Traditional pay TV will embrace the disruption

“The ‘new TV’ is here, and in 2021, I expect a seismic shift of advertising dollars to it.”

Everyone in the media business has a hot take on WarnerMedia’s decision to release all upcoming Warner Brothers movies on HBO Max the same day as in theaters. Whether you support or decry the move, however, misses the bigger point: Jason Kilar and John Stankey opted to dive head-first into the deep end of disruption, rather than slowly, begrudgingly accepting new realities on the horizon — and, in so doing, have hurtled the movie business toward that inevitable future.

My prediction for 2021 is that the traditional pay-TV business in the United States will experience a similar quantum jump.

Make no mistake: Traditional pay TV remains a big business. While ad revenue is expected to be down some 15 percent in the U.S., advertisers are still expected to spend $60 billion on TV spots this year. By year’s end, multichannel video programming distributors (MVPDs) are expected to generate nearly $210 billion in service revenue and reach over 60 percent of households worldwide.

The TV business has long, and successfully, worked to shield itself from disruption — indeed, networks continue to increase the monthly carriage fees they charge MVPDs for access to their content. But millions of consumers continue to cut the cord every year. Ultimately, the cracks in traditional pay TV’s foundation cannot withstand Covid-19’s economic earthquake.

What we see today is a gold rush. NBC is going all in on Peacock; CBS launched CBSN and All Access; Fox bought Tubi; ESPN and Discovery have tailored options for streaming. It is hard to miss the host of new channels (like Bloomberg Quicktake), new distribution platforms, and new consumer-focused options emerging across the over-the-top (OTT) landscape.

The “new TV” is here, and in 2021, I expect a seismic shift of advertising dollars to it. Advertisers will not only reallocate resources from traditional TV and digital into OTT, but also shift declining dollars from existing traditional media platforms.

The parable of the disrupted print media provides a continually valuable lesson in this arena. While many initially lamented the digital transition and branded the unwelcome shift as trading “dollars for dimes,” the fact is that audiences had already chosen digital as their platform. New digital upstarts, as well as traditional media players and brand partners that embraced the disruption, have found ways to convert those dimes into quarters, and some even into dollars. Those same entities foresaw — and shifted their focus to — mobile platforms once smartphones arrived, and are now moving swiftly (perhaps too swiftly) into streaming audio to take advantage of the eventual extinction of terrestrial radio. Those that didn’t and haven’t run fast enough into digital disruption are gone, acquired, or struggling.

The digital disruption of TV is now the fight that matters. It is the fight over the largest audience, the most captive hours, and the biggest economic pie. And in 2021, I expect media operators, publishers, platforms, and brands will take up this fight with heretofore unseen ardor.

The rise of digital is ceaseless and unyielding, but as the brilliant Mary Meeker has pointed out, history suggests a multi-year lag between rising audience engagement on new platforms and the media spend on such platforms. That “gap” between the time audiences spend and what media spend on OTT is the immense opportunity ahead for the industry. And next year, we’ll have a front-row seat to this paradigm shift.

M. Scott Havens is chief growth officer and global head of strategic partnerships for Bloomberg Media.

Everyone in the media business has a hot take on WarnerMedia’s decision to release all upcoming Warner Brothers movies on HBO Max the same day as in theaters. Whether you support or decry the move, however, misses the bigger point: Jason Kilar and John Stankey opted to dive head-first into the deep end of disruption, rather than slowly, begrudgingly accepting new realities on the horizon — and, in so doing, have hurtled the movie business toward that inevitable future.

My prediction for 2021 is that the traditional pay-TV business in the United States will experience a similar quantum jump.

Make no mistake: Traditional pay TV remains a big business. While ad revenue is expected to be down some 15 percent in the U.S., advertisers are still expected to spend $60 billion on TV spots this year. By year’s end, multichannel video programming distributors (MVPDs) are expected to generate nearly $210 billion in service revenue and reach over 60 percent of households worldwide.

The TV business has long, and successfully, worked to shield itself from disruption — indeed, networks continue to increase the monthly carriage fees they charge MVPDs for access to their content. But millions of consumers continue to cut the cord every year. Ultimately, the cracks in traditional pay TV’s foundation cannot withstand Covid-19’s economic earthquake.

What we see today is a gold rush. NBC is going all in on Peacock; CBS launched CBSN and All Access; Fox bought Tubi; ESPN and Discovery have tailored options for streaming. It is hard to miss the host of new channels (like Bloomberg Quicktake), new distribution platforms, and new consumer-focused options emerging across the over-the-top (OTT) landscape.

The “new TV” is here, and in 2021, I expect a seismic shift of advertising dollars to it. Advertisers will not only reallocate resources from traditional TV and digital into OTT, but also shift declining dollars from existing traditional media platforms.

The parable of the disrupted print media provides a continually valuable lesson in this arena. While many initially lamented the digital transition and branded the unwelcome shift as trading “dollars for dimes,” the fact is that audiences had already chosen digital as their platform. New digital upstarts, as well as traditional media players and brand partners that embraced the disruption, have found ways to convert those dimes into quarters, and some even into dollars. Those same entities foresaw — and shifted their focus to — mobile platforms once smartphones arrived, and are now moving swiftly (perhaps too swiftly) into streaming audio to take advantage of the eventual extinction of terrestrial radio. Those that didn’t and haven’t run fast enough into digital disruption are gone, acquired, or struggling.

The digital disruption of TV is now the fight that matters. It is the fight over the largest audience, the most captive hours, and the biggest economic pie. And in 2021, I expect media operators, publishers, platforms, and brands will take up this fight with heretofore unseen ardor.

The rise of digital is ceaseless and unyielding, but as the brilliant Mary Meeker has pointed out, history suggests a multi-year lag between rising audience engagement on new platforms and the media spend on such platforms. That “gap” between the time audiences spend and what media spend on OTT is the immense opportunity ahead for the industry. And next year, we’ll have a front-row seat to this paradigm shift.

M. Scott Havens is chief growth officer and global head of strategic partnerships for Bloomberg Media.

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