If you’re of a certain age, you remember the old days of watching TV. Over the antenna, you could get the three major networks, PBS and, in larger markets, perhaps some independent channels—some of which would begin airing programming from the new Fox network in 1986. If you made enough money, you could get a couple dozen channels from your local cable provider. If you lived in the sticks, you might have one of those massive C-band satellite dishes, informally known as the State Flower of West Virginia. You probably had a stack of VHS cassettes and an outstanding late fee at the local Blockbuster.
Those days are long gone.
The internet fundamentally changed the technology and economics of content delivery. Earlier, broadcast and cable relied on access to airwaves or heavy investment in coaxial cables. This created significant barriers to entry and limited competition—so much so that providers were seen (and regulated) as monopolies. Streaming, on the other hand, leveraged the existing internet infrastructure to drastically reduce the cost of entry for new players. At the time that many of our telecommunications regulations were put into place, streaming services were unheard of and, consequently, not regulated.
The relatively low cost of entry combined with a light regulatory burden fostered the rise of streaming services. Companies like Netflix (initially a DVD-rental service) recognized the potential of online streaming, and capitalized on it by launching its streaming service in 2007. Netflix was soon followed by Hulu, initially as a joint venture between News Corp and NBC Universal. The companies invested heavily in content acquisition and development, building vast libraries of movies and TV shows. The availability of large amounts of on-demand content attracted subscribers, creating a virtuous cycle of more subscribers generating more revenue, which allowed for further investment in content, attracting even more subscribers.
Today’s consumers face seemingly endless options to view video programming. This year’s NFL Super Bowl game was broadcast on the Fox network and streamed on Tubi and Fubo. Last week, my teenage son wanted to watch “Airplane!” with me at home. We had at least eight options: some for a fee, some included in a subscription, and some free with ads.
Nearly every channel that is available in a cable bundle is now available “a la carte” via streaming. With more than 200 streaming platforms available, Nielsen reports that households spend an average of more than 10 minutes simply searching for something to watch, leading to a widely circulated meme.
In the face of so many streaming options, millions of consumers have “cut the cord” and switched from cable and DBS satellite to streaming services over the internet. Cable subscribership peaked in 2010. Since then, the number of subscribers dropped by more than 35%. The Washington Post reports that barely half of American homes pay for live TV service from a cable, satellite TV, or an internet-delivered vMVPD (virtual multichannel video programming distributor) like YouTube TV.
The competition landscape in video content today is much different from the landscape of just a few years ago. More importantly, we’re only in the middle of a seismic shakeup that will produce a landscape a few years from now that is much different from today’s. These changes have rippled through the marketplace, affecting not only from whom we receive content, but what content we view, as well as how that content is funded, produced, and distributed.
As firms struggle to adjust to these rapid changes, policymakers have largely ignored whether and how to move policy out of the 20th century and toward the future.
From Flipping Channels to Shuffling Streamers
The streaming market is highly fragmented, with hundreds of platforms. This fragmentation has created a complex landscape for both consumers and providers. Streaming services operate under different business models, including:
- Subscription video-on-demand (SVOD): Platforms like Netflix and Disney+ charge monthly fees for ad-free access to content.
- Advertising video-on-demand (AVOD): Services like Hulu and Peacock, while also offering more expensive ad-free versions, rely extensively on advertising revenues in their basic subscription offerings. Meanwhile, several major SVOD services, including Netflix and Disney+, also offer AVOD “tiers” at a discounted price.
- Free ad-supported television (FAST): Services such as Tubi, Pluto TV, and Roku TV offer linear programming that relies entirely on advertising, rather than paid subscriptions.
- Hybrid models: Some platforms, such as Amazon Prime Video and Apple TV, combine subscription fees (and sometimes advertising) with additional paid video-on-demand (PVOD) options, in which consumers can pay to rent or own individual titles.
Deloitte reports that the average U.S. household subscribes to four streaming services and spends $61 a month on them. About half indicated they would cancel their favorite service if the subscription price increased by more than $5 a month.
Streaming services have shifted significantly from their initial subscription-only model to increasingly embrace advertising as an important revenue source. Over the past few years, as noted, Netflix, Disney+, and many other streamers have introduced ad-supported tiers. In the case of Amazon Prime, the overwhelming majority of users were opted into the ad-supported tier in January 2024, with only those who affirmatively chose to pay an additional subscription fee receiving ad-free content. The ad-supported option appears to be popular among cost-conscious households, as Nielsen reports that ad-supported programming accounts for about 40% of minutes viewed.
