What is the Tipping Point for Linear and Streaming Video?

How much market share loss can linear subscription services take to competitive “live TV streaming” services before the share of market share loss breaks the linear business model? 

It’s an existential question for linear TV service providers without the ability to create their own live TV streaming services. At the moment, in the U.S. market,  that might appear most clear for Fox, which does not have a significant live TV streaming alternative. Disney and Comcast already have significant live TV streaming operations: Disney with Hulu+ and FuboTV; Comcast with Peacock; Paramount with Paramount+.  Warner Brothers Discovery might develop Max as such a venue. 

Disney owns ABC; Comcast owns NBC; Paramount owns CBS. Each of those TV broadcast networks have streaming versions, with limited market share, it can be argued. 

The existential issue hinges on how much more market share erosion linear video subscription services can take before the business case is unworkable. Perhaps we might argue that local broadcasters already have their own distribution (“free” over the air broadcasting). 

The greatest danger lies ahead for networks that have relied on multichannel distributors (cable TV, satellite, telco TV) for distribution. 

Looking only at the 10 or so largest video distributors, it appears that live TV streaming could already have as much as 30-percent market share, principally held by YouTube TV and the combined Hulu+ and FuboTV. 

Company	Brand	Total Subscribers	Technology
Charter Communications	Spectrum	13,000,000	Cable
Comcast	Xfinity	12,800,000	Cable
TPG	DirecTV	11,300,000	Satellite
YouTube (Google/Alphabet Inc.)	YouTube TV	8,000,000	IPTV
EchoStar	Dish Network	5,590,000	Satellite
Disney	Hulu + Live TV	4,500,000	IPTV
Cox Communications	Contour	3,050,000	Cable
Verizon	Fios	2,880,000	Fiber
EchoStar	Sling TV	2,140,000	IPTV
Altice USA	Optimum	2,100,000	Cable
Total subs		65,360,000
Linear subs		47,070,000
Streaming subs		12,500,000
Market Share Linear		72%

Using current market share, we might argue that 30 percent share loss is troublesome and growth destroying, but not an immediate case of unprofitability. The issue is more that stress will accelerate with additional share loss, as both subscription and advertising face revenue shrinkage and undoubtedly profit shrinkage as well. 

Beyond that, it is hard to predict what the tipping point--in terms of market share--will be, even accounting for industry consolidation and other profit-enhancing measures. 

Several decades ago, one might well have made the argument that a rural cable TV provider would be “out of business” if its take rates (a market share proxy) dropped from 90 percent to 70 percent. Recent contract negotiations between Charter Communications and key programming suppliers have seen Charter executives arguing they would abandon the multichannel video business entirely rather than pay the rates key programmers were demanding. 

More recently, small and rural cable TV firms have gotten out of the video subscription business, which has always favored operators with scale. 

And video streaming services are a prime example of the “direct to consumer” trend in video content distribution, much as DTC has been a trend in retailing and other content businesses. 

Industry	Example	Growth Indicator
Content	Netflix, Disney+	Subscriber growth, revenue growth, market capitalization
Retailing	Warby Parker (eyewear), Allbirds (footwear), Glossier (beauty)	Revenue growth, customer base expansion, brand loyalty
Software	Slack (workplace communication), Zoom (video conferencing)	Subscription revenue growth, customer acquisition cost, market share
Food & Beverage	Blue Apron (meal kits), Nespresso (coffee)	Customer subscription growth, repeat purchase rates, brand loyalty

Linear TV Enters Early Stages of "Harvesting"

Since all observers agree the linear TV (“live TV”) subscription business is dwindling, we should expect consolidation of service providers, as that happens in virtually all declining industries. The objective for such moves is to reduce cost and harvest profits for as long as possible.

The most-recent example is the new joint venture combining live TV assets owned by Disney (Hulu+Live TV) with Fubo, where Disney will own 70 percent of the asset, but Fubo leaders will manage the business.

Both the Fubo and Hulu+Live TV brands will continue to exist and be marketed.

But that will not be the end of the consolidation, as other assets eventually are combined. The logical combinations (assuming antitrust issues are addressed) are cable assets merging or satellite assets being combined. The other logical move are combinations of streaming assets. 

