Over the past 18 months there has been a tremendous focus in the media world on how television and movie entertainment is moving to streaming services. While Netflix has become a staple of television service in roughly 70 million American households, the inclusion of Disney +, Hulu, HBO Max, Peacock, Apple TV +, Paramount +, and Amazon Prime has created a veritable entertainment offering for consumers. Discovery’s recently announced merger with Time Warner, which will bring Discovery + together with HBO Max, further underscored that the future of television lies in streaming entertainment services.
Sports programs have come into play. ESPN, which has been slow to get into streaming, recently signed renewal contracts for significant amounts of professional sports programming, giving it the flexibility to broadcast these offers through the ESPN + streaming service. Additionally, Amazon recently agreed to pay the NFL $ 10 billion just to air Thursday Night Football on its streaming service for the next decade.
With the migration of entertainment and sports programming to the streaming world, cable and satellite bundles of channels are losing subscribers faster and faster as viewers cut the cables – or in the case of younger viewers who never subscribe to cable or satellite to begin with. As the streaming wars deepen and old TV channels lose both viewers and subscribers, no one really focuses on what this means for the television news.
To understand the looming television news crisis, one must understand the economics of the current television system. Not only do television channels today generate advertising revenue by attracting an audience, but crucial to their economics are the fees that cable and satellite operators pay to broadcast those channels. For example, CNN, CNBC, MSNBC, and Fox News receive very high fees in every cable and satellite home in the United States. This means that now subscription fees are paid to news channels with a reach of over 75 million, up from almost 100 million recently. The news channels are paid for in each and every one of these households, although only a small minority of households watch each of these channels. That creates a very sizeable revenue base that supports the major TV news franchises – regardless of how many viewers the channel actually has, it is paid for in all cable and satellite households.
Similarly, local television stations, which are the backbone of local television news, receive what are known as “retransmission consent fees” from cable and satellite operators, which are very high payments for the right to broadcast those stations. These channels are also paid for for all cable and satellite households in a given local market, regardless of what percentage of those households actually watch a given channel. Because of this unique payment system for older broadcast and cable channels, many consider this payment system to be the best possible economic model the television industry could have.
If we move from consumers receiving a bunch of cables or channels to an environment where consumers are using some streaming services that they pay for directly, the whole concept of money-raising in all households disappears.
Entertainment content is making this transition, although many industry analysts doubt that all entertainment streaming services can do it. The exercise program is also beginning to make this transition. But there is a huge question mark over how news will be supported in this new streaming world. Any news broadcaster moving to a live streaming service would have to collect a very heavy fee from every home to make up for the loss of cable and satellite broadcast. News viewers may be the last to abandon the pay-TV package, but as the coverage of that package goes down, those fees will inevitably go down too.
To make matters worse, there is significant additional competition for television news as Roku and Amazon both offer extensive streaming news services. They don’t have the star power or the depth of content of the better-known TV brands, but they do offer a decent news menu for those who aren’t political junkies or brand-loyal news networks.
TV news began as a public service program that broadcasters had to run as a condition of obtaining a license from the FCC. The television news business eventually became profitable, but it will soon see an existential crisis as it is meant to stay.
There are a few ways to preserve the economics of news channels and local news beyond broadcasting each channel in an attempt to generate sufficient streaming revenue directly to the consumer from loyal viewers.
One way is to create a large bundle of national and local messages that are delivered through a single packager. Apple is doing this with magazines and newspapers, and offering many popular magazines and newspapers digitally with Apple News + for a monthly fee of $ 9.99, but so far the adoption has not been overwhelming. And traditional media companies will be extremely cautious about bolstering Apple’s power in the media market as they increasingly compete for streaming entertainment.
Another possibility would be to find a Swiss player rather than a neutral distributor. News and broadcasters are all in this predicament – if they can’t get subscription fees from all cable and satellite households, they will at least want to get fees from all news households, including those who are not loyal to their brands.
Certain companies can do better on their own than others. Comcast and NBCUniversal have a wide range of assets including CNBC, the leading business news channel; MSNBC, the leading source of progressive political news; Sky News, the leading international news broadcaster; NBC News Now, a streaming service; News offers from the digital streaming service Peacock; and a variety of local and regional news channels. Providing a separate news package for households who would otherwise subscribe to Peacock could encourage widespread adoption of news content while promoting better adoption of the broader entertainment streaming service.
Fox puts a lot of shoulders on Fox Nation, a subscription news channel designed to satisfy the insatiable appetite of this news audience for right-wing, often extreme, commentary. There may be a model for Fox here, but I suspect it won’t be enough to offset the significant financial decline the Fox News Channel will suffer with significantly less support for cable / satellite subscription fees.
The center of any democracy is a well-informed citizenry and a robust marketplace for ideas where quality news content can survive and thrive. Right now there is no obvious answer to saving TV news as pay TV subscribers drop, but let’s not let quality TV news become collateral damage in the entertainment streaming wars.
Tom Rogers is the Executive Chairman of Engine Media, Inc. He was the first President of NBC Cable.
Disclosure: NBCUniversal, owned by Comcast, is the parent company of CNBC.