Many streaming services are now also offered as “bundles” that combine multiple services or products into a single package, often at a discounted rate. As with revenue models, providers have adopted for a wide range of bundling strategies:
- Single-company bundles combine multiple services owned by the same parent company. For example, Paramount+ with Showtime, or Hulu, Disney+, and ESPN+.
- Co-subscription bundles package two or more competing direct-to-consumer (DTC) streaming services, such as the Disney+/Hulu/Max bundle.
- Operator bundles are offered through telecom operators and combine streaming subscriptions with traditional cable, broadband, or mobile services. Examples include Xfinity StreamSaver and Verizon myPlan.
- Third-party aggregators, also known as wholesale distributors, act as resellers of premium DTC streaming services and consolidate multiple apps into a single interface. Examples include Amazon Prime Channels and YouTube Primetime Channels.
- Cross-platform bundles combine streaming with other services. Examples include Walmart+ with Paramount+, or Instacart+ with Peacock. Other multi-service bundles include Apple One and the Hulu-Spotify bundle.
AlixPartners sees experimental streaming bundles as a first step toward consolidation. They argue that bundling allows streamers to obtain better data on consumer behavior, identify new or better revenue models, and provide a better consumer experience. Bundling also provides a lower-risk model relative to full-blown integration through mergers.
Local Broadcasters: First, Live, Local, Languishing
With the decline of so-called “linear” programming—a term generally used to refer to live TV, especially broadcast and cable—local broadcasters have suffered steep declines in revenues. Advertising revenues have been hit by a double-whammy of fewer “eyeballs” and a shift by advertisers toward more targeted digital advertising. In addition, the decline in the number of cable subscribers has reduced local stations’ revenues from retransmission-consent fees.
On top of that, local stations have lost their near-monopoly on providing “late-breaking” relevant news, weather, and traffic, as consumers shift to apps, online sources, and social media for timely news updates. As if that weren’t bad enough, local stations allege that networks’ direct-to-consumer services—such as NBC’s Peacock and CBS’ Paramount+—are cannibalizing viewers from local stations.
These market pressures have sparked renewed debate about the economics and regulatory framework of “must-carry” and “retransmission consent” rules. Originally designed to protect local broadcasting in a cable-dominated environment, these rules now operate in a fundamentally different competitive landscape.
When Congress enacted the Cable Television Consumer Protection and Competition Act of 1992, local broadcasters worried about cable operators excluding them from cable systems. Today, the power dynamic has shifted dramatically—cable operators argue they’re forced to pay ever-increasing retransmission fees for content that viewers increasingly access through other means.
The economics of retransmission consent have become particularly thorny as vertically integrated media companies leverage their broadcast networks’ must-carry rights to secure carriage for their cable networks and streaming services. For instance, when a broadcaster negotiates retransmission consent, they might bundle those rights with carriage requirements for affiliated cable networks or streaming services, effectively using their regulatory protection to extend market power into adjacent markets.
These developments have led some economists and policy analysts to question whether the current must-carry/retransmission-consent regime remains economically efficient. As broadcast viewership declines and streaming becomes dominant, the original market failure that these rules were created to address—the potential foreclosure of local broadcasters from cable systems—may no longer exist. But modifying these rules would require careful consideration of how to preserve local broadcasting’s public-interest obligations. This is of particular concern in smaller markets, where the economics of local news gathering are already strained.
Local station owners are under enormous pressure to cut costs and reduce staffing. But cuts alone may not suffice, so there is also enormous pressure to consolidate local station ownership through mergers and acquisitions. Stanford University reports there have been $23 billion in broadcast-TV ownership deals over the past decade. The three largest owners control 40% of all local news stations and are present in more than 80% of U.S. media markets.
With Brendan Carr’s appointment as chairman of the Federal Communications Commission (FCC), many observers expect the agency will become more favorable toward mergers. Sinclair Broadcast GroupCEO Chris Ripley told industry analysts just after the November 2024 election that he anticipated a new regulatory environment that would lift “a cloud over the industry.” Carr has a track record of advocating for deregulation, including arguing that current ownership restrictions hamper broadcasters’ ability to compete with digital-content providers. Notably, he and fellow Commissioner Nathan Simington wrote of the FCC’s December 2023 ruling against loosening ownership restrictions that it was “time for the FCC to confront the harms that its own media ownership policies have caused.”
