If you’ve been anywhere near the internet this past week, you’ve surely come across an article about how streaming TV is now dead, likely written by someone whose main interaction with the television industry has heretofore been as a viewer.
The rapid drop of Netflix stock, their stalling subscriber numbers and subsequent turn to advertising along with random anecdotes from the author’s friends are usually cited as proof points.
This is, of course, nonsense. Streaming isn’t dying or even slowing down and if you’ve been paying the least bit of attention (or reading TVREV) none of what happened in the past few weeks is the least bit surprising.
Allow me to explain.
I’ll start with one of my favorite anecdotes: despite the fact that set top boxes with built-in DVRs were routinely pushed, and pushed hard, by the various MVPDs, DVR penetration in the U.S. barely got over 50%.
Why? Because that was how many people wanted one. The rest just did not watch enough TV, or care enough about TV to want one.
So too with Netflix. It was inevitable that at some point everyone in America who wanted a Netflix subscription would have one. The company has already signed up around two-thirds of U.S. households, no small feat.
But that remaining third just doesn’t watch enough TV or enough Netflix-style TV to warrant coughing up that extra $15/month. Yet to read many of these takes, you’d assume that anything less than 100% penetration constituted abject failure on Netflix’s part, and that millions of new users would begin magically keep cropping up once that 100% figure had been reached.
And that’s just the U.S.. Which brings us to the next piece of obviousness: ads.
Netflix, in its quest for Total World Domination is now in every country on earth save China, North Korea and Syria. In many (if not most) of those countries, there really isn’t much of a middle class. Most people are poor, which means they don’t have an extra $15/month lying around with which to subscribe to a streaming TV service. Things like food and firewood get a higher priority.
So again I must wonder why it is surprising that Netflix is looking to introduce an ad-supported subscription tier (SAVOD)?
How did people think they were going to get subscribers in places like Africa and Central America?
(I’ll go one step further here and say that they’re also going to need to move to a free e.g., FAST model in those countries because even a low-priced subscription service is something few people can afford.)
Then there’s the wringing of hands about all the competition in the space and its effect on Netflix’s subscriber numbers.
As if the fact that there are eight other multibillion dollar streaming services was new information. Of course all that competition is going to cut down on Netflix’s ability to bring on new subscribers. Especially since many of those new services cost less than Netflix, have deals that allow subscribers to get many months for free, and have Really Good Shows That Everyone Is Talking About.
Which brings me to the final point: a lot of what is on Netflix these days sucks.
That one is on Netflix. Once the various networks and studios started taking popular library series like Friends and The Office, a decision was made to massively ramp up the amount of programming Netflix was producing.
And by “massively” I mean they were making close to 150 original series each year.
Compare that to a traditional broadcast network which, back in the day, may have created a dozen or so new series each year.
So of course quality was going to suffer—there just aren’t that many talented people in Hollywood. And while no doubt some of those series connected with certain demographics, by and large they created a perception that much of what was on Netflix was pretty awful.
Which was already a meme of sorts back in summer 2021, so again, no surprises there.
Then there is the other side of the coin, the irrational exuberance to declare linear TV dead, usually combined with the observation that “nobody I know watches cable anymore.” Which of course resulted in a massive overestimation of the potential growth curve for streaming.
As we have pointed out time and again, traditional pay TV is very much alive and well and there is likely a floor of somewhere between 30% and 40% of current TV households who are only going to give up traditional pay TV when someone forces them to.
So no it is not dead, and yes it will impact the number of subscription services people will ultimately subscribe to.
Final note: The CNN+ debacle was all about corporate politics, an executive on his way out trying to make a point to the people taking over. Cooler heads/common sense would have indicated it never should have launched and the decision to shut it down has everything to do with Warner-Discovery wanting to put all its eggs into a single basket (or app, as the case may be) and using CNN content to help that app set itself apart and nothing to do with the long-term viability of streaming. Well that and not being bound by an ill-fated rogue decision.
If you are a player in the streaming industry or someone who feels compelled to write about it, remember that this is not a zero-sum game.
