Legacy Media Faces Decline as TV Networks Struggle and Streaming Growth Stalls
The landscape of the media industry is undergoing a seismic shift, with legacy media companies grappling with a dual challenge. On one hand, traditional TV networks are facing a decline as a result of a dismal ad environment that is dragging down revenue. On the other hand, streaming platforms, which were once seen as the saviors of the industry, are struggling to turn a profit as costs rise and subscriber growth stalls.
Paramount, one of the major players in the industry, reported a 15% year-over-year slump in linear ad revenue in the fourth quarter of last year. This drop was steeper than what analysts had predicted and worse than the decline seen in the previous quarter. Other media giants such as Warner Bros. Discovery, Disney, and Comcast also experienced a decline in ad revenue in their traditional broadcast and cable businesses during this earnings season. These companies find themselves in a difficult position, having invested heavily in expensive streaming endeavors while witnessing a mass exodus of pay TV consumers.
In the past, linear advertising and cable affiliate fees had consistently boosted revenues for media companies. However, as ad buyers increasingly shift their focus to digital options like streaming, it is becoming clear that these companies may never see the same level of returns. The exodus from traditional TV channels in favor of streaming has put immense financial pressure on legacy media companies.
Adding to the challenges faced by the industry is the realization that the streaming boom may be coming to an end. A recent report by subscription analytics platform Antenna revealed that subscribers to premium subscription services grew at their slowest pace since before the pandemic began. The growth rate was just 10.1%, significantly lower than the 21.6% seen in 2022. Moreover, churn rates, which refer to subscribers canceling their streaming plans, have nearly tripled since 2019, with 140.5 million cancellations in 2023, marking the largest drop in subscribers over the past five years.
As consumer sign-ups slow down, the profitability of streaming platforms still has a long way to go. Virtually all media companies continue to lose money in this business, with the exception of Netflix and, more recently, Warner Bros. Discovery. However, even Warner Bros. Discovery’s streaming turnaround was not enough to lift earnings in the fourth quarter, underscoring the challenges faced by legacy media companies in finding a balance between traditional and streaming revenue streams. The company reported a miss on both the top and bottom lines, primarily due to a drop in networks revenue and the plummeting ad market.
The decline of legacy media and the struggles of streaming platforms have sent shockwaves through the industry. Media companies are now forced to navigate a rapidly changing landscape, reevaluating their strategies and seeking new avenues for growth. The future of the media industry remains uncertain, but one thing is clear: the days of traditional TV dominance are waning, and the era of streaming is facing its own set of challenges.