Cable television’s long-running drama appears to be entering its final season, with a plot twist costing the industry billions.
In a whirlwind 39 hours last week that felt more like a cancellation spree than a financial recalibration, three media giants: Warner Bros. Discovery, Paramount Global, and AMC Networks, collectively wrote down over $15 billion in cable network value.
This staggering sum, enough to fund several blockbuster series or perhaps a small streaming service, serves as a stark reminder that even the mightiest can fall in the entertainment world.
As cord-cutting accelerates and streaming services continue their ascent, these write-downs signal more than just red ink on balance sheets. They mark another moment in the evolution of how we consume television content.
Warner Bros. Discovery led, announcing a $9.1 billion devaluation of its cable networks. Paramount Global followed suit, marking down its Viacom cable channels by $5.98 billion. Although smaller in scale, AMC Networks contributed to the trend with a $97 million write-down. These moves underscore a harsh reality: once a golden goose for media conglomerates, the cable TV business model is rapidly losing its luster.
Of course, the decline of cable television isn’t a sudden phenomenon. For years, industry observers have noted the steady erosion of cable subscribers as viewers increasingly opt for streaming services. However, the scale and rapidity of these write-downs suggest that even media executives have been caught off guard by the acceleration of this trend.
Several factors contribute to cable’s waning relevance.
Streaming platforms offer unparalleled convenience and personalization, allowing viewers to watch what they want, when they want, without the constraints of linear programming. The COVID-19 pandemic accelerated this shift as homebound consumers explored and embraced streaming options.
Moreover, younger generations, raised in the digital age, show little allegiance to traditional cable packages. They prefer à la carte content consumption, piecing together their entertainment diets from various streaming services rather than paying for bloated cable bundles filled with channels they’ll never watch.
Of course, networks and distributors could have long ago offered à la carte options… but instead favored the bundle as the be-all, end-all choice, with that now being their ultimate demise.
The financial implications of this shift are profound. Cable networks have long been profit centers for media companies, benefiting from dual revenue streams of advertising and carriage fees from cable operators. As subscribers dwindle, so do these revenue streams, putting pressure on profitability.
While growing in popularity, streaming services have yet to replicate the profitability of the cable model fully, as they often are unable to capture those duel revenue streams.
Many are still operating at a loss as companies pour billions into content production to attract and retain subscribers. The recent price hikes announced by major streaming platforms suggest a push toward profitability, but whether consumers will tolerate ever-increasing subscription costs remains to be seen.
Media companies face a challenge in navigating this transition period.
They must balance the declining but substantial revenue from cable operations with the need to invest heavily in streaming infrastructure and content. This balancing act is reflected in the recent financial maneuvers of companies like Paramount Global, which announced significant layoffs alongside its write-down, likely to streamline operations and free up capital for its streaming initiatives.
The loss of sports rights, particularly Warner Bros. Discovery’s loss of NBA rights, further complicates the picture. Live sports have been a key differentiator for cable, keeping many subscribers tethered to their packages. As these rights increasingly migrate to streaming platforms or are split among various providers, cable’s value proposition further diminishes.
It would be premature to sound cable’s death knell entirely. Industry analysts project that a core group of pay-TV customers — estimated at around 50 million households — will likely persist for the foreseeable future. This base is largely sustained by the enduring appeal of live sports and news programming, content categories that have proven more resistant to the streaming onslaught.
The write-downs also raise questions about the long-term viability of recent media mergers.
Both Warner Bros. Discovery and Paramount Global are products of recent consolidations aimed at achieving the scale necessary to compete in the streaming era. Yet, as evidenced by their recent financial adjustments, even these enlarged entities struggle to find solid footing in the rapidly evolving media landscape. The industry must embrace strategies to remain relevant.
One promising avenue is migrating well-known cable brands to Free Ad-Supported Streaming Television (FAST) services. This move could breathe new life into legacy channels, allowing them to reach cord-cutters while maintaining brand recognition. Imagine a world where MTV’s music video programming finds a new home on a dedicated FAST channel, satisfying nostalgia seekers without the overhead of traditional cable distribution.
Similarly, established cable brands could carve out branded sections within existing streaming platforms. Discovery’s nature documentaries or HGTV’s home renovation shows could become cornerstone content hubs on services like Discovery+ or Max, leveraging their reputations to drive streaming subscriptions.
However, adaptation also means making tough decisions.
The cable landscape is cluttered with redundant channels that strain resources without adding significant value. Do we need three MTV channels when one robust, well-curated offering could suffice? The music video format that once defined MTV is now more at home on YouTube, where users can curate their own playlists. By streamlining their channel portfolios, media companies could redirect resources to strengthen their most viable brands and invest in original content that differentiates them in a crowded market.
Originality will be key to survival.
Cable channels that continue to rely heavily on reruns and formulaic content are likely to struggle. Instead, networks should focus on creating unique, high-quality programming that can’t be easily replicated or found elsewhere. This could mean investing in niche content that serves specific audience segments or developing innovative formats that blend traditional TV with interactive elements.
For some legacy channels, survival may mean a complete reinvention. While controversial among history buffs, the History Channel’s pivot towards reality programming about modern-day professions has helped it maintain relevance. Other networks might consider similar bold moves, reshaping their identities to meet contemporary viewer interests while still drawing on their brand equity.
Ultimately, for content that can’t justify the costs of a dedicated cable channel, the future may lie in a “lift and shift” strategy. Media companies can preserve valuable libraries by moving this content to more cost-effective digital platforms while reducing overhead. This approach allows for a more flexible, on-demand consumption model that aligns with modern viewing habits.
The cable industry’s path forward is neither simple nor guaranteed. It requires a willingness to experiment, take risks, and sometimes make difficult cuts. Those networks that can successfully navigate this transition—whether through FAST channels, streaming partnerships, or radical reinvention—may find new life in the digital age. For others, it may be time to acknowledge that their final episode has aired, making way for the next generation of content delivery.
Looking ahead, the industry faces a period of continued upheaval. Media companies must reevaluate their strategies, potentially considering further consolidation or partnerships to achieve the scale and technological capabilities needed to thrive in a streaming-dominated world. The recent rumors of Paramount seeking a streaming partner, possibly from the tech sector, highlight this trend.
For consumers, this transition period may bring both benefits and challenges.
The proliferation of streaming options offers unprecedented choice and flexibility. However, as the market fragments and each service raises prices in pursuit of profitability, viewers may face costs comparable to the cable bundles they sought to escape.