There was never going to be a “Netflix killer” because there is never going to be just one streaming service that wins.
Similarly, most viewers are going to be watching some combination of linear and streaming, at least for the near future. Because that is not a zero-sum game either, as the continued trickle of cord cutting (versus the mythical “massive wave”) attests.
So yes, streaming services will continue to grow and viewers will continue to subscribe to both traditional pay TV and to various and sundry streaming services. But TV, largely due to the complexity of the underlying distribution and rights deals, will not collapse the way the music or print industries did.
If you are Wall Street, it’s time to re-evaluate how you look at the television industry, which is a lot more complicated these days than you would like it to be, what with multiple revenue streams and players like smart TV OEMs assuming a far greater level of importance.
Meaning there’s a whole lot of gray and not all that much black and white, so maybe a deep breath before you send stocks soaring or sinking again. (We’re here to help.)
If you’re Netflix—and this is the most important point of all— you have a chance to really reinvent TV advertising and fix everything that currently ails it when you launch your product—focus on that, on hiring the right people and once again being the revolutionaries you were born to be.
We’re counting on you.
The TV measurement industry got two pieces of good news this week.
First, Nielsen struck a deal with VIZIO to use its Inscape ACR data for measurement. Combined with the Gracenote data Nielsen already owns, that will make for a larger sample size and reaffirms the ascendency of ACR data.
Second, iSpot, one of the key “alternative currency” vendors, received a whopping $325 million investment from Goldman Sachs (they now own a minority share) which will allow it to further refine its measurement tools while focusing on “everything from additional capabilities in products supporting currencies to tighter industry-wide integrations and MRC accreditation,” as per CEO Sean Muller.
As more and more viewing moves towards streaming and as MVPDs begin sunsetting their set top boxes, ACR data from smart TVs takes on more and more prominence, both as raw data and as a key part of newly ascendant measurement platforms like iSpot
The value of ACR in the current hybrid (streaming and linear) environment is that it captures everything that is “on the glass” (on the TV screen) and thus can measure both linear and streaming viewing from the same TV, which provides for far more accurate measurement.
This has taken on a great deal of importance as of late given the growing complaints about “over-frequency”-the same households getting hit with the same ads on both streaming and linear.
It also provides advertisers with a much larger data set: Inscape collects data from over 20 million TV sets, compared to Nielsen’s panel base of 40 thousand viewers.
As for iSpot, its measurement is now currency for NBCU during the upcoming upfronts (say that one ten times fast) and they have major measurement deals with Warner Media and others as well. And they are not alone—other alternative currency providers have their own deals too now, as the industry reacts to the availability of bigger and better data.
All this matters because the television industry’s main competition is not other companies in the TV space but rather, digital, in the form of Google and Facebook. What those two companies can offer are 1:1 metrics on how each and every ad impression performed, who it was served to, when and where, all presented in beautiful four-color charts.
What they can’t offer is the emotional connection of a television commercial, so the more TV companies can show more complete measurement stats, the easier it is for advertisers to justify the spend.
If you are VIZIO and iSpot, take a bow. It’s been a long uphill climb and even now I speak to senior people in the business who don’t get the value of ACR and/or what you and other providers are up to. But you hung in there and now your day has arrived, so kudos.
If you are Nielsen, kudos to you too, for being wise enough to reach out beyond your comfort zone—the more inputs TV data has, the more accurate it will seem.
If you are an advertiser or agency executive and you feel you don’t know enough about ACR, TVREV has some reports for you. Because digital delivery of television is the future and it’s not going anywhere.
Alan Wolk veteran media analyst, former agency executive, and author of "Over The Top. How The Internet Is (Slowly But Surely) Changing The Television Industry" is Co-Founder and Lead Analyst at TV[R]EV where he helps networks, platforms, agencies, brands and ad tech companies navigate the rapidly shifting media landscape. A widely published columnist, speaker and industry thinker who is a regular on Cheddar TV, Wolk has built a following of over 300K industry professionals on LinkedIn by speaking plainly and intelligently about TV and the media business.
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