There’s now, and then there’s “then”. Most of you can probably recall when to make a success of a broadband service, you had to have linear video delivery. Video killed the radio star, so the song goes, but it made broadband possible…then. Now, linear video may be an albatross, and that comes straight from confidential comments I’ve gotten from those who provide it.
Linear TV, or linear RF, is the classic “cable TV” that evolved from over-the-air TV that’s still available in urban areas. TV originally consisted of stations, which collected into network affiliates as it became clear that content creation couldn’t work if it was balkanized down to a local level. TVs were expensive items, and in the early days it was rare for a household to have more than one. In many areas, particularly rural areas, families clustered around the TV to watch favorite shows, and you either watched what was on, or did something else. Cable increased the scope of offerings, but it was still tied to “what’s on”, until cable added in VCR capabilities, and improvements in broadband made streaming video from libraries of content a practical reality.
Wall Street demonstrated the “now” picture with its respond to Charter Communications’ quarterly earnings report. Quoting Light Reading, the company stemmed its loss of video subscribers significantly, but its broadband losses were significant. Some Street analysts took this as a good sign (“The results are eye-opening. Maybe video isn’t dead after all”), but the stock dropped over 18%, and I got a lot of comments from operators who offered linear video, and also from some of the vendors who serve them.
The general view, held by almost three-quarters of those who offered me comments, was that streaming video had already fatally wounded linear video, and its death was surely coming in a couple of years. There are a number of reasons for this, of course. One, the largest reason in the US overall, is the loss of “watching TV” as a family activity. Children today, one cable company planner told me, watch less than an eighth of their TV with their family, and less than a tenth the time that was spent in family TV-watching a couple decades ago. But even for adults, streaming on demand has altered viewing habits. Couples, the planner said, seem to watch their own shows three times as often as they used to. Even senior empty-nesters spend far less time in collective viewing. Collective viewing, too, is more often viewing a time-shifted show, not one broadcast live.
Time-shifted viewing is a key factor. Many today will watch some shows regularly, but will fit them into a work, social, and activity schedule rather than watch them “when they’re on”. Once you establish a time-shift habit, planners say, the tendency to watch something at a particular time, in a group, diminishes. In urban and suburban areas where there are always activities, at any time of day, the evenings just aren’t reserved for staying home with the TV, and so you either time-shift shows you like, or learn to like what you can get when you’re ready to view.
The multiplicity of viewing platforms available for video is another factor. The majority of homes have multiple TVs, and virtually all of them have phones, tablets, and computers that can be used to stream TV or movies. This facilitates breaking a household down into multiple viewing groups from the single family-centric group. You could see this happening over a decade ago; I did a consulting gig with a non-US cable operator who feared streaming competition 25 years ago, and I told them that they didn’t have to worry until they saw households with children splitting off the family-TV model. That was true, and it was driven in no small part by the availability of alternate platforms for streaming.
The planner also noted that Google’s YouTube was a big, and growing, factor in viewing habit changes. YouTube has a lot of creators, and so there’s a lot of content available there that cannot be seen on traditional linear TV stations. Much of it is shorter, more focused, and more appealing to young people. Get the young viewing streaming video, and you’ve lost family viewing and linear video appeal.
Streaming programming offered by giants like Amazon and by content producers or producer federations (Disney, Hulu, Netflix, Paramount, Peacock…) is also a growing factor. Amazon’s Prime Video, offering a vast library to any customer who orders enough from Amazon to benefit from free shipping, prompted Walmart to offer Peacock as part of their competing Plus service. That means that a large library of on-demand content is already “free” to many.
That ties into the last factor, which is the “Nothing good is on now” problem. Almost every linear video planner told me that content is getting harder to find. The content providers want to charge more and more for new stuff, and the number of successful new shows is declining, they say. The more often a viewer can’t find anything on a linear station, the more often they move to on-demand streaming, which then means that they are less tolerant of marginal interest in what’s on linear TV at the moment, more likely to stream instead.
So has streaming killed the linear star? Not quite yet; there’s still some breath left, and Charter shows that too. There is more margin in linear RF video, and cable companies whose infrastructure was tuned to it, as well as satellite players, can still raise their revenues based on the linear capability. Those who aren’t tech-literate are more comfortable finding a station playing something interesting than in navigating multiple streaming sources to find on-demand content. Charter likely sees increasing video penetration as a means of offsetting broadband Internet pressure.
Coming from what, exactly? The planner cited two sources. First, FWA has undercut a favorite cable-company strategy of securing a monopoly on broadband within a new residential subdivision through a deal with the developer. This is also true of rental properties, where a payment to the landlord could assure no other broadband provider could wire a building or complex. But wireless broadband can’t be stopped that way. Most cable planners who comment to me tell me that FWA is by far the largest source of broadband losses. Second, ending affordable broadband service struck a big cable advantage off the books. Cable has a lower pass cost than fiber, even lower than twisted-pair copper. Lower-income households have fewer devices available to fragment viewing, so linear is more competitive. But many such households depend on some form of rate regulations to make broadband affordable.
Some optimistic planners did say that they believed that the impact of streaming on the linear TV market had already peaked, but most think that’s not true. I agree with the latter group. There are too many factors driving us toward a highly individualistic viewing, and individual viewers with individual interests will demand more variability than linear TV can deliver.
Streaming is a form of viewing personalization, and so this raises a question about the way that AI might impact the swirling market tumult we’re seeing. Suppose that we took this personalization further, from delivery to the content itself? Suppose AI could customize what was delivered to each person? It might start with a selection of “versions” of video content selected based on user characteristics, and move to actually using AI to build personalized content. Even product placement might be impacted. A Coke can on the table instead of a Pepsi? Could happen; after all, is Meta trying to make social media into self-authoring content?
As a closing point, streaming has had a major impact on advertising. It opened online channels for ads embedded in content, which can be targeted more easily than ads on a broadcast show. There are many more media sources now, dividing ad dollars that are growing far more slowly than the number of firms that depend on them. In addition, most publications have gone online, and that’s further eroded the dollars-per-ad-channel available. That’s why the question of the durability of ad sponsorship is important to search and social media giants, and perhaps why they’re willing to bet so aggressively on AI. For operators, though, not only has streaming media demanded greater access capacity, the online experience has convinced consumers they shouldn’t have to pay for things—ads should sponsor them. That has limited willingness to pay for incremental capacity, which is all ISPs can really sell. All this has to level-set somehow, and we’re in the middle of the adjustment today. It’s going to last a while, likely through this decade.
