Do you recall when Netflix announced it would discontinue its home video delivery service? Viewers around the globe expressed their dissatisfaction and communicated their feelings about this decision by the company that had become essential for their semi-on-demand entertainment.
Fortunately, Netflix CEO Reed Hastings and his team remained steadfast in their decision regarding this shift. They were resolute in their streaming vision for making content instantly accessible to customers without having to wait for DVDs to arrive via the postal service.
Now, streaming media has surpassed both broadcast and cable media and is expected to keep expanding.
At a recent luncheon hosted by the Media Institute, David Kenny, executive chairman of Nielsen, provided an insightful overview of how streaming and on-demand viewing have completely altered the media landscape. Mr. Kenny pointed out that for those under 35, streaming platforms account for 65% of their media consumption, while traditional broadcasting only represents 7%. This trend illustrates a dramatic change not only in viewer preferences but also in the overall framework of media consumption.
According to Nielsen’s larger metrics highlighted in its July 2024 The Gauge report, streaming currently represents over 40% of total viewership, with cable at 27% and broadcasting just above 20%. Kenny remarked that this transition introduces complex challenges for content creators and distributors as the industry adapts to new methods of audience engagement and monetization.
Kenny emphasized one of the most noticeable changes: the rise of “individual watching.” With the prevalence of smartphones, tablets, and other personal viewing technology, the tradition of families gathering around a single television set has mostly faded, except for instances like live sports. This shift in behavior has led Nielsen to increasingly utilize Portable People Meters and investigate new technologies such as eye-tracking and recall methods.
The Role of AI and Data
Looking towards the future, Kenny stressed the crucial impact that artificial intelligence will have on the media landscape. He forecasted that “AI will infiltrate every industry,” describing data as the essential fuel driving this shift. However, he quickly pointed out that the current state of data often lacks the refinement and consistency vital for fully realizing AI’s capabilities. He suggested that integrating metadata will be critical in facilitating a smoother application of insights throughout various parts of the media value chain.
The Upcoming Generation: Alpha
Kenny also raised an important question regarding the media habits of Generation Alpha, the group following Gen Z. These children aged 10 to 14 are already maturing in a streaming-dominated environment, yet their media habits are difficult to track due to legal and social constraints. Kenny foresees them becoming even more immersed in streaming than their older counterparts, which will further solidify the prevalence of on-demand media.
As Kenny succinctly encapsulated, the media sector stands at a crucial juncture. Streaming has become foundational to consumer behavior, and the capacity to adapt to this reality—through enhanced data integration, AI, and innovative measurement technologies—will shape the future of content distribution and audience interaction.
The message is unmistakable for players in the tech and media sectors: adapt or face irrelevance in a world where streaming digital media and data will increasingly dominate our work, education, and personal lives.
Television continues to transform, exemplified by the NBA’s recent media rights deal that indicates the future path of the medium. Last month, the NBA welcomed NBC/Peacock and Amazon Prime Video as new media partners while parting ways with TNT, which had broadcast games since 1988. The 11-year agreement worth $77 billion will conclude following the 2035-36 season. NBC, as a broadcast network, has a broad reach, serving 125 million U.S. households, while Prime Video boasts a reported 115 million subscribers in the U.S. and 200 million globally.
Additionally, a reflection of the evolving television landscape has been the financial difficulties faced by once-profitable regional sports networks. Last year, AT&T SportsNet, which operated in four markets, exited the RSN market. The Diamond Sports Group, the largest RSN, declared bankruptcy while ceasing its RSN operations and focusing on a combination of broadcast stations and a direct-to-consumer model. Local channels enjoy extensive coverage in TV markets and are benefiting from the increase in digital antennas and the growing availability of NextGen TV. Furthermore, the trend of watching live sports via streaming services is on the rise.
In May 2011, the number of households with cable programming reached its peak, with over 105 million subscribers representing nearly 91% of TV homes. Since that time, the rise of cord-cutting has led to a significant drop in the percentage of homes with cable. Currently, only 57% of television households have cable subscriptions, which equates to just over 71 million homes. Additionally, the trend of households canceling their cable TV subscriptions has been increasing. In 2023, a record five million people among the largest cable programming distributors opted to cancel their cable service, up from 4.6 million in 2022.
As the subscriber numbers decline, most cable networks have seen their audiences plummet. In 2023, there were merely three cable networks that managed to average more than one million viewers during prime time. In contrast, in 2013, there were 19 cable networks that achieved the same viewership. This decline in audience is not showing signs of slowing. According to Nielsen’s June 2024 Gauge report, cable accounted for a share of 27.2% of TV usage, marking the lowest level to date. In June 2023, cable’s share stood at 30.6%, and in June 2021, it was at 40.1%.
Common reasons cited for cost reductions include expenses and the rise of alternative viewing options such as streaming services. In 2023, pay TV providers generated $85 billion in revenue, a drop from $92.4 billion in 2022. Advertising revenue for cable television is also on the decline. S&P projected that in 2023, cable ad revenue would total $22.4 billion, with continual yearly declines expected to bring it below $20 billion by 2027.
