Streaming is structurally less profitable than traditional TV, said Shapiro, who was Turner Broadcasting's strategy chief for three years before the company was acquired by AT&T. He also held other strategy and investor-relations roles at Time Warner during his 12 years at the company and was an analyst in the media and telecom sectors prior to that.
The traditional TV business has been remarkably resilient and has grown pretty steadily over the last decade, even as streaming has exploded. Now growth is grinding to a halt. Most of the major media companies are really ramping up their streaming efforts, as they should be, and in some cases reorganizing their companies around streaming. But I don't think there's a broad understanding of what the profit implications are of that push.
We're at the point where some of the best high-production value comedies and dramas on television are all on streaming. The only thing that streaming has not yet picked off really is live programming, particularly news and sports. When that happens, and the upstart marches up the quality curve like that, definitionally it means more competition. And as a generality more competition means lower profits.
On the cost line, because there's more competition, you have new entrants that are willing to operate at much lower margins, or in some cases, no margin at all.And so, yes, I think ultimately all the television companies are likely going to have to adjust to a lower-profit environment, which means organizing around that and staffing around it. And that's just a very painful process.
So, the market is trying to differentiate between winners and losers. It's just going to take time for it to become evident whether that assessment is correct. Another big question is, how much scale do you need? And then the third big question is, do you have a sufficiently strong consumer brand that people are going to be compelled to buy your direct-to-consumer product?You see a lot of companies clustered in the $10 billion to $12 billion per year range in programming spend. Disney post-Fox acquisition is the highest in the twenties.
My sense is that the benefit of bundling streaming services for consumers is twofold: to reunify the consumer experience and to get a discount. What Roku is trying to do, or Apple is trying to do, is to create an aggregated TV experience. Once you get past the unified experience, the main benefit of bundling is just to get a cheaper price. So my sense would be that, no, I don't think that bundling is going to really change these dynamics.
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