Ever since Netflix first launched, streaming services have slowly been taking more and more customers from traditional linear television.  This shift from the lucrative cable platforms has caused major problems for the traditional studios, who have relied on getting money for channels bundled together and the advertising from those channels.

This is why some studios have been slow to withdraw from traditional television since they are still making money from it.  While also trying to chase Netflix’s growth to make sure they don’t fall too far behind, because they know eventually, streaming will eclipse linear television, and that that looks to be coming later this year.

According to research firm Ampere Analysis, streaming revenue will hit $17.3 billion in the third quarter of 2024, overtaking traditional pay television’s $16.7 billion.   And traditional Pay TV is expected to continue to decline, to around half of what the business was making at its peak in 2017.

Over the past few years, streaming services have been looking to make more money since, while the traditional model helped fund the creation of new shows, the shift was leading to major losses at the studios that couldn’t continue, especially as subscriber growth was slowing. This has resulted in Wall Street pushing for profitability, and so we’ve seen price rises and a rise in advertising. 

These additional revenues have helped push the average revenue per user (ARPU) much higher, and that is likely only to continue to rise.   The introduction of ads onto streaming services has had a major impact, with $9 billion of revenue this year.

The increase in revenue is also expected to continue with the studios, including Disney, clamping down on password sharing, following Netflix’s boost of over 20 million subscribers following its clamp down on account sharing.

Another shift within the industry saw Disney+ bundled with Charter’s Spectrum cable, which is also going to give a huge boost of 15 million subscribers with access to the ad-supported tier.  This latest move is expected to be followed by other cable providers, giving a boost to Disney+ but also giving traditional television an extension, as the two work together.

Rory Gooderick, senior analyst at Ampere, explained:

“Most major streaming services in the U.S. have launched their hybrid advertising tiers, which, along with increasing clampdowns on password sharing, have been successful at reigniting growth in the streaming market.  There is still a way forward for pay TV, however. Disney and Charter’s recent deal in the U.S., which gave almost 15 million Charter subscribers access to Disney+’s advertising tier, shows how the two businesses can work together to maximize streaming’s reach to domestic subscribers and highlights the importance of traditional distribution platforms as service aggregators. Longer-term contracts and the reduction in churn make this an attractive proposition for streamers, while control over the billing relationship also means there’s something in it for the pay-TV provider.”

And it’s likely we will see traditional television continuing to lose customers in the future, especially as a younger audience doesn’t have the same habits.  But we are also going to start seeing more bundles, which help reduce the churn of subscribers leaving.  Plus, price rises for ad-free tiers are likely to continue to increase as the studios push more of us to the ad-supported tiers where they make more money. 

We will likely also see more consolidation within the streaming industry as there are simply too many platforms for customers to either subscribe to or even watch. 

Disney has positioned itself for the future, where streaming is going to be the main income for its television business, which is why it has been spending so much money on not just original content but purchasing Bamtech and Hulu to have the backbone to run platforms on their own. 

Executives said way back in 2019 that Disney+ wouldn’t hit profitability until 2024, and it looks like that’s likely to happen, but we will likely see more changes ahead (including launches of Hulu On Disney+ and ESPN on Disney+), as streaming becomes the main way we watch television.

Have you dropped cable?  Let us know on social media!

Roger Palmer

Roger has been a Disney fan since he was a kid and this interest has grown over the years. He has visited Disney Parks around the globe and has a vast collection of Disney movies and collectibles. He is the owner of What's On Disney Plus & DisKingdom. Email: Roger@WhatsOnDisneyPlus.com Twitter: Twitter.com/RogPalmerUK Facebook: Facebook.com/rogpalmeruk

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