How Getting Streaming Wrong Cost the TV Industry

How Getting Streaming Wrong Cost the TV Industry
Cheyne Gateley/VIP+

Catch up on part one of this commentary, as it identifies the strategies TV networks employed in their attempts to compete with the likes of Netflix.

Look no further than the stunning success of cable drama “Yellowstone” in 2021 for indication of how the TV industry got streaming wrong.

When Paramount Network began airing “Yellowstone” in 2018, it lacked a streaming licensing deal, which seems incomprehensible for a show featuring a well-known star in Kevin Costner. It announced a deal with Peacock, owned by rival media firm Comcast, in January 2020, a month before the plans for what became Paramount+ were unveiled. But it was during the period when ViacomCBS was flogging the family silver in order to raise capital for its own streaming service.

Unlike fellow Paramount original “South Park,” which sees new episodes available on HBO Max the day after airing on Comedy Central, new episodes of “Yellowstone” are windowed to appear on Peacock five months after airing on Paramount+.

This means that a TV subscription or electronic sell-through (EST) purchase on iTunes via Apple are the only ways to watch “Yellowstone” when new episodes are available for months. This is quite unlike AMC hits “The Walking Dead” and “Fear the Walking Dead,” which are available on AMC+ a week before airing on AMC, and FX hits “American Horror Story” and “American Crime Story,” with next-day availability on Hulu.

This led to two stunning findings for traditional TV. The first was the overall success of the pandemic-delayed fourth season of “Yellowstone.” With the show available for catch-up on the premium tiers of big-title-starved Peacock and the fact that the premium tiers of Peacock are available for free to Comcast Xfinity and Charter MVPD subscribers (a wide base for catch-up views), the audience for the exclusive-to-TV fourth season skyrocketed, with the premiere episode up by 5.8 million (137%).

Comparing “Yellowstone” with the other big cable dramas, which are not TV exclusives for several months, only proves the theory that limiting streaming exposure provides value for pay TV. The AMC and FX hits pale in comparison to “Yellowstone” for audience, as viewers know they can watch in places other than TV.

Worth noting, too, is that the strategy paid dividends for the season finale of “Yellowstone,” the only big cable drama in 2021 to see an audience increase for the end-of-season episode.

The argument against hollowing out the value of pay TV takes on increased significance when considering how widespread TV networks remain in homes and the value they bring to media companies.

TV networks generate a huge amount of revenue even in the streaming age, and that is why the decision to considerably weaken their value proposition is reactionary at best.

The money generated by traditional TV takes on increased significance when considering how costly it is to compete in streaming. The transference of resources from TV to streaming, together with the need for high-quality originals, movies and exclusive sports rights, contribute to the estimated direct-to-consumer spend among the big four media companies mushrooming from $18.4 billion in 2021 to $40.1 billion in 2025 — an increase of 118%.

With streaming currently yielding big losses at Disney, NBCUniversal and Discovery, it pales in comparison to what these companies take in from TV. This further illustrates the questionable wisdom in gutting a profitable business for one that will take several years to even turn a profit.

The jury is out on whether streaming revenues will ultimately match those from traditional TV. Discovery CEO David Zaslav said in the Discovery+ investor day unveiling in 2020 that ARPU from Discovery+ would exceed that of linear in the short to midterm. That may be true, but unless the majority of the 81 million current TV subscribers to Discovery’s networks pick up Discovery+ (or HBO Max, once it is folded into that), it’s likely that it will make less total revenue overall.

The facts illustrated here show the folly of traditional media companies in attempting to go it alone to compete with the streaming heavyweights. A smart idea would have been for the networks to remain in league with one another, à la old Hulu, windowing pay TV content and joining together for a selection of high-profile originals.

Instead, the lure of streaming revenues saw the once promising union dissolve as companies sought to boost their prestige to Wall Street. It is already proving to be a tough arena, hence the merger between Warner Bros. and Discovery and persistent rumors that Comcast and Paramount may unite domestically on a streaming strategy.

It didn’t have to be this way. As “Yellowstone” shows, TV subscribers will still turn up if it is the only option to view (see also cable news and sports). But give them the option to watch on their own schedule, with fewer ads, and viewers will often turn to that. As it stands, the decisions of the TV networks will go down as missed opportunities.