FreeCast Restores the Edge the Media Industry Gave Up

For decades, there were few better industries to be in than media. Television and movies were engines of great wealth creation, cultural cachet, political influence, and celebrity star power. Enter streaming. While the rise of Netflix and its ilk may have signaled to many that we were in a golden age of television, with an abundance of cinema-quality content at affordable prices, a crisis was brewing below the surface. Now that crisis threatens the whole institution of American media, including its biggest players.

Without major change, names like Disney and Paramount could join the likes of Kodak and K-mart as once-great business empires, and now cautionary tales and shadows of their former selves.

Now that streaming has overtaken traditional TV, we’ve reached a tipping point. Because put another way, from the perspective of the big media firms, the challenging and low-margin business line has overtaken the highly-profitable and long-perfected one.

To borrow a Hollywood metaphor, this is like a moment on the Titanic. For a long stretch of the movie, the ship was taking on water and slowly sinking, but then suddenly the stern was lifted out of the water, and half the ship was swallowed up by the Atlantic in a matter of seconds.

As the “good” business gets smaller and the “bad” business becomes dominant, the looming financial crisis will accelerate. For the media industry, time is up. Even the successful firms will be less so, equivalent to trading a luxury ocean liner for a life boat, but at least they’ll stay afloat. Others will simply sink.

Despite the challenges in the industry, there is one best and likely last chance for media firms to right the ship. But understanding it requires grappling with the realities that are contributing to the current crisis.

The Fundamental Obstacle: Going from Scale to Retail

When cord-cutting first began to cloud the horizon for the media industry, most saw a simple solution. Rather than let Netflix eat their lunch, the rush was on for the big media companies to become Netflix themselves.

The original SVOD service became a Wall Street darling thanks to rapid growth, achieved mostly with content licensed from the very big media companies it would soon find itself competing against. By launching their own streaming services, those companies believed they could deprive Netflix of a necessary asset, and that consumers would follow the content back to its new first-party streaming services.

Multiple important factors were not taken into account. First, at its core, Netflix was a Silicon Valley tech firm. Its content was all licensed, but what made it work was its distribution technology. To replicate this, old school media businesses would soon find out that they had to become tech companies too, investing billions to build their own streaming technology.

Each company to do this not only re-invented Netflix’s technology, they also replicated costs, sinking billions of dollars in the process.

The more severe problem, however, was the shift to Netflix’s “retail” business approach. Netflix had to earn every subscriber it ever had, all the way back to its days of renting DVDs by mail. The big traditional media firms never did; they relied exclusively on wholesale relationships.

A handful of deals with the nation’s major TV providers, and these companies had massive and frictionless scale: hundreds of millions of subscribers, each forced to receive and pay for dozens of channels. This was their most powerful economic engine, and precisely what is now threatened by the shift to streaming.

In addition to building out their own technology, the media had to become their own marketing and distribution experts as well, acquiring customers one-by-one. So far, that’s been a disaster, with customer acquisition costs as high as $200 each, often for a subscriber that churns out after just a few months, only to be marketed to and reacquired again at a later date, incurring that high CAC again.

The Other Monster They Created: Savvier Consumers

By licensing their content to Netflix, and effectively letting Reed Hastings manage their video on-demand offering, the big media companies realized they’d created a monster. They began to focus efforts on chasing Netflix, without realizing that the other problem being created under their noses.

Consumers learned early on that cord-cutting wasn’t a free lunch. While it could save a household over $100 versus a monthly cable bill, implicit in that bargain was that they’d have to work for it. They’d need not only a handful of streaming services, but likely also set-top hardware, cables to connect other devices to their TVs, antennas for local television, and the patience to manage it all, hunting for content between different apps and hitting their TV remote’s input button an awful lot.

Even as cord-cutting becomes the norm, that understanding has stuck with consumers. Relative to cable TV, with its long history of skyrocketing monthly bills, streaming was supposed to be cheaper, though it required more effort on the user’s part.

This is precisely why the consumer that once stomached a $150 cable bill for years won’t stay consistently subscribed to 5 or 6 streaming services for under $20 each. The more they have to work, the less they’re willing to pay. For the media firms, this means what they earn via direct-to-consumer streaming will likely never match what they were getting via the old cable bundles, neither at the individual media company level nor at the aggregate level of the whole media industry.

While it’s true that finding content has become more cumbersome, this complaint is not the heart of the problem, it’s a factor of that notion that more work should equate to more savings.

The media industry has inadvertently trained its would-be customers to be bargain hunters. Due to regional cable monopolies, those customers never had much choice before. If they wanted pay-TV, no matter where they got it from, they got all the familiar channels all the big media empires. That’s no longer the case, and there’s thus no loyalty to any of them. Once a customer has watched the latest season of their favorite programs, there’s little reason to keep paying for the streaming service it was on while waiting for the next.

