KEY POINTS

  • US consumers have been increasingly relinquishing their linear TV subscriptions since 2013. US pay-TV subscribers fell .4% and .5% year-over-year (YoY) in 2013 and 2014, respectively. In 2018, this figure is projected to reach 4% YoY.
  • As consumers flee linear TV, they're spending more time on digital video services with ad-free and ad-lite viewing experiences. Globally, consumers spent 212 minutes online per day on average in 2017, up 11% YoY.
  • This migration of viewership is hurting TV networks' ad revenue while benefiting deep-pocketed streaming giants like Netflix. US TV ad sales fell 7.8% last year, the steepest drop in US ad revenue outside of a recession in at least 20 years; meanwhile, Netflix added more than 20 million global subscribers in 2017 alone.
  • In response, media companies are tapering their reliance on pay-TV revenue by launching their own streaming services. CBS was a relatively early mover in this trend, launching CBS All Access in October 2014. Other traditional firms followed suit and, by October 2017, there were over 200 over-the-top (OTT) services in the US, according to Parks Associates.
  • Traditional networks are also seeking M&A opportunities to gain the resources, talent, and technologies necessary to compete with streaming giants. In 2017, 876 M&A transactions occurred between US media and telecom companies, up 29% YoY.
  • As another tactic, media companies are experimenting with airing fewer commercials per hour to enhance the linear TV viewership experience. Companies including Fox and NBCUniversal have pledged to cut the number of ads they air to keep viewers engaged and encourage brand spending. 

Introduction

US consumers have been “cord-cutting” — or canceling their pay-TV subscriptions in favor of internet-delivered alternatives — since 2010. The number of pay-TV subscribers dropped a record 3.4% year-over-year (YoY) in 2017, and the rate of decline is expected to accelerate further in the coming years; consequently, pay-TV providers will continue to see their most important revenue stream erode. To compete in the shifting media landscape, traditional media companies' business strategies must satisfy two goals: extract as much revenue from pay-TV as possible before the opportunity to do so fizzles out, and taper reliance on pay-TV-related revenue along the way.

In this report, Business Insider Intelligence will look at how big media companies are refining their strategies to meet the aforementioned goals and mitigate the impacts of cord-cutting that are detrimental to their [...]