Since Netflix reported weak first-quarter 2022 subscriber additions in April, there has been an onslaught of punditry about the demise of streaming which runs counter to many of our numbers and forecasts. We estimate 89 million U.S. paid streaming subscriptions were added in 2021 and forecast 80 million additions in 2022, and 50 million in 2024, all highly robust.

For the most part, streaming is a replacement for TV subscriptions, as well as for box office, packaged sales and rentals. With 6 million to 7 million U.S. TV subscriber losses per year — double the annual losses of a half-decade ago — TV is the gift that keeps giving for the streaming business. Between cord-cutters, cord-nevers and those who still subscribe to traditional TV, the penetration rate of households that pay for streaming is higher than it ever was for television.

At its apex in 2016, U.S. TV access and advertising was a $181 billion business, versus $158 billion in 2021. Based on our forecasts, it will tally $140 billion in 2024 and $105 billion in 2027. That’s not a pretty growth picture.

Meanwhile, U.S. streaming access revenue grew 37% to $39.4 billion in 2021, and we forecast revenue of $51 billion in 2022 and $69 billion in 2024. At its current run rate, streaming access revenue will be over $91 billion in 2027 and, when combined with TV programmers’ streaming advertising revenue, would be larger than the legacy TV business.

Assuming TV subscribers continue to decline at 6 million to 7 million per year, TV access providers will be effectively disintermediated by their programming suppliers. Hence within a decade, traditional TV will no longer exist and streaming will be the only show, game or movie in town.

Programming and now streaming behemoths The Walt Disney Co., NBCUniversal, Paramount Global and Warner Bros. Discovery are all seeing impressive streaming subscriber gains but at the cost of lackluster TV advertising and programming sales revenue growth. At the same time, they’re being constrained by Amazon, Apple, Google and Netflix, which together represent almost half of U.S. streaming access revenue.

Further, these major programmers will not reach, based on their own forecasts, streaming profitability until 2024-2025, as content spend has grown exponentially to keep up with Amazon, Apple and Netflix.

Programmers’ profitability predicament has been punished by Wall Street with stocks down on average over 40% year over year, not that Amazon or Netflix have fared any better. Further, Netflix was cash flow positive for the first time in 2020, but not in 2021, and we assume on a standalone basis Amazon and Apple’s streaming businesses are not profitable. 

Consumer Benefit, Provider Pain

Thus far, the only real beneficiary of streaming has been the consumer, who between paid and advertising-supported streaming can now assemble programming at lower cost than a TV subscription. Given the lack of stickiness of most streaming offers, consumers can also easily sign up and then churn off subscriptions. Streaming has also ushered in a massive rise and diversity of programming.

How much streamers raise prices, add advertising or limit free viewing going forward remains to be seen.

That streaming is only going to become more pervasive and end TV as we know it does not mean streaming is a great business for most.

All numbers in this article are from Convergence’s annual Couch Potato report series. 

Media agency Magna Global reduced its forecast for U.S. advertising spending because of the from Russia’s invasion of Ukraine.

Magna now expects U.S. ad spending to increase 11.5% to $320 billion. Its original forecast was for 12.6% growth. The war in Ukraine has exacerbated supply chain issues and inflationary pressures.

National TV revenues, which Magna defines as cross-platform national long-form video, will be down about 1%. Traditional TV ad sales will be down about 5%, while ad-supported video on demand, over-the-top and connected TV revenues will jump 27%.

Local TV will be getting a huge boost from the midterm elections. Magna estimates that media owners will generate $6.2 billion in incremental advertising revenue from political campaigns, up 41% from 2018 (that’s up from the previous forecast of a 31% increase). Local TV will get $4.2 billion of that, up 26% from 2018, while digital media gets $1.45 billion.

Also: Magna Sees U.S. Long-Form Video Ad Revenue Rising 4% in 2022

Overall, local TV ad revenues are expected to grow 16% in 2022, according to Magna.

“The Ukraine crisis has already hit consumer and business confidence. It will slow down economic growth in 2022 and fuel the inflationary trend. It is too early to assess the depth and length of economic repercussions, but Magna believes the U.S. economy is strong enough to weather this new challenge,” said Vincent Létang, executive VP, global market intelligence at Magna. 

