Before we get into all this, who remembers when you just turned on the TV and it was free? Maybe you had just to adjust the antennas or something, but that was it.
Then came the crazy expense of cable TV, which prompted many to use streaming platforms.
Cable TV may be over as we know it.
In September 2022, just a few months before he made an unexpected return to The Walt Disney Co., Bob Iger issued a stark warning that resonated deeply with the media world. Speaking at The Beverly Hilton, Iger cautioned that linear TV was on a collision course with disaster. “Linear TV and satellite is marching towards a great precipice, and it will be pushed off,” he said. At the time, his words seemed ominous, but they weren’t fully understood. Fast forward to this week, and it appears that the industry has indeed plummeted off that very precipice.
On August 7, Warner Bros. Discovery (WBD) revealed a staggering $9 billion impairment on its linear cable channels. This financial blow was partly due to the anticipated loss of NBA broadcast rights and uncertainty surrounding affiliate renewals. Just days later, Paramount Global followed suit, announcing a $6 billion charge tied to its cable channels, influenced by the valuation associated with its deal with Skydance. In the blink of an eye, $15 billion in value evaporated, marking a dramatic and painful chapter in the history of cable television.
The decline of cable TV isn’t a new story; it’s a tale that has been unfolding for years. Iger, in fact, first hinted at this back in August 2015 during a famous earnings call where he suggested that cable TV had peaked. Bank of America analyst Jessica Reif Ehrlich later reflected on that moment, noting that Iger’s comments had effectively signaled the beginning of the end. Yet, even those who saw the writing on the wall couldn’t have predicted the rapid acceleration of this decline. As Ehrlich put it, “The cable networks just are in this horrific, perennial, never-ending decline.”
The forces driving this downfall are multifaceted. Cord-cutting has been a significant factor, as more and more consumers abandon traditional cable subscriptions in favor of streaming services. But recently, the situation has worsened as advertising dollars have also begun to flee from TV, driven by the explosion of ad-supported streaming platforms. According to Robert Fishman, a senior analyst at Moffett Nathanson, this double whammy—declining subscriber numbers combined with shrinking ad revenue—has created an almost insurmountable challenge for cable networks.
For decades, the entertainment business thrived on the economics of pay-TV. Rising carriage fees and valuable ad inventory made cable television a financial powerhouse. However, as the industry shifts, some companies are better positioned to weather the storm than others. While Disney and NBCUniversal can lean on diversified assets like theme parks and internet services, companies like WBD, Paramount, and AMC Networks find themselves in precarious positions, with their futures uncertain.
So, what happens next? Analysts suggest that the chaos is far from over. Cable channels could go the way of newspapers, becoming targets for investment funds looking to squeeze out whatever cash remains. Alternatively, these networks might pursue consolidation, merging with other companies to cut costs and survive in an increasingly hostile environment. However, the value of cable channels is in a state of flux, as evidenced by the massive impairment charges. Investors may be hesitant to make any moves until the dust settles, or they might wait for more opportunistic moments, like potential bankruptcies.
Despite the bleak outlook, some companies are trying to adapt. Paramount, for instance, is attempting to reshape its portfolio to compete in the future, even as it contends with the fallout from the Skydance deal. As Paramount co-CEO Chris McCarthy noted, “The assets under consideration are undeniably strong with exciting futures ahead, but will be better served on their own or as the centerpiece of another business.”
In this rapidly evolving landscape, traditional broadcasting and live sports remain valuable, while entertainment has firmly shifted to streaming. For traditional media companies, streaming is finally beginning to show signs of profitability. While the new model may not be as lucrative as the old pay-TV system, it offers a path forward—albeit one that requires adaptation and innovation.
As WBD CFO Gunnar Weidenfels remarked, this is a distribution ecosystem in transition, not a content ecosystem in crisis. The challenge now is convincing Wall Street to believe in this new reality. As Macquarie analyst Tim Nollen noted, “This remains a difficult space in which to invest.”
