Cable TV's slow but fast spiral

Trapped in time, and they don't know what to do.

The bell is tolling for cable television.

For years, TV networks looked down at the digital world, much like newspapers and magazines before them. Instead of embracing the changing environment, TV execs buried their heads in the sand, ignoring the power, if not potential, of streaming companies and social platforms, two main culprits in the downfall of the TV network.

It’s only been three years since NBCU ad sales chief Linda Yaccarino took a shot at digital at its upfront, according to Adweek:

"Promising brand safety is a really low bar, and some companies can’t even do that. What the hell is a view anyway? Has a view ever bought one of your products? Has a like ever walked into a store, purchased your products or driven a car out of the dealership? … That’s why TV works, because it reaches real people. Honestly, that should be game over.”

The difference, however, between networks’ disdain for digital and print is that the revenue for the former dwarfs the latter. The Today show alone brings in $500 million in ad revenue. The New York Times, for a not quite exact comparison, brought in $530 million in ad revenue in 2019.

But with ratings and audience (and even ad rates) diminishing, TV networks have increased ad revenue. So they’ve been blinded by dollars. No longer.

The point is this: legacy media companies, whether print or TV, ignored how digital would overtake them until it was too late. 

And now cable networks are facing their own reckoning.

Cable networks rely on cable subscriber fees for the bulk of their revenue, and as the idea of the bundle has been dwindling, so have audiences.

At a time when there are myriad streaming networks and gaming platforms to take eyeballs and attention away from cable. 

Which leads us to moves CNN, Fox News and NBCU are making.

CNN’s $70 million content bet, Great Big Story, is shutting down after five years. Last year, it won an Emmy and a Shorty Award.  

Started as a “socially distributed video network,” the play was to go after a younger, hipper audience accustomed to watching videos on their phones and on platforms, but grew to be more than that. 

In a 2017 Business Insider article, GBS’s Andrew Morse, EVP of editorial for CNN US, and GM of CNN Digital Worldwide, walked through how it would move forward.

"There are two reasons we are doing this," Morse said. "For one, there's an economic reason, as the market for OTT ["over-the-top" of the cable bundle] content is frothy right now. And we've been methodically building an audience base, and now have an idea of what a modern channel would look like. We're at this inflection point where if you don't expand, you just become a really good production studio."

Three years later, no more. 

This is a blow to CNN’s international audience, as according to an October 2019 report in Digiday, Great Big Story accounted for 15 percent of CNN International’s ad revenue. 

According to Variety:

CNN hoped to generate revenue from advertisers, who would create unique sponsorships of Great Big Story and also distribute branded content on the site. Executives told media buyers that the site aimed to reach urban dwellers between 25 and 35. Some critics, however, believe CNN would have done better to develop an internal unit focused on short-form video content rather that launching a separate entity.

Public momentum around Great Big Story has quieted down in recent months. Chris Berend, a co-founder of the site and the former supervisor of CNN’s digital-video efforts, left the company in May of 2019 to join NBC News to head that unit’s digital efforts.

And it comes at a time when new CNN-parent, AT&T, seems to be shedding as much of its content operations as possible (for example, it bought DirecTV in 2015 for $49 billion and is now looking for a suitor; it bought Xandr [nee AppNexus] in 2018 for $1.6 billion and is now looking to sell).

Which of course raises a question: why take on $150 billion in debt picking up various aspects of media only to try to flip it so quickly?

Great Big Story’s announcement comes a day after the Wall Street Journal reported that Comcast NBCUniversal’s suite of cable networks is facing serious headwinds, from losing 10 million subscribers over the last six years to declining ad revenue, and everything in between.

The WSJ writes:

The 2011 Comcast deal for NBCUniversal “was all about the cable networks, and the theme parks and movie studio were almost an afterthought,” said analyst Craig Moffett, of MoffettNathanson. “Now, the cable networks are an albatross.”

Interestingly, in 2017 NBC created and then quickly shuttered a GBS-like division called Left Field.

Last week, Fox News laid off staffers across “various businesses and platforms,” according to The Wrap.

An internal memo from Fox News Media CEO Suzanne Scott called Wednesday “a challenging day and noted that “as a result of this reorganization, many of our co-workers and friends will be departing.”

A source with knowledge of the restructuring said less than 3% of the workforce would be affected, but excluding on-air talent like anchors and contributors, positions of all ranks within the company would be included. They will receive a severance and benefits package.

The cognitive dissonance with the collapse of the TV business is that we are at peak “TV”, with more TV shows produced now than ever before. Between Netflix, Hulu and YouTube, the notion of TV has changed, and an industry is forced to play catch up. 

New audiences are finding new shows across different services and platforms. And a new generation, at least evidenced by my kids and their friends, now views TV as either “Hulu” or “Netlfix.” Whichever streaming service has their shows. They have no idea what a network is, and they love the commercials when I watch football. Why? Because they don’t see commercials on Hulu or Netflix. A brave new world. 

Thank you for allowing me in your inbox, today and every day. If you have tips, thoughts about the newsletter or have a streaming service for me, drop me a line. Or you can follow me on Twitter. If you appreciated this edition, please consider sharing across your social networks or getting your colleagues to sign up. Thanks, and have a great afternoon!

B.B. King, “The Thrill is Gone”

Some interesting links:

For marketing snafus:

  • Amazon says it didn’t build the ‘Prime bike’ and tells Echelon to stop selling it (CNBC)

For media investment banking:

  • Bourkoff Is Star Media Dealmaker, But Can He Make Shift to Tech? (The Information)

For media company ad networks:

  • Penske joins with MRC to create a JV for ‘publishing and content’ (Hollywood Reporter)

For platforms:

  • Facebook will let Trump run ads on election night prematurely claiming victory (Fast Company)

  • Leaked audio: Mark in the Middle (The Verge)

  • Facebook vows to restrict users if US election descends into chaos (Ars Technica)

For the newsletter-curious:

  • Another big-named journalist jumps to Substack (OneZero)

  • Is Defector the future of media? (TNR)

For tech policy

For the Holy Shit files:

  • What if Trump refuses to concede? (The Atlantic)

  • Allegations of racism have marked Trump’s presidency and become key issue as election nears (WaPo)

For wishful thinking:

  • Go Live in Another Decade. I Recommend It.: Watching TV news from the past helps me get a grip on the present. (NYT)