At the same time, Carr has expressed interest in revisiting the FCC’s “public interest” standard as a focus of its review of media policy, arguing that the standard can be used to help restore the public’s trust in broadcast media. In a December 2024 letter to Walt Disney Co. CEO Robert Iger, Carr wrote that “national programmers, which so many Americans no longer trust, supply many of the shows and content that local broadcast TV stations air.” That same month, he said in an appearance on CNBC’s Squawk Box that:
We need to look at empowering those local broadcasters to serve their local communities, even if that’s in conflict with the interests of those national networks.
We’re less than a month into the new administration, so it remains to be seen whether the FCC will adopt Carr’s light-touch approach to mergers, which favors deregulation, or his heavy-handed approach, which favors micromanaging business decisions.
If You Don’t Have Sports, You’re Out of Sorts
Broadcasters and cable companies traditionally dominated the distribution of sports content. Over the past few years, however, this dominance has been eroded by streamers who see sports as a key offering to attract and retain both consumers and advertisers. Sports have become such a key feature that they have been described as the “new battleground” in video competition.
Unlike on-demand content, live sports events offer a unique draw, creating appointment viewing. They remain the primary driver of traditional TV viewership. As audiences move to streaming, sports content is following suit.
Sports are powerful tools for attracting new subscribers and reducing churn. ESPN’s direct-to-consumer service, which will launch this year, is expected to significantly disrupt both traditional cable and vMVPDs. Virtual MVPDs initially attracted viewers with a lower-cost, cable-like experience, but their value proposition is eroding, as sports content moves to direct-to-consumer platforms. The rise of direct-to-consumer sports streaming is further accelerated by tech companies acquiring broadcasting rights, including:
- Amazon’s 10-year exclusive deal to carry the National Football League’s (NFL) Thursday Night Football package on Amazon Prime for $1 billion a year, as well as its 11-year deal to offer 66 regular season National Basketball Association (NBA) games per-season, starting later this year;
- Apple’s $2.5 billion, 10-year exclusive deal to carry Major League Soccer games on its Apple+ service, as well as its seven-year deal valued at $115 million annually to broadcast Major League Baseball (MLB) games; and
- Google’s seven-year exclusive deal to distribute NFL Sunday Ticket through YouTube, valued at $2 billion a year.
Such deals have generated controversy—notably, a long-running class-action lawsuit alleging the NFL violated antitrust laws by exclusively selling its out-of-market game package Sunday Ticket back when it was distributed exclusively by DirecTV. The plaintiffs in that case allege the exclusive arrangement restricted competition and forced subscribers to pay a higher price for access to all games, rather than allowing teams to sell their individual out-of-market rights separately.
After a three-week trial last year, the jury came back with a $4.7 billion award against the NFL that could have been trebled to more than $14 billion. The judge in the matter, however, threw out the verdict by granting the defendants’ motion for judgment as a matter of law, because the plaintiffs did not demonstrate any economic harm. The judge’s decision is now under appeal.
In February 2024, FuboTV filed a lawsuit in New York federal court against media giants Disney, Fox, and Warner Bros. Discovery that sought to block their planned sports-streaming joint venture, Venu Sports. Fubo alleged that the joint venture would monopolize the sports streaming market and drive them out of business through anticompetitive practices. A judge issued a preliminary injunction in August blocking the joint venture.
Fubo’s claims were fairly weak. The planned $42.99 monthly price for Venu Sports would have been significantly lower than Fubo’s entry-level price of $79.99 and the defendants argued (correctly) that Fubo was a “weak competitor” that adds little value to the TV ecosystem. At the same time, many questioned whether Venu’s offerings were worth the price to consumers. Thus, in the waning days of the Biden administration, the Venu joint venture was abandoned, the lawsuit was dropped, and Fubo entered into a deal with Disney that would see Disney become its majority shareholder, while Fubo will effectively merge with what had been Disney’s Hulu + Live TV vMVPD business.
These lawsuits demonstrate the high stakes attached to delivering live sports content. Sports are unquestionably a crucial component of video competition and even seemingly small disruptions can fundamentally shift the competitive landscape, to the point they trigger multi-million (or billion) dollar lawsuits. With little success in the courts so far, it’s likely that companies under competitive pressure will turn to legislation to slow the “creative destruction” associated with the rejiggering of how sports content is delivered.
Policymakers should be cautious, however. Heavy-handed regulation, such as mandated unbundling of sports content or price controls, would be counterproductive. It could lead to such unintended consequences as reduced investment in sports programming. It could also stifle innovation, reducing both consumer choice and the efficient delivery of content.
Furthermore, media regulations are often implemented with an eye on the rear-view mirror, rather than out the front windshield, inviting the likelihood they will be obsolete soon after they are enacted.
