The cancellation of Netflix’s critically beloved cult favorite sitcom One Day at a Time felt like some weird crossed Rubicon for the streaming era — even more so than Netflix canceling the cult comedy American Vandal or Hulu deciding not to order a second season of its Sean Penn-starring The First. (Both events happened in 2018.)
One Day at a Time was ostensibly the kind of show the streaming revolution was supposed to support. Its audience might have been small — not that we have any real way of knowing — but it was deeply loyal to the series. What’s more, the show’s majority Latinx cast, as well as its incredibly diverse writers’ room, felt like a prime example of Netflix’s recent attempts to position itself as a home for stories from voices that are rarely front and center in film and television.
But none of that ultimately mattered. Whatever the show’s viewership, it was too small for Netflix to justify a fourth season. And in a self-flagellating Twitter thread, the streaming service seemed to suggest that the show’s cancellation was, on some level, the fault of viewers for not finding it — before insisting that Netflix remains committed to telling stories from Latinx viewpoints, despite having just canceled its most prominent show that did so.
And to anyone who felt seen or represented — possibly for the first time — by ODAAT, please don’t take this as an indication your story is not important. The outpouring of love for this show is a firm reminder to us that we must continue finding ways to tell these stories.— Netflix US (@netflix) March 14, 2019
One Day at a Time’s demise is just the latest example of a new business reality in the streaming era: If a streaming service doesn’t own the TV shows it airs, those shows have to be massive hits to justify the expense of licensing them. One Day at a Time was produced by Sony Pictures Television, not Netflix. Sony is subsequently hoping to sell the series elsewhere, which has led to the very backward scenario of One Day at a Time fans like famous person Lin-Manuel Miranda hoping for a broadcast network to pick up a show that Netflix canceled. Topsy-turvy!
But this is just a sign of the times. The streaming revolution, which promised to break down lots of barriers in the TV industry, is beginning to morph into something else. And what it’s morphing into looks a lot more like ... traditional television.
Netflix’s blockbuster deal to keep Friends around for one year shows the direction that streaming is headed in
Arguably the single most important thing to happen at February’s 2019 Television Critics Association winter press tour happened almost in passing.
It came during a press conference held by Kevin Reilly, the president of TBS and TNT and the chief creative officer of Turner Entertainment and WarnerMedia Direct-to-Consumer — which is to say, the guy who is heading up the new WarnerMedia streaming service that will include content from Turner, Warner Bros., and HBO.
Reilly was asked specifically about Friends, which recently made headlines for almost leaving Netflix. The streaming giant ultimately signed a massive deal, spending a reported $100 million to keep the classic ’90s sitcom in its catalog for another year. But the deal was non-exclusive, meaning WarnerMedia can shop Friends around to other streaming services if it liked — or, more likely, place it on whatever the upcoming WarnerMedia streaming service turns out to be.
So, Reilly was asked: Would Friends continue to stream on Netflix in a world where WarnerMedia has its own streaming service? At least hypothetically?
Reilly left himself a little wiggle room — since he ultimately won’t make the final call as to the fate of Friends on Netflix — but not much.
“I think you can expect that sort of the crown jewels of Warner will ultimately end up on the new service,” he said. “And I think for the most part, sharing destination assets like that, it is not a good model to share them. My belief is that they should be exclusive to the service.”
So, yeah, it’s possible that Friends will keep streaming on Netflix. But if you were to bet on it, the odds would be stacked heavily against you. Within a year or two, Friends and other in-demand properties like Game of Thrones, Wonder Woman, and even a lot of shows on The CW are probably going to be exclusive to a streaming service owned by the same company that owns the shows themselves. And there’s not much that independent players like Netflix can do about it.
To understand this level of corporate integration — and how TV has been headed toward it for nearly 30 years — we need to jump back in time to explore the invention of the cable bundle.
Cable bundles, explained
The cable bundle is a creation of the 1970s and ’80s that exists to this day because it’s still central to the way everybody in Hollywood makes money.
In the early days of cable, there were lots and lots of channels, and many of them charged what amounted to à la carte subscription fees. If you wanted HBO or the Disney Channel or ESPN, you could just pay a subscription fee directly to your cable or satellite provider, which would pass it along to the network in question.
But as the number of networks and channels increased, providers realized they could group lots of channels together, charge consumers a single fee, and then pay each network what’s called a “carriage fee.” Carriage fees are paid monthly, per subscriber (in most cases), and they typically amount to a few cents per channel — though for certain behemoths, particularly ESPN, they can range up to over $1. That doesn’t sound like much, but if a big cable company is paying 5 cents to FX for every single subscriber to its core package, FX stands to make a ton of money. Carriage fees are a huge part of the reason networks jockey to get added to companies’ core, basic packages. That’s where the money is.