Company	Brand	Subscribers	Type
Charter Communications	Spectrum	14,122,000	Cable
Comcast	Xfinity	14,106,000	Cable
DirecTV	DirecTV, DirecTV Stream, U-verse TV	11,300,000	Satellite/IPTV
YouTube (Google)	YouTube TV	7,900,000	vMVPD
Dish Network	Dish Network	6,471,000	Satellite
Fubo	Hulu + Live TV plus Fubo	6,200,000	vMVPD
Verizon	Fios	3,012,000	Fiber
Cox Communications	Contour	2,695,000	Cable
Altice USA	Optimum	2,262,000	Cable
Dish Network	Sling TV	2,055,000	vMVPD

Just as discussions about future mergers of linear video programming assets (“cable channels”) now are happening, so too will distributor mergers have to happen, as the market continues to shrink. 

Like it or not, linear video content and distribution assets now are cash cows to be milked as the category inevitably declines. 

2024 is Quite Different from 2002, for U.S. Satellite Video Providers

In the U.S. subscription TV business, the difference between 2024 and 2002 is that half the market has gone away. In 2002, the linear subscription TV business still had not reached its peak. In 2024, the business is universally recognized as being past its peak, and declining. 

That creates a different regulatory context, as DirecTV and Dish now plan to merge, an action that will require antitrust review. Back in 2002, when the firms tried to combine, but the U.S. Department of Justice blocked the deal on antitrust concerns. At the time, the thinking was that preserving competition required the two satellite platforms to continue to compete. 

Today, with the whole market in decline, that insistence on the value of platforms seems misplaced. Customers are deserting linear subscription TV on every platform, in favor of streaming services. And most of those streaming platforms that offer a linear service (virtual) are struggling in 2024, compared to 2020, when most services still were growing. 

Virtual Services	2020 Subscribers	2024 Q1 Subscribers	Change
YouTube TV	3 million	Not reported	N/A
Hulu + Live TV	4.1 million	~4 million**	-2.4%
Sling TV	2.47 million	~2.1 million**	-15.0%
fuboTV	548,000	~1 million**	+82.5%

Nor, as a platform, do satellite services seem likely to challenge cable TV or telco platforms for what remains of the market, as growth is challenged in most segments of the market. 

Provider	Subscribers (Millions)
Cable TV	60-65
Satellite TV (DirectTV, Dish)	15-18
Virtual MVPDs (Hulu Live TV, YouTube TV, fuboTV, etc.)	15-20
Telco TV (AT&T TV, Verizon Fios TV)	5-7

Where there still is some growth comes from sports-themed services such as Fubo, or bundled offers from mobile or fixed wireless ISPs. 

Provider	Net Growth (Millions)
Cable TV	-1.5 to -2.0
Satellite TV	-0.5 to -1.0
Virtual MVPDs	2.0 to 2.5
Telco TV	0.5 to 1.0

Still, the point is that the U.S. linear subscription business is in decline since 2000. The peak appears to have been in 2002 or so. 

Year	Estimated Subscribers (Millions)	Net Decline (Millions)
2000	90-95	baseline
2005	85-90	-5 to -10
2010	75-80	-10 to -15
2015	65-70	-10 to -15
2020	55-60	-10 to -15
2024	50-55	-5 to -10

For such reasons, many observers do not expect an antitrust challenge to the combination of DirecTV and Dish. Where antitrust enforcement might make sense in a growing market, it often does not make any sense in markets that are in decline. 

When a market is in decline, overcapacity often exists, meaning there are too many suppliers for the existing demand. This can result in price wars and lower profit margins for all suppliers. While temporarily favorable for consumers, such conditions also mean weaker competitors must exit the market.

This can lead to higher quality products or services, since the survivors can afford to invest more. 

Also, the remaining suppliers may be able to consolidate their operations, leading to cost savings and economies of scale, which can lead to improved consumer welfare. 

While a reduction in suppliers may lead to higher prices in the short term, it can also result in more stable pricing and reduced price volatility over the longer term. Also, when markets are declining, supplier profitability is normally a big issue. Consolidation tends to help suppliers preserve their profit margins, which in turn allows them to continue to reinvest in the business, to an extent. 

And market power is hard to exercise when markets are in decline. When demand for any product is declining, competitive pressures are applied by the sheer disappearance of demand.