While it has been evident for quite some time that the future of cable TV is uncertain, recent events have highlighted the disruption caused by streaming and changing viewing habits. The recent dispute between Disney and Charter Communications brought to light the challenges facing the cable TV industry. Fortunately, the two sides reached an agreement. Now, Warner Bros. Discovery is pushing the boundaries with the launch of CNN Max, risking potential contract violations with distributors. This example showcases the delicate balance companies must maintain between their lucrative cable contracts and their streaming ambitions.
The Disney-Charter Deal
Earlier this year, Disney and Charter Communications found themselves in a public dispute that left Charter customers unable to access Disney channels, including ESPN. This dispute brought attention to the changing dynamics of the video business. Many in the industry saw this as a tipping point, where cable TV is becoming more of a liability than an asset. One issue raised was that Disney was putting its best content on its streaming platforms, while charging hefty fees for cable distribution. Fortunately, the two companies came to a deal that recognized the value of both linear television and streaming services.
Alan Wolk, a media analyst, highlighted the significance of the deal, noting that it signals the direction towards wholesale prices for streaming services. This reflects the industry’s move towards bundling linear offerings and streaming to avoid tension with distributors. Previously, consumers had to pay twice to access cable offerings and streaming platforms. Going forward, this double-dipping will no longer be acceptable.
CNN Max Testing The Boundaries
Warner Bros. Discovery’s launch of CNN Max raises concerns about potential contract violations. Distributors like DirecTV are pushing back against TV companies as they no longer have the same incentive to offer cable TV bundles. Instead, they focus on selling broadband internet services. DirecTV has warned Warner Bros. Discovery about the risk of violating their contract with CNN due to the streaming channel CNN Max. The outcome of this dispute remains uncertain.
Despite the potential legal issues, Warner Bros. Discovery’s broad offering of Max is seen as a smart move. It recognizes the value of providing news, sports, and entertainment in one service. David Zaslav, CEO of Warner Bros. Discovery, emphasized the importance of news and sports in making these platforms come alive. CNN previously attempted a streaming venture with CNN+, but it was short-lived.
TV Companies Treading A Fine Line
Nielsen data indicates that broadcast and cable TV combined accounted for less than 50% of total viewership in July, which is a record low. As viewer habits change and more people cut the cord, TV companies face a delicate balance. They must develop their streaming platforms and attract customers while maintaining their profitable cable TV contracts. This is crucial for funding their streaming ambitions. However, the decline of cable bundles and the rise of streaming means that TV companies will not make as much money as they did in the past. While the industry will remain profitable, it will see a decrease in profitability compared to previous decades.
Despite these changes, there will still be a significant portion of the older population that holds onto their cable subscriptions. This means that the cable bundle will remain for the foreseeable future. However, companies need to adapt to the streaming landscape to ensure long-term success.
In conclusion, the cable TV industry is undergoing significant changes due to streaming and shifting viewer habits. Disputes, such as the one between Disney and Charter Communications, highlight the challenges companies face in maintaining their cable contracts while embracing streaming. Warner Bros. Discovery’s launch of CNN Max pushes the boundaries and raises concerns about contract violations. The industry must find a delicate balance between developing streaming platforms and retaining profitable cable contracts. While the decline of cable bundles will impact profitability, the TV industry will remain lucrative with the rise of streaming.
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