A decade ago, six cable networks each boasted over two million viewers during primetime. Fast forward to 2023, and the landscape has dramatically changed: Nielsen data reveals just three cable networks managed to maintain an average audience of over one million viewers. This is a steep decline from the five networks that achieved this in 2022 and a far cry from the 19 networks that did so in 2013.
It's becoming clear to those within the industry, from insiders to cable companies, that the era of legacy broadcast business is near death. Over the years, we've seen a significant shift in how people find and enjoy their favorite shows and movies. Leading the change are streaming services like Netflix, Amazon Prime Video, and Disney+, offering instant access to a vast collection of entertainment. Their competitive pricing and the convenience of watching anytime and anywhere—without a cable subscription—have drawn millions away from traditional cable TV.
"The cable industry is a dead business," said Dan Goman, CEO of Ateliere Creative Technologies. "I think at this point, it's likely the cable industry knows this as well, but no one's going to come out and say it."
Dan Goman founded his company in 2018, recognizing that streaming technology was well on its way to eclipsing traditional broadcast media. With a background in software development having worked for some of the largest software companies in the world, he and his team were able to quickly develop a platform that powers the modern media supply chain. Today, Goman is working to transform an industry that frequently clings to outdated processes instead of embracing innovation.
According to Dan Goman, cable companies, and related businesses are increasingly recognizing that the traditional cable business model is becoming obsolete. Despite this, some companies are choosing to "ride out" the business as long as possible, extracting whatever value remains rather than innovating or transforming their business models.
"We were talking to this company operating in the cable ecosystem and they were saying, 'Look, we fully understand and we're aware of the fact that we are a dying business, but we're just going to ride this out until there's nothing to milk,'" Goman said.
Content Distribution and Carriage Rights
Historically, media companies made substantial revenues from carriage rights, which are fees paid by cable companies for the rights to carry or distribute the media companies' channels.
Over time, cable providers started packaging channels into bundles as a standard practice. These bundles contained a wide variety of channels, from highly sought-after sports and entertainment networks to more niche and less-watched options. The goal was to provide a diverse selection to appeal to all viewers. However, this often resulted in consumers being subscribed to—and paying for—many channels they weren't interested in, with the strategy behind these bundles being to maximize revenue from subscribers by using popular channels to support the distribution of a broader selection of content.
"Ultimately, the revenue comes from what we've all paid for in the past—the cable bundle. This is why, as a customer, you couldn't simply say, 'I just want this channel.' For a long time, I didn't grasp this before entering the industry, wondering, 'Why can't I select just this one? I don't want 300 channels I'll never watch,'" Goman said.
As Goman indicated, this approach has also been a source of frustration for consumers, who want more control over what they watch. The demand for customized viewing options has greatly contributed to the popularity of streaming services, which offer more flexibility in content selection. As a result, the traditional way of distributing content and the reliance on bundled packages has come under pressure. The growing desire for personalized, on-demand content is reshaping the cable model, causing significant changes in the industry and how content is offered.
The Rise of Cord-Cutting
Today, the phenomenon known as cord-cutting—where consumers actively cancel their traditional cable subscriptions to switch to digital streaming services—has seen a significant surge in recent years. This trend signifies a major shift in how people consume media, with an increasing number leaning towards the convenience, diversity, and often cheaper options offered by streaming services instead of traditional cable.
"It's just been astounding to watch how quickly things moved," Goman said. "Content owners are still asking for the same high fees from cable operators, as they did during the peak times when these operators had millions of subscribers. However, the number of subscribers has drastically decreased, going from millions to tens of thousands, and it's expected to keep declining. You'll probably have a couple thousand cable subscribers to each cable operator in a year or two, whereas they used to have millions before."
This sharp decline in subscribers means that the revenue cable operators can generate is also decreasing. When cable operators had millions of subscribers, it was feasible to pay these high fees because the costs were distributed across a large number of subscribers, allowing both the content owners and the cable operators to profit. Now, with the dwindling number of subscribers, this model is no longer viable.
Changing Business Models
Facing a sharp drop in subscribers and income, cable companies are rethinking their strategies. Recognizing that the traditional cable model is becoming increasingly unsustainable, some operators are shifting their focus away from offering conventional cable services. Instead, they are moving towards becoming pure-play Internet Service Providers (ISPs), capitalizing on the growing demand for high-speed internet services. Alongside this transition, these companies are beginning to offer packages that include digital streaming channels, positioning themselves as distributors of online content.
"Spectrum was the very first one that came out last year during the negotiations, and they publicly said, 'This doesn't seem like a viable business model. We're actually contemplating dumping our traditional cable business altogether and simply aggregating digital streaming channels,'" Goman said.
At the same time, the relationship between cable operators and content owners is becoming strained. The high fees content owners are still asking for are often backed up by contracts with minimum guarantee clauses, which force cable operators to pay a set fee to content owners, no matter how many subscribers they have or what their financial situation looks like. This situation increases the pressure on cable operators who must fulfill these financial obligations even as they earn less money.
The Future Landscape
As streaming services become the go-to choice for many, the way we consume media has transformed perhaps more than ever before. Now, with just an internet connection, we can dive into a wide range of content whenever and wherever we want, making old-school cable subscriptions less relevant. As this trend grows, the ease and adaptability streaming services provide are setting the new norm for those looking for entertainment and information.
However, this evolution in media consumption also hints at a cyclic nature of change within the industry. As more streaming services enter the market and vie for viewers, there's a growing trend towards the aggregation of these services into digital bundles. This development is reminiscent of the traditional cable model, where a variety of channels were bundled together—often including content that subscribers did not necessarily want. With digital bundles, consumers might again find themselves navigating packages of streaming services, potentially facing similar dilemmas as before—paying for a mix of desired and undesired content.
"The only thing that's happening is a recreation of that original cable model now on streaming, digital streaming, because that's what the industry knows, that's what's worked," Goman said.
"The industry really depends on some sort of a predictable model where cash is coming in, it's consistent, they know what to expect, and they're living large."
