Part of being a media executive at a business with a legacy TV component is insisting that the pay TV model isn’t dead, or at least pointing to a diminished enterprise and praising its durability.
“We're not giving up. We really believe in linear,” said Warner Bros. Discovery (WBD) CEO David Zaslav on the company’s earnings call Wednesday.
“Cable is still powerful,” former CNN president Jeff Zucker said during an interview at the Yahoo Finance Invest conference a day before. “Cable will be here for the next decade. It obviously will continue to diminish.”
The defenses of a declining but still influential business and the laments of a bygone era of robust margins come as the media industry wades through a weakened ad environment and investors come to grips with an epic streaming spending spree that has yet to pan out.
But even a profitable business that’s technologically and generationally on its way out has more to offer. A shrinking model can still deliver returns, especially as the ambitions of the new streaming era collide with a slumping ad market and a tech-infused future with thinner margins.
In an interview at Invest, Kevin Mayer, Candle Media’s co-founder and co-CEO, said that linear businesses have historically generated robust profit margins as high as 40% or more. “Streaming will probably never get to that profitability level,” he said, even as he praised Netflix (NLFX) and other outfits that are on a trajectory for improved earnings.
“But to get to a 40% margin or 35% margin, like broadcast and cable used to get,” the former CEO of TikTok and Disney exec said, “not going to happen.”
For industry players with a stake in the legacy model, one way to stave off cord-cutting is by reshaping what a linear plan looks like. The Disney-Charter deal inked in September, for example, had Charter (CHTR) agreeing to pay Disney (DIS) higher rates to carry its TV channels, in return for providing its Spectrum pay TV subscribers with the Disney+ and ESPN+ streaming services.
“You can imagine a world as we're redoing our deals,” said Zaslav during the call, “to get Disney+ and Max as an additional benefit to the cable subscribers and to be getting paid on each one of those and being able to sell advertising against each of those and having lower churn on each of those.”
The case for a remixed bundle, using one type of media offering as an on-ramp to an array of digital content, is modeled in another prestigious media brand: the New York Times (NYT). The news company's earnings report on Wednesday, touting for the first time more than 10 million subscribers, offers a model for legacy media ownership that's more modest in scope than the gargantuan profits of linear TV's past. But it's one that embraces the varied, roving interests of digital audiences.
If legacy TV isn't dead, it might go the way of legacy print, in which an industry leader essentially transformed itself from a news company into an entertainment hub, with broader objectives.
Zucker, for his part, said cable will be part of the media landscape for the next decade. But the upshot is that even as legacy TV sheds subscribers, what’s left is still a sizable audience with better margins than the next generation of media distribution.
“Yes, cable is not what it was when we had nearly 100 million subscribers a decade ago,” he said. “But even at half of that, it’s still powerful.”
Banking on more modestly sized audiences isn't guaranteed though, if viewers aren't hooked.
Zucker emphasized that regardless of how the future of TV shakes out, what matters most is the quality of the content. “Whether it’s something like TikTok or something like ESPN or the legacy cable outlets,” he said, “Great content will win. No matter the distribution.”
Hamza Shaban is a reporter for Yahoo Finance covering markets and the economy. Follow Hamza on Twitter @hshaban.
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