Last year, a transformative carriage fee agreement was reached between Charter Communications and Disney. With the new arrangement, Charter’s Spectrum TV Select subscribers will gain access to Disney+ with ads. Additionally, those subscribers will be able to use ESPN+. Moreover, Disney permitted Charter to eliminate several cable networks: Freeform, Disney Jr., Disney XD, Nat Geo Mundo, Nat Geo Wild, FXM, FXX, and Baby TV.
Streaming is currently the fastest-growing video platform. According to a survey conducted by Park Associates, 89% of U.S. households now have at least one video streaming service, which is significantly higher than those with cable TV. The growth in streaming video can be attributed to better content, binge-watching capabilities, and on-demand access.
Nielsen’s Gauge Report indicated that streaming reached a record high of 40.3% of TV usage share in June 2024. Furthermore, during the week of July 1, streaming recorded over 313 billion viewing minutes across various platforms, marking the highest amount of streaming consumption in a single week. In June, YouTube maintained its position as the most viewed video platform, achieving a record high 9.9% share for the 17th consecutive month. YouTube reports that 150 million people in the U.S. watch the platform monthly. Netflix ranked second with an 8.4% share of TV usage.
The rise in streaming usage is supported by the increasing prevalence of web-connected smart TVs. On average, viewers now watch over 20 hours of streaming video weekly. According to Nielsen, more than 70% of U.S. TV homes have at least one smart TV, an increase from 62.3% two years ago.
One of the fastest expanding sectors is ad-supported streaming. A survey by LG Ad Solutions revealed that 69% of U.S. connected TV users prefer free ad-supported streaming television (FAST) channels over paid subscriptions. While most content consists mainly of licensed programming, the survey noted that 53% of users spend over two hours each week using FAST applications.
Furthermore, connected TV (CTV) has emerged as the fastest-growing ad-supported media channel. eMarketer forecasts that CTV ad revenue will exceed $30 billion this year, surpassing cable revenue. It is projected that ad revenue will reach $42 billion by 2027.
Streaming does face challenges, however. Many users find it frustrating to sift through numerous viewing options, spending an average of 10.5 minutes choosing what to watch, according to a study by Nielsen’s Gracenote. Amazon’s Prime Video has announced its intention to implement AI to assist in program recommendations. Rising costs also pose a challenge, as 45% of subscribers have canceled a streaming service due to affordability issues. To mitigate subscription cost increases, several bundling options are being offered at discounted prices.
Broadcast television is seeing a rise in the use of traditional or digital antennas. According to a CivicScience survey, this method has become the quickest growing way for viewers to watch television today, with 30% of U.S. adults utilizing an antenna, which allows access to free over-the-air broadcasts from local stations. The survey found that 17% of households frequently use their antenna. This trend is particularly strong among millennials aged 25 to 44. Additionally, since the switch from analog to digital in 2009, broadcast station groups have launched many over-the-air digital multicast networks, often referred to as “diginets,” accessible via digital antennas. A good-quality digital antenna can be purchased for less than $100.
In November 2017, the FCC authorized regulations that allow local broadcast television to transition to an IP-based standard for transmitting over-the-air signals. This upgrade, known as ATSC 3.0 or NextGen TV, has been implemented on a voluntary basis in various markets. To access NextGen TV, viewers need an in-home antenna, a television set compatible with ATSC 3.0, and either Wi-Fi or a streaming subscription.
During the Paris Olympics, 56 television markets will have the capability to watch the games via NextGen TV with High Dynamic Range (HDR). Approximately 73 million TV households live in areas where NextGen TV signals are broadcast with HDR video. (HDR is a technique that enhances the detail in very bright and very dark videos.)
NextGen TV also offers numerous advantages, including a wider array of content, such as multiple video streams and interactive on-screen apps, as well as the possibility of watching video content on mobile devices and in cars. In the U.S., 12,000 NextGen TV sets are sold every day.
What does the future hold?
Industry analyst Bill Harvey argues that the anticipated decline of linear TV has been overstated, noting that many of the most highly rated streaming shows originally appeared on broadcast or cable. He references a Nielsen Gauge article stating, “The 6 billion minutes Young Sheldon accumulated in May 2024 were nearly evenly split between traditional linear channels and streaming. Its success on linear TV contributed to its performance on streaming platforms, and the reverse is also true. This is how programmers who stay ahead of trends will create a stronger television business by coordinating all delivery methods.”
Harvey further comments, “Streaming isn’t in competition with linear; it’s expanding the reach of linear. The potential advantages of addressability have yet to be fully utilized, and when they are, the smaller commercial loads in streaming will yield a comparable return per viewing minute as the heavily commercialized non-addressable linear options. At that point, networks won’t need to be concerned about which delivery method a viewer opts for, as they will all be nearly equally profitable. However, if linear moves away from scripted series in favor of less expensive reality shows, that could lead to the dreaded scenario of decline becoming a reality.”
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