The U.S. audience for streaming video already exceeds that of pay TV, and now a new study predicts that our streaming expenses will also top our total pay-TV expenditure by 2024.
In a forecast of U.S. subscription TV released Tuesday, the market-research firm Strategy Analytics said that while in 2020 we spent $90.7 billion on traditional pay TV (an 8% drop from 2019) and $39.5 billion on streaming (a 34% jump from the year before), by 2024 legacy pay TV will only account for $74.47 billion—with streaming ahead at $76.3 billion.
And by 2026, pay-TV spend will only add up to 40% of our collective video budget, less than half of its 2016 share of 81%.
Strategy’s press release quotes Michael Goodman, director of TV and media strategies at the Newton, Mass., firm, offering this bleak forecast for cable and satellite: “This is a long-term transition, but there is no doubt that the writing is on the wall for pay TV as we have known it for more than 40 years.”
Audience numbers for streaming video have been surging for some time—in an email Wednesday, Goodman noted that Strategy’s data showed streaming first topped pay TV in 2019, at 92.64 million households to 81.63 million households.
But the metric of total spending matters more because traditional pay TV bills run so much higher, allowing cable and satellite operators to keep making more money even as their audience boils away.
Goodman noted that this math still works for content owners too; don’t expect a cataclysmic end to Big Cable.
“This is all about managing a declining market to maximize revenue,” he said. To illustrate that, he sketched out some simplified scenarios for Discovery
Goodman estimated that in 2020, Discovery raked in $992.7 million in affiliate fees from U.S. pay-TV providers, assuming nearly 100% carriage and a $1.10 monthly payment per subscriber from them. Even after six more years of pay-TV receding, those affiliate fees would still total $761 million in 2026, assuming the same nearly-complete carriage and $1.10 rate.
“Given these numbers it does not make sense for Discovery to abandon linear TV too soon,” he wrote. “There is still plenty of juice to be squeezed from this lemon.”
Meanwhile, if Discovery+ can hit 25 million U.S. subscribers paying $4.99 a month by 2025 (there’s also an ad-free version of this service at $6.99), Goodman said that would generate $1.5 billion in U.S. revenue. Advertising revenue would pad out both the pay TV and SVOD figures.
“The challenge for Discovery and other programmers is managing their legacy channels while simultaneously growing their [direct to consumer] services to maximize revenue,” Goodman said. “Increasingly, Discovery will pour more resources into Discovery+ but it does not make sense at this point to just leave $761B on the table and abandon its linear channel.”
But Goodman’s colleague David Mercer, vice president and principal analyst for Strategy’s media and intelligent home practice, suggested sports could hit a breaking point sooner. He pointed to the streaming service DAZN’s recent win of domestic Italian rights to carry Lega Serie A soccer matches, beating out a bid from the satellite service Sky.
“Obviously internet-based services have been chipping away at major sports rights in recent years, but this is the first example in a major market where internet will now be the primary platform for premium sports, high-viewership live events,” Mercer wrote.
Baseball fans should take note, as Major League Baseball is now trying to coax regional sports networks into offering direct-to-customer services after streaming-TV services have dumped so many of them—leaving most “RSNs” confined to cable, satellite and one particularly expensive streaming service.
Mercer suggested that both the broader transition from legacy pay TV bundles to streaming subscription video and the precedent just set in Italy could bode well for such a shift.
“The funds are clearly there, in select cases for the moment, for streaming players to at least attempt to displace legacy pay TV players to a large extent,” he said.
Now we need to see who might show up with a big enough check.