“Looking at marketing and advertising, the macro-economic headwind will be mitigated by continued organic drivers (innovation, emerging verticals, ecommerce) and stronger-than-expected political fundraising (leading to at least $6 billion in incremental ad spend),” Létang said. “Balancing all factors, Magna reduces its 2022 advertising revenue growth forecast by one percentage point, as media owners’ ad revenues will grow by 11% this year to pass the $300 billion milestone for the first time”.

Technology, telecoms, entertainment, travel and betting are among the categories expected to grow faster than average, while automotive continues to struggle with supply chain issues.

Magna sees digital media growing 16% in 2022. Search is seen increasing by 17% and social will be up 16%. ■

Casa Systems cut its revenue guidance by $50 million for the rest of the year this week, explaining that its cable operator clients are putting off longterm investments on network expansion as they mull their big moves to virtualized architectures.

Speaking to investors during Casa’s second quarter earnings report, company president and CEO Jerry Guo said customers are making only short-term investments on network capacity expansion, eschewing high-capacity purchases of Converged Cable Access Platform hardware as they mull their strategy on next-generation Distribute Access Architecture (DAA).

Related: Casa Systems Shrinks IPO Size to 6M Shares at $13 Each

“Over the last few weeks, it has become clear to us that we are witnessing a pattern shift in procurement in the cable market,” Guo told investors, according to a transcript provided by Seeking Alpha. “While our customers weigh the timing for their large-scale rollout of the next network architecture, they are choosing to only procure capacity in a short-term basis. And they're not making very long-term upgrades of the chassis-based products in some cases.

“We do see DAA delayed industry wide in terms of large scale deployment,” Guo added. “And given that a lot of operators are contemplating DAA, they are slowing down their spending in their current capacity expansion.”

Guo said believes larger scale DAA deployment will begin in 2019.

Of course, none of this is helping Casa’s bottom line in the short term. The company’s stock is down around 23% since its Tuesday earnings report, during which it cut full-year revenue guidance to as low as $330 million.

Casa reported second quarter revenue of $68.7 million, up 3.1% from the year-ago quarter, but down 23% from the first quarter of this year.

With fewer original shows airing during the third quarter, AMC Networks reported a drop in earnings that was slightly smaller than expected.

Citing an increasingly digital world, the company also said it is reducing staff and eliminating positions. By tightening its belt, AMC joins Time Warner's Turner Broadcasting, HBO and Warner Brothers, as well as Scripps Networks in cutting payroll costs in order to invest in  contest creation while maintaining profit growth.

"We are very mindful of expenses and are continually focused on refining our organization and the way we do business in order to operate as efficiently as possible," CEO Josh Sapan said on the company's earning call with analysts. "As part of this ongoing effort, we have taken steps in recent month to reorient and reorganize our staffing. This is an area we continue to examine carefully and constantly calibrate."

AMC has been ramping up original programming, causing worries on Wall Street about rising costs.

The company declined to say how many positions have been eliminated, but on the call, CFO Sean Sullivan said that third-quarter earnings included $6 million in restricting charges related to the elimination of certain positions across the company."

He added that there would be further charges in the fourth quarter and possible more beyond that.

In the third quarter, AMC Networks' net income dipped to $54 million, or 74 cents per share, from $58 million, or 80 cents a share, a year ago.

Revenue rose 31.4% to $520 million because of the acquisition of Cellomedia, now called AMC Networks International. Revenue at AMC's national networks was up 4.3%.

Both figures exceeded analyst expectations of 73 cents a share in earnings and revenue of $511 million.

Distribution revenue was up 10.5% to $259 million.

Domestic advertising revenues dropped 5.8% to $138 million because AMC's cable networks aired fewer original programs during the quarter. Last year, the high-rated final episodes of Breaking Bad aired and those attracted premium prices from advertisers. The company said that while ad revenue was down at AMC, it was up at its other, smaller networks.

Sullivan said that the company expected results to improve and that the fourth quarter would be the strongest quarter of the year. "Advertising continues to be a growth driver for the company and will benefit from the return of The Walking Dead, is forecast to grow double digits at our national networks."

"AMC Networks continued its strong financial and operating performance in the third quarter with a double digit increase in revenue and growth in AOCF," Sapan said. "We are particularly pleased that for the broadcast season, which ended in the third quarter, AMC Networks in aggregate was the only cable media group to have experienced double-digit growth in viewership among key demos adults 18-49 and adults 25-54. Our year over year growth is significant and speaks to the success of our core content investment strategy."

Sapan added that AMC's recently announced BBC America partnership "meets many of our core strategic objectives for our business and provides a platform for long-term growth and success."

W