared across nonlinear services, but linear TV is seeing a resurgence with new offerings such as FAST and vMVPDs (Virtual Multichannel Video Programming Distributors).

VOD services could learn a thing or two from the experience that linear TV delivers:

It is hard to beat the experience afforded by linear TV: highly curated, community-oriented content that is low-effort to consume.

Live events, and specifically sports, continue to have unparallelled audience-pulling power.

And where do viewers get their news from? Linear TV broadcasters have long been the bastion of credible news production, with large news gathering operations. Even in a fragmented media landscape, they continue to be the preference for the vast majority of viewers when it comes to getting their news.

If we take into account the bigger, global picture, between the potential economic downturn and the overwhelming choice of streaming services, we start to understand why viewers are returning to the comfort of linear (and free) TV. And if we consider demographic differences such as age and geography, consumption patterns vary wildly with older generations remaining fiercely loyal to linear TV.

It follows that, if you’re in the business of producing or distributing TV, it’s still early to tear down your broadcast or cable distribution business. Your content production and multiplatform distribution should continue supporting traditional services, and be ready to respond to shifting audience demands, offering additional VOD services and linear streaming.

What’s The Winning Strategy?

Even though traditional TV viewing has seen a decline in viewership, it remains the go-to spot for news and sports programming. For original and episodic content, VOD is currently favored. But with the emergence of free ad-supported streaming channels, which often include live news and sports, this may buck trends yet again.

So we can see that the business of making and delivering video content to an audience is not getting any easier. If you’re a media organization, your business strategy needs to feature a diverse portfolio of services that includes linear and nonlinear offerings, across traditional broadcast, cable and OTT – without forgetting personalized experiences through social media channels!

When the audience pie is this fragmented, with generational differences defining consumption patterns, media companies need to cover all bases, which, of course, comes at a technical and financial cost. To succeed, your organization must be ready to pivot quickly, and build the right partnerships to future-proof its business strategy.

After more than 30 years in the media industry, the Dalet team has seen a fair share of technology and business transformations, having helped hundreds of media companies evolve and remain successful during increasingly challenging times. We predict that this is not the time for linear TV to die, but rather to evolve and remain an important part of any media brand’s multi platform strategy.

Will streaming services completely replace or integrate linear TV and cable over time? Please share your thoughts in the comments!

Contact us to discuss how to best integrate your linear media strategy into your OTT and streaming services.