The Solutions That Never Were

In spite of these fundamental challenges in the new media industry landscape, most of the media firms and Wall Street have shrugged it off. One favorite refrain is that consolidation is inevitable, and thus M&A will sort out the industry’s troubles. But looking at the industry from the aggregate level, rather than the individual firm level, it’s easy to see that some big mergers don’t offer a way out. The shift from wholesale economics to retail economics remains a problem. A larger vault of content and a combined subscriber base doesn’t address the inherent instability of that subscriber base, nor the fact that average revenue per user remains much lower than it was for linear TV subscribers.

Worse yet, consolidation comes with its own downsides. Costly integration, regulatory scrutiny, layoffs, cancelled content, and more. Ultimately these mergers are designed to lead to a stronger company in the end, but collateral damage to the larger ecosystem can’t be ignored. It also must be pointed out that these big mergers aren’t guaranteed to work out. Time Warner was once the crown jewel among programmers, boasting successful cable channels, movie studios, and the premium HBO brand. Yet twice now, the firm has been involved with mergers where the promised synergies and advantages never materialized: first with AT&T, then with Discovery.

Another often-repeated idea is the notion that some “great rebundling” will simplify things for consumers and get churn under control. Where there is some evidence that bundles reduce churn, it certainly doesn’t do so at the level necessary to make the economics of streaming work.

Two further challenges limit the effectiveness of bundling. First, they depend on deep discounts, which constrains revenue further the economics of making streaming profitable are already so challenging. The second is that consumers often realize that it’s cheaper still to subscribe to binge and bounce, even with deep discounts on the bundle. As streaming prices continue to rise, particularly as the economy remains uncertain or takes a hit from tariffs, this pressure pushing consumers towards thriftier ways will remain.

Sports represent another idealized savior, and with the way media companies are spending on TV rights for college and major league games, they’re definitely betting that they can draw in subscribers. But again, the numbers just don’t bear that out.

Take for example, Comcast’s deal bringing NBA games to Peacock. At $27.5 billion, Peacock would need to raise prices by more than 50% and not lose any subscribers doing so, just to break even. So the idea that adding sports, at these kinds of prices, can generate enough growth to both offset their costs and leave streaming services in a better place is nothing short of voodoo economics.

Last but not least, is the idea that cable companies can reinvent themselves as streaming bundlers, bringing wholesale advantages back with them. This one is perhaps the easiest to debunk given the current situation. These deals that give cable subscribers access to streaming services are notorious for juicing subscriber numbers. But they contribute no additional revenue to the streaming service bottom line, it’s simply a way to manipulate the numbers to make cable subscribers appear as if they are streaming subs too. But when cable TV goes away, so too will these “zombie subs” and all the revenues associated with them (which to be clear, are in the form of cable retrans fees). Many of these will indeed sign up for a streaming service or two after ditching cable, but it’s highly unlikely that any of them will subscribe to the whole bundle of services they were receiving via the cable wholesale deals.

FreeCast Brings Scale Back

Getting the media industry back on track requires a multi-faceted approach, and FreeCast is currently the only solution in the game within spitting distance of bring all those necessary pieces together. That’s no accident, as the company has spent over 10 years and more than $50 million doing just that, after planning for this exact scenario.

The major advantage that FreeCast offers is that it gets the big programmers out of the costly businesses that they don’t want to be in: technology, distribution, direct-to-consumer retail, and marketing.

By consolidating these functions within a single entity rather than having each major media firm running their own operation, the duplicated costs problem is effectively eliminated and a cost savings of billions is achieved industry-wide.

FreeCast has the technology stack needed for these companies to easily plug into and offer their content on our platform, with whatever monetization means they choose: free with ads, subscription, pay-per-view, or some combination of the three.

With its own focus on growth through wholesale deals, particularly in the telco and multi-dwelling industries, FreeCast is able to offer immediate scale, with little to no marketing cost. And like the cable contracts of the old days, these customers are sticky and do not churn out or need to be reacquired repeatedly.

Together this allows media companies to focus on what they do best: making great content. That’s how it was before streaming and cord-cutting disrupted the industry. Getting content from the film can to screens where viewers would see it was someone else’s problem, other businesses existed to do that.

Getting back to that model is what can restore stability to an industry that’s been roiled by a disruptive decade. This isn’t a lifeboat on a stormy sea, this is a way forward with economics that work.

Better yet, it works well for consumers too, eliminating many of their main complaints about streaming: there’s too many apps, too many subscriptions to manage, content is too hard to find. A single unified interface, available on all devices, with all content from all providers massively reduces the friction for consumers. This directly tackles that old streaming trade-off of doing more work to pay less. The easier that experience is, the more comfortable consumers will be opening their wallets.

Certainly all the challenges facing the media industry won’t be resolved overnight by one platform. The media industry can’t turn back the clock 20 years and become what it was before. FreeCast offers a path forward that is rich in opportunity, but only if the majority of the industry gets on board with it. While no guarantee, it’s a best shot at a return to those heights of success or perhaps even something greater. That sets it apart from any merger, bundle, or sports deal.