The impact of cord-cutting extends far beyond the cable industry, forcing media companies themselves to adapt. Revenue from cable carriage fees encouraged media companies to create more and more channels that fewer and fewer people watched. Now, as more people shift their TV watching to on-demand and over-the-top services, the media companies are becoming more focused.
Hulu CEO Randy Freer spoke to this trend on the Recode Media with Peter Kafka podcast earlier this month. “If you look at the last five, eight years,” Freer said, “most of the media companies have in some way, shape, or form narrowed their networks to the brands that matter.”
Without naming names, Freer said that even the few companies that still have dozens of channels are “rationalizing their portfolio of networks as well.”
Mergers and divestitures swept through the media industry over the past 12 to 18 months. Now would be a good time to look at how the largest media companies in America are right-sizing their portfolios.
Fox and the Power of Now
When 21st Century Fox executives began discussing a sale of assets to Disney, they had a clear vision of a leaner, more efficient Fox Corporation. Rather crossing all media categories, live and local would be the heart of the new company. Throughout Fox Corporation’s inaugural investor conference in May, CEO Lachlan Murdoch kept returning to this theme.
“Our news, sports, and broadcasting assets are reinvented into a simpler, stronger Fox,” Murdoch said. “We out-punch competitors in the amount of live television we deliver to American households. We call this ‘The Power of Now’.”
A focus on the live TV experience also makes direct-to-consumer less of a priority. Fox has apps for pay-TV customers as well as the Fox Nation service for die-hard news fans. Other than that, COO John Nallen told investors, “we do not see a near-term, meaningful market in a Fox-only [direct-to-consumer] offering.”
Disney’s Focus on Entertainment
A similar desire for focus drove the Disney side of the 21st Century Fox acquisition. “When you look at what people are spending their money on today,” Disney CEO Bob Iger said to industry analysts, “they realize they are buying a lot of channels [from cable] that they may never find and may never have any interest in watching. Today’s consumer doesn’t look as positively at that as perhaps they once did.”
At the company’s recent upfront event for advertisers, executives from each of the networks highlighted the clearly-defined audiences they serve. John Landgraf, chairman of FX Networks, talked about “the boldest, most acclaimed programming for adults” his network offers. A little later, Freeform President Tom Ascheim praised his team’s “keen understanding” of young adults and Millennial women.
Banking on Stability at NBCUniversal
When cable giant Comcast bought NBCUniversal in 2011, CEO Brian Roberts described the combination as “the ideal entertainment and distribution company.” Several of NBCUniversal’s networks shifted strategies in the aftermath of the merger. Scripted dramas have assumed a bigger role at USA while Bravo favors unscripted reality shows.
More recently, networks like Syfy have begun aligning around NBCUniversal’s new streaming strategy. Syfy canceled The Expanse despite its popular and critical success. Without ownership of the productions, Quartz reported, NBCUniversal did not have a stake in streaming revenues after Syfy broadcast the episodes.
Having gone through its big restructuring eight years ago, NBCUniversal executives have less to explain than their competitors. Ad executive Linda Yaccarino, for example, made scale and stability a virtue at NBCUniversal’s upfront presentation at the beginning of the month.
CBS Corporation’s Scrappy Performance
CBS Corporation is among the most focused of the media companies which shows in the Tiffany Network’s consistent rankings at the top of the ratings list. It’s sister networks also have a clear focus, although Chief Creative Officer David Nevins’ short summaries at this month’s CBS upfronts — Showtime is “royalty”, Pop TV is “sexy” and CBS Sports Network is “sweaty” — aren’t particularly revealing.
When CBS bought the rest of Pop TV from Lionsgate in March, Nevins was a little more forthcoming. The network that created such hits as Schitt’s Creek is, in Nevins’ view, a home for “idiosyncratic, comedy-leaning original programming.” Nevins also praised Pop TV for its “distinct brand with inventive programming and a scrappy, competitive drive” – a description that could apply to the flagship CBS Network.
Viacom’s Focus on Flagships
Viacom’s portfolio of networks was among the most bloated in the industry as it stuffed cable bundles with multiple variants of MTV. In 2017, Viacom’s newly-hired CEO Bob Bakish decided to rein in the portfolio. “Viacom’s flagship brands will be the company’s highest priorities and will benefit from significant and increased resource commitments. According to Bakish, BET, Comedy Central, MTV, Nickelodeon, Nick Jr. and Paramount “each have compelling, valuable and distinct brand propositions.”
Viacom is distributing its flagship networks and the content they produce through as many channels as possible. The company signed new deals with streaming services like fuboTV, reinforced relationships with pay-TV providers like DirecTV, and is packaging content for the free Pluto TV which it bought earlier this year.
“We unquestionably have momentum in the core,” Bakish said on Viacom’s investor call, “including having secured meaningful distribution wins, both extending the existing relationships and creating new ones in the U.S. and beyond.”
The courts dismissed the last opposition to AT&T’s merger with Time Warner in late 2018. That set the stage for a realignment of the mega-corporation’s operations in early 2019 with the creation of WarnerMedia. The new organization will take “a more coordinated approach to the company’s original programming” as it combines the fiercely-independent HBO and Turner television networks under one roof.
“We have done an amazing job establishing our brands as leaders in the hearts and minds of consumers,” WarnerMedia CEO John Stankey said in the announcement. But the company’s executives acknowledged that they had to react to a changing environment. “This is the first step in an evolution,” Turner Entertainment CEO Kevin Reilly told Variety. “As you know, the media system is reconstituting.”
TV in Transition
Hulu’s Randy Freer observed on the Recode podcast that the industry is in a transition period. “It’s not something you can snap your fingers and say, ‘Great, we’re going to break it up.’”
For the six largest media groups, the cord-cutting wave will continue to reward disciplined approaches to programming while punishing the channel-stuffing that plagued the cable TV era.