PARQOR is the handbook every media and technology executive needs to navigate the seismic shifts underway in the media business. Through in-depth analysis from a network of senior media and tech leaders, Andrew Rosen cuts through what's happening, highlights what it means and suggests where you should go next.  

In Q4 2022, PARQOR will be focusing on four trends: this essay is on the trend of "Linear channels seem doomed. What happens next?"

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[Author's Note: There was not a Member Mailing on Wednesday because while editing, it became clear the essay simply didn’t work. I have since figured it out and below it is today’s mailing.]

Also, a quick note regarding the new details about Netflix’s “Basic with ads” tier, which otherwise would have been the topic of today’s Friday mailing: As we’ve seen with other initiatives like gaming and interactive video, Netflix starts conservatively and evolves iteratively. That said, ~60% of all Netflix subscribers watch kids and family content every month, and kids content is the hardest to monetize with targeted advertising due to The Children's Online Privacy Protection Act of 1998 (COPPA). 

So, I imagine any upside to Netflix’s business from advertising most likely will come from the broader bucket of family content, and less likely will come from kids content until it solves for its COPPA-related pain points (which also exists on YouTube).

Next week Netflix will kick off Q3 2022 earnings for media. Even if there is no rhyme or reason to public markets right now, cord-cutting continues to be a very real and getting real-er trend: one estimate found that overall pay TV subscribers fell 6.1% in Q2, and lost 1.95MM customers in the quarter. Cable network affiliate fees are flat to possibly negative, and they’re the bread of the “bread and butter” of legacy media cable businesses (the butter being advertising). Recent research from MoffettNathanson senior analyst Craig Moffett also estimated AMC Networks affiliate revenues are down 7%, reflecting declining demand for its networks and content in particular. 

Last week I mentioned the scenario of AMC Networks disappearing from linear distribution due to a lack of demand. We won’t know until early November how it weathered Q3 2022, but odds are the story will be one of decline, and therefore we’re incrementally closer to its linear business “disappearing”. That dynamic was summed up elegantly in a presentation at the IAB Brand Disruption Summit 2022 by Chris Bruderle, IAB’s Vice President of Research & Insights, 

The other trend worth noting lately is the promise of more blockbuster game titles by 2030 from the likes of Electronic Arts (EA) and Sony PlayStation Studios. Because, as I noted last week, as gaming production ramps up for larger gaming audiences, those resources will compete for visual effects (VFX) editors schooled in Unreal Engine and the Unity VFX platform.

The point is not that AMC Networks’ loss may be EA’s gain by 2030 - though AMC’s “The Walking Dead” series and its spin-offs do rely heavily on VFX, so that dynamic will play out in some form or another. Rather, the point is that the decline of AMC Networks and the end of “The Walking Dead” series (Sunday November 20th) will start a trend that will put a lot of post-production talent back on the market, and some in demand from gaming's growing ambitions with Gen Z and Gen Alpha.

These two clear signals of decline (linear) and growth (gaming) are interdependent, but they also imply some uglier dynamics hiding beneath.

Key Takeaway

Linear and film production's decline seem to be the gaming world's gain in Visual Effects. However, the clarity of those signals hide a messier story.

Total words: 1,500

Total time reading: 6 minutes