For the last few years, a number of people have predicted the downfall of television as a medium, proclaiming “TV is dead.” This bold and bleak prediction stems from a continual downward trend in viewership numbers and an emerging disruption through new mediums. Many point toward the proliferation of mobile devices, pulling attention away from television, while simultaneously creating new content consumption habits through social media.
It is definitely true that social media has taken away viewership from television, but the truth is that the digitisation of streaming services has led to the biggest disruption for television. The result of this digitisation is that linear television viewership as declined as consumers shift towards a new and simpler way to consume content. Streaming services allow for more freedom to choose exactly what people are looking for, no longer tied to content schedules and predefined show times.
This shift started years earlier with the rise of VHS to record content before set-top box solutions like TiVo introduced a quicker and easier way to do this. But now, streaming platforms offer incredible content libraries that no TV channel could compete with. The way people access content has changed dramatically. In what could be called the Netflixisation of content, full libraries of content sit within a digital environment, further separating consumers from traditional scheduled viewing behavior.
For example, in a study in May last year, Amazon Prime Video contained 42.6 thousand hours (1,775 days, or 254 weeks, or roughly 5 years) of content. Netflix had 42.46 thousand hours. All of this content is easily accessible through well-designed and integrated apps that understand consumer behaviour to continually offer personalised recommendations. Media consumption is now data-driven, built around preferences and habits.
Linear signals are built using radio waves, with cable signals delivered using microwave signals. Both are expensive to maintain and tricky to manage. This has led to a move away from these analog systems towards digital signals. However, it is still an outdated model. The quest to update how linear television has been distributed was understandable, but it ignored how the world around it was evolving.
Technology Advances Pushing TV Forward
The last few years have seen huge strides in the capabilities and costs of television sets themselves. No longer incredibly heavy, huge boxes with small screens, TVs became cheaper, with smaller yet more advanced electronics seeing sets dramatically reduce back panels while screen sizes continued to grow. And most importantly, they became internet-enabled.
These devices, referred to as Connected TVs (CTV), highlight this evolution of television and the modernisation of television content consumption. Those who claim the downfall of TV simply need to look at the rapid growth of Connected TV usage to understand that television is not going anywhere. The truth is that, yes, linear TV is dying. How people have historically consumed TV is falling by the wayside, but it is stepping aside as technology improves the delivery mechanism.
In the early days of streaming services, the bulk of this media consumption was done using mobile devices. While streaming was initially available through websites, it wasn’t until the proliferation of streaming mobile apps that streaming started to see a big uplift in usage. These apps helped streamline the process of finding content and quickly putting on exactly what consumers wanted to watch. This was an individualistic endeavor, however, with the reality of people watching something on mobile by themselves due to limited screen sizes making it difficult to watch with other people.
The rise of CTV eventually saw a shift in viewership away from mobile towards CTV. While this took time, it did help bring better connections to content, as it allowed people to watch together. This is important as television consumption has often been driven by shared experiences.
While this helped CTV address a more connected viewing environment, there were still some technical hurdles that needed to be overcome beforehand. Technical limitations of the operating systems and a smaller potential audience base created barriers. But as CTVs ownership began to grow, so did the viewing habits. Local TV networks, for example, have seen CTV viewing numbers climb from 20-30% just 5 years ago, to a staggering 70%+ today. This means that the majority of people watching their streaming content are doing it on the biggest screen in the house, and no longer just on their phones.
As great as these technical advances have been, it is still limited by internet accessibility. The developed world often takes the internet for granted, but even in these countries, there are still large areas where the internet is inaccessible. This means that linear television still has a place, as this has far-reaching connectivity through aerials and satellite dishes in areas with limited or no internet coverage.
Challenges With Streaming Revenue
One of the biggest challenges for streaming services is growing operational and content production costs with limited revenue generation. Profitability has often been cited as one of the biggest hurdles to overcome for streaming. While most streaming services have operated at a loss for years, signs are beginning to show that highlight profitability is happening for many of the biggest streaming giants.
Netflix, for example, reportedly has over 300 million subscribers, all paying monthly fees. While the operating costs of buying content libraries and producing new shows and movies do make it a tough balancing act, Netflix has remained profitable for years. In fact, Netflix is the only one that can claim profitability, with it reporting around $5 billion in revenue a year. For most streaming services, this has not been the case.
Streaming services initially positioned themselves as ad-free, allowing for uninterrupted viewing for a minimal monthly cost. This monthly cost was a tough balancing act that needed to be high enough to cover operational costs while also being low enough to attract a large audience.
By contrast, linear TV has always seen huge advertising spend throughout the years. This revenue has helped to fund content creation, pay TV personality salaries, and make the company profit. There was a sense of synergy with this approach for advertisers: reach a built-in audience in an engaged environment. This has changed as audiences have left these channels, which is hard to digest for TV companies who have therefore seen revenue drop, as well as audiences.
Now, streaming services are looking towards ad-supported models as a way to increase revenue and capture this ad revenue. However, again this is a tough balancing act between offering low ad loads for consumers, and ad revenue. This is the next big battle for streaming services to solve.
The Issue Of Decision Paralysis
People no longer struggle to find something to watch on traditional TV channels with pre-arranged content schedules; they now find themselves struggling to find something to watch through endless content libraries of numerous streaming services. This is often referred to as ‘decision paralysis’, and leads to sometimes hours a week of scrolling through these libraries trying to find something to watch.
Streaming has led to people having too much choice, and ironically one of the best ways to address this is by bringing the linear television model back. This is why FAST (Free Ad-Supported Streaming Television) channels continue to grow around the world. Aligned closely with traditional scheduling, and binge-worthy content, FAST channels give consumers an avenue to put something on that involves far less thought, they simply need to choose the kind of content they feel like, not the specific content. There looks to be a perfect middle ground for streaming services, offering extensive content libraries for choice, and FAST channels for casual viewing.
The Future Of TV Is Already Here
The future of TV is already here. The doomsday predictions that TV is dead are overblown, but the way people consume TV is changing. There is no need to predict what TV will look like in the next 5-10 years, or even answer those who question if TV will still be around in 5-10 years. Streaming services have replaced linear television in a number of ways, but it isn’t perfect, yet. Technical barriers still exist with streaming, and while internet access is improving there are still large areas of the world that have limited or no access to the internet. This means that linear TV still needs to exist for some.
As TVs have become smarter, and the cost of production dramatically reduced, CTVs now represent a large portion of TV devices. With streaming services being an app-first environment, this has created an easy, frictionless way to access streaming content. Consumers now expect more freedom and choice. They want to watch exactly what they feel like watching at any particular time. This, however, is not without its own challenges, as decision paralysis continues to plague people looking for something to watch. FAST channels look to solve this, echoing the traditional television model.