In a recent shareholder letter, Netflix revealed its 58 million American subscribers spent just under two hours a day consuming the platform’s content in Q4 2018. Notably, Nielsen reported in December that 18-to-34-year-olds watched around the same amount of live and time-shifted television. However, by adding together all the time Millennials kill consuming entertainment on internet-connected devices, it’s clear they prefer digital content over TV.
Millennials changing their main entertainment platform preferences is a big deal. First off, it undermines broadcast television’s traditional business model. Networks finance their programming by selling advertising space to brands. The more viewers a TV show attracts, the higher its ad rates are. Because there are 305 million TV viewers in America, it’s long been the marketing channel advertisers spent the most money on.
Generation Y is disrupting that established paradigm in a major way. America’s largest consumer demographic watches TV content online at rates higher than Generation X, Baby Boomers, and even their younger siblings in Generation Z. Consequently, Millennials’ viewing habits are pushing big brands to move their advertising dollars to digital platforms.
As such, Millennials are killing broadcast television by taking away its main source of revenue.
The Death of TV Isn’t the Death of Shows
It should be noted that while television is going the way of Applebee’s and Buffalo Wild Wings, TV shows are doing fine. Netflix only got to be a subscription juggernaut because of great original shows like “Black Mirror” and “Stranger Things.” Moreover, HBO wouldn’t have 147 million subscribers without hugely popular shows like “Game of Thrones.”
Consumers’ hunger for new shows and growing disinterest in broadcast TV has been highly lucrative for some major tech companies. For example, Amazon’s Prime Video Channels, which offers media from 156 different brands, brought in $500 million in income in 2018. Moreover, Netflix made $1.21 billion last year and 58 percent of its users only stream licensed content.
Amazon and Netflix’s success at distributing broadcast TV’s content has not gone unnoticed. Disney’s purchase of 21st Century Fox was in large part due to a desire to own all of Hulu. More importantly, the rise of streaming TV has led Apple, Warner Bros., and Disney to create their own digital streaming platforms.
The oncoming digital platform wars will be a mixed bag for consumers. A competitive market will keep individual subscription services from going crazy with their pricing. But it means Millennial cord-cutters are unintentionally fostering conditions worse than those that initially put them off pay-TV.
The New Boss Might be worse than The Old Boss
One of the main reasons Netflix is so popular with Millennials is its affordability. Indeed, $9 a month for access to an endless supply of movies and TV shows is a really good deal. It’s certainly a better deal than the $107 a month cable and satellite providers ask of their subscribers. However, the proliferation of subscription video-on-demand (SVOD) platforms has caused major problems for the streaming giant recently.
The Netflix corner of the Marvel Cinematic Universe got demolished because Disney decided to distribute rather than license its content. Similarly, the company recently paid Warner Bros. Television $80 million for just one more year of “Friends” streaming rights. That transaction happened because WarnerMedia is getting ready to launch its own SVOD services soon. The perception that subscription video is a gold mine waiting to be exploited is leading to content Balkanization.
Then there’s the other big reason Millennials and other demographics like streaming TV so much; refined content options. Cable and satellite services force customers to subsidize channels they don’t watch to get access to the shows they love. SVOD companies give consumers the ability to pay for what they want.
Unfortunately, the increasingly stratified content landscape will make it much more expensive for consumers to access their favorite media. For instance, let’s say you love “Black Mirror,” “Star Trek,” “Star Wars,” and “Gotham.” Right now, you can enjoy all four programs on Netflix. But, in the next year or so, you might need to subscribe to Netflix, CBS All Access, Disney+, and DC Universe to watch those shows. That’s a price increase of 222 percent.
Still, “Millennial humor” is typified by surrealism and bitter irony. So, Gen Yers should be able to find the funny side of finding themselves trapped in a hell of their own making.