Parks Associates reports 88% of US internet homes had at least one OTT subscription service
BY Addie Morfoot, BROADCASTING + CABLE
Every year, the number of households paying for over-the-top services increases, which has led to the assumption that linear television is nearing its death. But despite the gap widening between households subscribing to OTT providers or to traditional pay TV, broadcast networks are here to stay.
“There’s no doubt that how we watch, when we watch, what we want to watch and on what platform and device has changed,” said Dan Rayburn, an expert on streaming media and the chairman of the NAB Show Streaming Summit conference. “The windowing of content has changed, but this idea that broadcast TV is dead — absolutely not.”
Not Giving Up
According to Parks Associates’ OTT Video Market Tracker, last year 377 independent OTT providers existed in the United States and 88% of US internet homes had at least one OTT subscription service. But despite that high percentage, Americans are not ready to give up their linear subscriptions thanks in large part to live sports content.
“If you unbundled sports from broadcast TV, broadcast TV would have a problem,” said Rayburn.
But live sports licensing contracts are expensive and the agreements currently in place with various broadcast networks including FOX, ABC, CBS and NBC are multi-year arrangements that aren’t set to expire for several years.
Stephen Brown, executive vice president of programming and development for Fox First Run and Fox Television Stations, agreed that live programming is key to keeping broadcast TV alive and well.
“It’s incumbent upon linear broadcasters to create programming that attracts audiences,” said Brown. “We saw it with the World Cup. The audience that is not necessarily a linear audience will come to see the programs they want on the platform where it exists. Live news, live sports, live game shows, those are things that we need to lean into to differentiate ourselves in the marketplace.”
A recent example of a network veering away from original content that once proved successful is The CW Network. In January, The CW, known for shows that attract younger audiences, signed a multi-year rights deal with LIV Golf. Under the terms of the deal, The CW will air 14 global LIV Golf League live events in 2023.
“In an era of declining linear TV viewing, premium sports content is one of the few genres preventing viewers from cutting the cord,” said Elizabeth Parks, president and chief marketing officer, Parks Associates. “In Q1 2022, 40% of US traditional pay-TV subscribers still watch live sports via legacy pay TV.”
But, according to Parks, the sports consumer’s experience will eventually move online and away from traditional pay TV. Evidence of this shift has occurred over the last few years when Apple TV+, Hulu, HBO Max and Amazon each began delivering various live sports broadcasts.
But Rayburn said it’s a risky, expensive endeavor for streamers to take on.
“It’s way too expensive and so far, no (streamer) has shown a good return on investment to where they can make money from it,” he said. “Even Amazon, when they were asked publicly if Thursday Night Football is profitable for them, they replied and said, ‘Well, we kind of don’t know. We are in one year of a 10-year deal. We are certainly aiming to get it to profitability.’ So they flat out said even they don’t know because the cost to license is so high.”
That said, Parks Associates expect revenue from sports streaming subscription packages to increase 73% to $22.6 billion in 2027 after generating $13.1 billion in 2022.
What won’t be changing in the near future is the overwhelming bevy of content being offered by multiple OTT services and the numerous subscriptions needed to access that content. Despite consolidation, which includes Showtime being integrated into Paramount+ earlier this year, as well as the 2022 Discovery acquisition of WarnerMedia and the subsequent birth of Warner Bros. Discovery, consumer fatigue is here to stay.
“This isn’t about what consumers want or like,” said Rayburn. “That’s not what these companies are doing. What they are trying to do is make it easier for themselves to monetize and make money off their catalog. However they have to bundle that for consumers, that’s what they are going to do.”
Parks predicts that further streaming consolidation will occur over the next few years.
“Experimentation with hybrid business models and varied pricing tiers, providing customers with the ultimate option in how they watch video will continue as SVOD business models work to generate more revenue from TVOD and AVOD services,” said Parks. “In the next year, we may see Amazon, Disney or Apple buy smaller entertainment businesses in need of a bigger parent. These multi-billion-dollar purchases are clearly aimed at undermining Netflix’s dominance in the SVOD business.”