But this system also allows niche channels to proliferate. It might not matter how many people watch Food Network if all of them are Food Network die-hards who would scream if they didn’t get to watch Guy Fieri eat at greasy spoons across the nation. (No judgment!) And as more channels gain followings, providers add more channels to various subscription tiers, causing the cost to edge ever upward.
It doesn’t help matters that the majority of cable providers have what amount to monopolies in their service areas. Yes, there are occasional competitors (especially direct-to-consumer satellite providers like Dish Network, and DirecTV before it became part of the AT&T empire). But for the most part, if you live in my current neighborhood, you’re locked into AT&T U-verse, and if you live in my old neighborhood, you’re locked into Time Warner Cable (now merged with Spectrum).
Yet whenever a competitor has found a foothold, it’s been difficult for that competitor to effectively undercut established cable companies, simply because at a certain point, it has to pay networks the carriage fees they were used to. The only way to really put a dent in subscription fees is to reduce the total number of channels on offer. (This is the principle that so-called “skinny bundles” like SlingTV operate under. They offer you far fewer channels at a greatly reduced cost, then mostly stream over the internet.)
The response to the ever-increasing cost of cable bundles is usually, “Well, why not just offer individual channels à la carte?” If you watch Food Network and only Food Network, you might be willing to pay even $20 a month for it, if it would save you the extra $80 per month you’re paying for a huge bundle of channels you don’t watch. This approach has met with some success in other countries (though Canada has seen many bills go up). The age of streaming has reduced some of the overhead involved in offering channels in this fashion (like, say, having to own or rent a cable box), so à la carte has slowly gained traction with add-on channels that can be purchased via Amazon, YouTube, and others.
And, of course, there’s Netflix, which has built itself atop this entire moldering system, then presented itself as an alternative to the ground beneath it. Netflix wouldn’t exist if it wasn’t able to buy cheap content to stream from the networks it’s attempting to usurp, and it’s available via the internet, which is still provided by cable and satellite companies in the majority of US homes.
But Netflix’s success has caused everybody else in Hollywood to realize just how much money there is in streaming, how much money they’ve already ceded to Netflix, and how much they’d like to be making. Enter the new cable bundle.
Forget Netflix. Let’s talk about Disney and Hulu.
In a matter of weeks, Disney is going to own a 60 percent stake in Hulu. (The other 40 percent is held in a 30/10 split by NBCUniversal and Warner Bros. respectively. So far, it’s not clear if Disney will try to buy up that 40 percent.)
At the same time, Disney is touting its upcoming Disney+ streaming service, expected to launch at the end of 2019. Thus, the question many people are asking is: What will happen to Hulu once it is majority-owned by a company that’s launching a competitor to Hulu?
That’s the wrong question. The right question: How much of Hulu just becomes Disney+?
Streaming sites don’t arrive overnight. They require a great deal of infrastructure investment, in ways both obvious — building an interface designed to help people choose which programs to watch — and less so. Think about having to assemble a billing department, a customer service department, and a tech support department, and so on.
Any gigantic corporation can of course hire plenty of people to take care of these jobs. But in Disney’s case, taking control of a tech entity like Hulu (which has already thought about all this stuff) will allow it to cut out a lot of setup. Similarly, WarnerMedia seems to be thinking of HBO — which already has a robust streaming operation in HBO Go and HBO Now — as the core of what will eventually become a more all-encompassing streaming service. If the infrastructure is in place, why not build atop it, instead of starting over from scratch?
So the question of “what happens to Hulu?” is a misnomer, because to me, Hulu seems core to the future of Disney’s streaming strategy. Disney+ might end up being built around Hulu, but Hulu will be central to whatever Disney+ becomes in the way that HBO will be central to whatever WarnerMedia’s streaming service becomes. (A hopefully obvious caveat: If Hulu’s other owners complicate this matter for Disney, that will curb how much Disney is able to do with Hulu without navigating corporate boardroom drama.)
It’s not too difficult to imagine how things will proceed from there. If you’re already a Hulu subscriber, well, why not pay another couple of bucks a month for access to the entire Disney vault? And then a couple more bucks for a Marvel Cinematic Universe “channel,” or a Star Wars “channel”? Or maybe you have a free version of Hulu — with lots of ads — and then you just pay for access to Disney’s family movies.
