×

Media’s Big 2019 Challenge: Building New Netflixes While Consumers Keep Cutting Cords

Netflix’s amazing success over the past decade has been so significant that many others are hoping to repeat it. Discovery Inc. CEO David Zaslav vows a new streaming outlet that brings golf content to overseas markets will become a “Netflix for golf.” 21st Century Fox recently launched a SVOD service for “superfans” of Fox News Channel called Fox Nation. Executives there don’t mind if you liken the product to a “Netflix for conservatives.”

Behind the impetus for some – not all – of the glitzy new services is a gloomy old problem: As media companies work to build new connections through broadband streaming, they continue to lose links to consumers via cable and satellite subscriptions.

The phenomenon known as “cord cutting” became severe in the third quarter, according to data from Kagan, a market research firm that is part of S&P Global Market Intelligence. Satellite broadcasters lost 726,000 subscribers, the industry’s worst quarter on record. Combined with cable and telecom distributors, the sector shed 1.2 million video subscribers in the three-year period ending September 30, 2018. At Pivotal Research, analysts have predicted 2019 pay-TV losses will “continue at a similar pace to ’17 and ’18 as consumers continue to rebel against the rising price of PayTV amidst the continued emergence of cheap entertainment alternatives.” Satellite TV, they said, will face continued erosion “outside of rural areas. Expect another ugly year in 2019.”

Hopes that new customers for broadband services such as Sling TV, DirecTV Now, Playstation Vue or live-TV options from Hulu or YouTube may have been tempered during the period: Those services have gained about 2.1 million new subscribers in the first nine months of the year, but traditional outlets lost 2.8 million, according to Kagan.

To make up for the subscriber shortages, the industry is working to create a swarm of new Netflixes – and fast.

“Consumers have much more flexibility to pick and choose the things they want to subscribe to, and I think that is going to be more attractive to a greater majority of people than a traditional pay TV company giving them a handful of restrictive bundles to choose from,” says Tim Hanlon, CEO of Vetere Group, who consults for media and marketing companies. “Most programmers need to gently land their pay TV model while greatly ramping up their direct-to-consumer offerings. That is the dance that most television managers need to do over the next five-plus years – manage the decline of the bundle and shift to the expertise of being a direct-to-consumer proposition.”

To be certain, some of the declines have been driven by distributors themselves. AT&T and other video conduits have decided to get out of the business of hanging on to low-profit subscribers, the ones who sign up when it’s time for another season of “Game of Thrones” or another football cycle, and then quickly leave. “Net losses [in subscribers] is not necessarily the same thing as cord cutting,” cautions Bruce Leichtman, an industry consultant.

Even so, it’s clear the industry is trying to look past its traditional business. Walt Disney in 2018 launched ESPN +, a subscription-based broadband service for sports fans that gives them new programs and games coverage they won’t see on the flagship cable network. In September, Disney said the service had notched more than 1 million paying subscribers in just five months (a portion of them came from ESPN Insider, a now-defunct ESPN subscription service).

In 2019, media companies will bet even more heavily on streaming. AT&T plans to unveil a subscription-based offering using its WarnerMedia content – with three different pricing tiers. Disney has grand hopes for Disney +, a subscription service that will feature programming from its Disney, Pixar, Star Wars and Marvel lines. CBS is placing more emphasis on its “CBS All Access” streaming service. AMC Networks has backed Shudder, a streaming service devoted to horror.

One can easily imagine a new world in which TV fans decide to get their primetime entertainment from Disney, Amazon, Netflix, WarnerMedia or Hulu, rather than CBS, NBC, Fox and ABC. But that future is in no way guaranteed.

Even cord-cutters have to watch their wallets. Can the average family – even without cable and satellite – afford to subscribe to so many different services, let alone other things like Apple Music or Sirius XM radio? “We simply don’t think it is plausible, in a world of rampant password sharing and of two home subscriptions collapsing to one, that we will continue to see anything like a sustained 1:1 conversion rate. That’s obviously bad news for all cable networks,” said a recent report from media-analysis company MoffettNathanson. Meanwhile, the firm’s analysts suggest, linear TV networks will need to latch on to “the most passionate viewership, driven predominately by live news and sports.”