It’s also not too difficult to see how this arrangement might appeal to Hulu, a service that has long struggled to compete with Netflix and Amazon because it isn’t a global player. Disney will instantly be able to infuse Hulu with the cash it needs to become one — and will also be looking to take Disney+ global as quickly as possible, so it will have the incentive to do so. Maybe Hulu ends up only existing as a small corner of Disney+ (probably combined with more adult-skewing TV brands like FX), but either way, Disney+ will likely have a fair amount of Hulu architecture in its DNA.
It all goes to show how, instead of the kind of one-size-fits-all package we see with Netflix, we are moving rapidly toward a world where streaming services have all sorts of boutique, custom options and pricing tiers. The shift is already happening with something like Amazon Video’s à la carte cable channel packages, or even with services like YouTube and Hulu’s live TV packages. I think it’s inevitable, for instance, that most streaming services will end up offering at least two tiers — with ads and without — and many will offer more, to control for the number of ads you’re willing to watch.
But then we get to the heart of why these streaming services are so attractive to multinational entertainment corporations. In essence, it allows them to control their own cable bundles, to charge you for the number of channels you want to pay for, without having to worry about other corporate entities. It might end up feeling a lot like the early days of cable — only with the corporate conglomerates controlling the means of distribution as well as the programs they’re distributing. And they’ll effectively be able to charge consumers whatever they want, instead of having to work within the carriage fee system of the old cable companies.
So imagine a world where, to get access to everything you’re interested in watching, you’re essentially subscribing to multiple cable bundles across several streaming platforms. To me, that sounds like the opposite of what cord-cutting was supposed to achieve.
Which brings us back to the old cable companies.
A return to cable bundles isn’t inevitable, but it’s likely
Cable companies figured out early in the cable revolution that the natural solution to a world with a whole bunch of channels at varying price points is to bundle those channels together into a slightly more affordable bundle. Some company will probably “rediscover” this idea as we head deeper into the streaming age. And it almost doesn’t matter if what’s being bundled together is effectively a bunch of bundles, as long as it’s more cost-effective.
So next, consider this: A shocking amount of the US broadband infrastructure is still controlled by cable companies, which might be losing TV subscribers but continue to have a fairly ironclad lock on providing internet. In many parts of my city, Los Angeles, the only option when it comes to buying an internet package is to go with a local cable company like AT&T.
At least two major cable companies — AT&T and Comcast — are about to have affiliated streaming platforms (WarnerMedia and NBCUniversal, which is an investor in Vox Media, respectively). So they might not be thrilled to play ball with Netflix or Disney or [insert other entertainment company here] when creating cable bundles 2.0, given that doing so might directly enrich their competitors.
But at the same time, my guess is that most of these companies know they’re not going to wipe massive companies like Netflix or Disney from the face of the earth — to say nothing of a company like Apple, which is still waiting in the wings with its own proposed streaming service, or YouTube, which has struggled to launch its own subscription service but owns the viewership habits of the generation just entering its teens and 20s.
Which means that eventually, we’ll probably go right back to the cable bundle as the only real option for getting access to film and TV content at home. Those who really want to will still be able to assemble their own packages à la carte (presuming that the death of net neutrality doesn’t result in cable companies privileging their own streaming services to the exclusion of others, which is an entirely different ball of wax).
But most of us will pay the $200 a month for internet and streaming TV. It’ll just be easier, if horribly expensive.
Will all of this happen like I say it will? Some of my predictions might miss the mark; maybe Netflix will rise above everybody else and cement its status as a sort of Spotify of TV, with all major competitors having to navigate around its ubiquity. Maybe Disney’s deep bench of content pushes it into first place. Maybe Amazon does ... something ... and then it comes in first place? Hey, that could happen!
But I wrote a version of this article in 2016, and a surprising amount of what I predicted then has happened in the years since. And when I talk to folks in the TV industry, very few of them suggest the future I’ve laid out above is unlikely. Even people who work for the streaming networks understand that having a bunch of streaming networks, all with their own unique and in-demand programming, all asking you to pay between $10 and $20 per month, could end up being catastrophic to consumers. But there’s too much money on the line for those who might find a way to get us to that point, so today’s many, many players keep charting a collision course of their own making.
The era of media consolidation has made it harder and harder to ignore that we are heading, inexorably, toward a period when major entertainment corporations will control the distribution and production models for their programming and will, effectively, be able to charge whatever they want for it. And in that world, the cord-cutting era will start to feel a little like a blip, when a growing movement to change an unfair game invented an entirely new one.
Correction: The original version of this article stated that UVerse and Time Warner Cable are part of the same massive corporation. They are part of different massive corporations! The article has been changed to reflect this.