In that world, some traditional TV outlets may not survive. NBCUniversal has not been afraid to shut down several cable networks in recent years – Esquire, Chiller, Cloo and Style among them. Viacom ran into headwinds in 2017 negotiations with Charter Communications about the placement of its networks on pricing tiers, though the two sides reached a détente. Discovery is poised to turn one of its smaller cable outlets into a showcase for content inspired by home renovators Chip and Joanna Gaines.

Next year is likely to be one full of new Netflixes. Whether these streaming offerings generate enough subscribers to offset the ones who seem to be turning down a cable connection remains to be seen.

Popular on Variety

More Biz

  • Beverly Hills Realtor Accused of Stealing

    Beverly Hills Realtor Accused of Stealing From Usher, Adam Lambert

    A Beverly Hills real estate agent has been arrested on charges of stealing from the homes of celebrities, including Usher, Adam Lambert and “Real Housewives” star Dorit Kemsley. Jason Emil Yaselli, 32, is accused of encouraging an accomplice, Benjamin Ackerman, to enter homes during open houses in order to steal from them. Ackerman allegedly sold [...]

  • Pod Save America Hosts on Trump

    'Pod Save America' Hosts on Trump, the Democratic Primary and What's Wrong With Cable News

    Like many Democrats, Tanya Somanader was blindsided by the 2016 presidential election. A veteran of the Obama White House and a former speechwriter and digital specialist for House Speaker Nancy Pelosi, Somanader was gearing up for a Hillary Clinton administration. Instead, she had to grapple with the reality of a Donald Trump presidency. “A lot [...]

  • Ann Sarnoff Warner Bros

    Ann Sarnoff Formally Takes Reins of Warner Bros. as CEO

    The Ann Sarnoff era at Warner Bros. has begun. Sarnoff formally took the reins as Warner Bros. chair-CEO on Thursday, two months after she was appointed to the post. Sarnoff told employees in a memo that she has been impressed by the company’s track record during the past year amid a period of upheaval for [...]

  • Former movie producer Harvey Weinstein (L)

    Harvey Weinstein to Be Arraigned on New Indictment

    Harvey Weinstein is set to appear in court on Monday for an arraignment on a new indictment, the Manhattan D.A.’s office said Thursday. Prosecutors announced last week that they would seek a fresh indictment, which would allow actress Annabella Sciorra to testify at Weinstein’s trial. The move came after Justice James Burke ruled on Aug. [...]

  • AI Technology David Beckham

    How AI Tech Is Changing Dubbing, Making Stars Like David Beckham Multilingual

    David Beckham does not speak Arabic, Hindi or Mandarin. But when the soccer legend starred in a PSA for malaria awareness this spring, he effortlessly switched among these and six other languages, thanks to cutting-edge technology that could soon change how Hollywood localizes its movies and TV shows. The PSA in question was produced with technology [...]

  • Eminem Publisher Sues Spotify, Claiming Copyright

    Eminem Publisher Sues Spotify, Claiming Massive Copyright Infringement

    Eight Mile Style, a publishing company that holds administration rights to Eminem’s early catalog, filed a major copyright infringement lawsuit against Spotify late Thursday, claiming that the streaming giant has no license to host about 250 of Eminem’s songs, while also taking aim at the Music Modernization Act, the federal law enacted last year to [...]

  • iQIYI headquarters building in Beijing

    China’s iQIYI in Talks for Indonesia Expansion

    Chinese streaming firm iQIYI is in negotiations to expand further into Southeast Asia through a venture with Indonesia’s Media Nusantara Citra. iQIYI announced its first step outside Chinese-majority territories in June, when it revealed a linkup in Malaysia with pay-TV leader Astro. It also operates in Taiwan. In April, the company said that it planned [...]

More From Our Brands

Access exclusive content