Listen: MediaTalk | Season 3 | Ep. 2 - New strategies in play in 2025 amid broadband, streaming saturation

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Mike Reynolds: Hi, I'm Mike Reynolds, a senior reporter covering the media industry with S&P Global Market Intelligence tech, media, and telecom news team. Welcome to "MediaTalk," a podcast hosted by S&P Global, where the news and research staff explore issues in the ever-evolving media landscape. Happy New Year, everybody! Today we're going to talk about what 2025 will bring for the broadband and wireless markets, as well as the streaming space. I'm joined by a trio of S&P Global Market Intelligence Kagan analysts: John Fletcher, who specializes in US broadband and multichannel; Lynette Luna, who tracks US wireless carriers; and Seth Shafer, who writes about subscription and ad-supported streaming, among many other things. We're going to begin with Seth. I wanted to talk first about the rise of ad-supported video-on-demand services. Amazon Prime Video took the plunge early in 2024 and added a lot of inventory that impacted pricing in the market. Netflix began with ads in November 2022, Walt Disney Co.'s Disney+ a month later; NBCUniversal Media LLC's Peacock, Warner Bros. Discovery Inc.'s Max, and Paramount Global's Paramount+ are all in the mix with ad markets. What are your thoughts on where this stands and how many ad dollars are going to shift from linear to the streaming world?

Seth Shafer: Yeah, Mike, interesting questions. I think obviously the ad tier push has taken over streaming. So we have all the major services, except for Apple TV Plus, with an ad tier. You mentioned this year has been interesting; some of the big companies in quarterly earnings have talked about the fact that this abundant supply of inventory has kept pricing down, making it a little bit difficult to realize as much as they'd like on the pricing side. That said, obviously, this is the wave of the future for streaming video — not just the potential in the ad market in terms of ad revenues themselves, but being able to offer an inexpensive tier alongside your ad-free tiers. So that tool to expand your addressable market and pricing, all those things are good. I think the question that will start to get answered in 2025, hopefully, is: will these audiences at each of these individual sites, as we go down service by service with an ad tier, reveal what that ad viewing audience is? The operators have been fairly coy about avoiding telling us, "Oh, there are 30 million ad-tier households in the US" and things like that.

So it's still a bit of a guessing game, and why that's important is — getting to your point finally — when you're shifting to streaming, obviously that's where a lot of advertisers want to be. There are advantages on the streaming side: addressability, targeting, better analytics. What's holding some of them back, though, is still just reach. They're having to do ad buys at different services. The potential audiences are maybe 5 million to 20 million to 30 million, something like that. So it's difficult for them to do large buys like they would prefer in a single spot. I think this year will be interesting to see if we get a little more insight into what these audience sizes are and if the services can continue to scale it up so that these become more and more appealing one-stop buys for advertisers.

Reynolds: Yeah, I think to that end, to use your word, they've been coy about this and that and how many people are actually doing this. Nielsen Holdings PLC claims that they have their gauge survey, which estimates how many people are watching streaming at large, cable broadcasting, and it breaks it down for the platforms. They say that in the first quarter, they're going to start releasing more specifics, so we'll see. It's going to be interesting.

Shafer: Yeah, it'll be interesting to see, as far as Nielsen and the entire industry, whether it's streaming video or digital. We've really been looking for robust analytics that capture multi-platform audiences. That's been a bit of a deterrent for some advertisers and brands to really jump in feet first into these new worlds of advertising. So if Nielsen can pull that off, and it seems like this past year their service that you mentioned, the gauge, has finally gained some traction, with more operators in the space referencing it in earnings calls and things like that. So it would definitely be nice to have a unified, trusted currency for audience sizes and things like that.

Reynolds: Let's switch over to sports a little bit. For a lot of the national rights deals, the game plan for the NFL — and maybe even more so now with the new NBA contracts— seems to be a combination of broadcast and streaming. Seth, your thoughts on that model?

Shafer: Yeah, that model is not going away anytime soon. So as much as we get excited about talking about the shift of live sports to streaming, however you slice it — from revenues to games, broadcast to things like that — a sizable majority of all of that is still being generated on the linear side. I can't predict that world wholly flipping over this year or anytime immediately, but Netflix, I won't say they caved in. There was pressure on Netflix or expectations on Netflix to get into live sports for quite a while. Whatever you think about sports entertainment, wrestling, or Tyson vs. Paul and things like that, the NFL games that Netflix has, the two NFL games, obviously that's a lot of sports. We can't quibble anymore over whether Netflix is involved in a lot of sports. But that model will be the model, I think, for a while, in that rights still are primarily tilted toward linear broadcast, but that the streaming side is marketed more and more and just becomes a baked-in assumption for the average household with a lot of these services — that you get entertainment plus sports too.

Reynolds: Yeah, that makes sense. And as I've cut my Peacock cord, with basketball coming up in the new season, there are a lot of games going to be on Peacock, so I'm going to be back in there. Seth, I appreciate you taking the time to give us a little look ahead into 2025, and we'll talk again soon. All the best in the new year.

Shafer: Thanks, Mike.

Reynolds: Next up is Kagan analyst John Fletcher, who specializes in multichannel and broadband. How are you doing, John?

John Fletcher: Great. Thanks for having me.

Reynolds: All right, Amazon's satellite broadband Kuiper [low-Earth orbit] LEO is going to launch in 2025. Sensibilities, pricing for that — what are we talking about here, John?

Fletcher: That's the plan. They're going to launch Kuiper and have it commercially available this year. They have been delaying it for a number of quarters, so we'll see what really happens. I don't know what they're going to price it at, but that's my big question with low Earth orbit and thinking about it this year: Is Amazon going to come in and charge market rates, or are they going to come in and do what fixed wireless did in the first couple of years and compete on price to steal share? That's the question, and I'm not sure what they're going to do, but if anyone can compete on price and run an operation at a loss for a while, it's going to be a company like Amazon.

Reynolds: Yeah, they've done that in other places. Exactly. We're supposed to have a new FCC chairman, Brendan Carr, coming in. What do you think that means for Starlink vis-à-vis BEAD funding? And I love to say this: Broadband Equity Access and Deployment program.

Fletcher: Yeah, Space Exploration Technologies Corp.'s Starlink for the last four years was losing access to some federal funds for broadband because their uplink speed was below 20 megabits per second. So they said, according to our new definitions that we want to have here at the FCC, you are no longer defined as a broadband service. Therefore, you can't get BEAD funding. As you may have noticed during this election, the Starlink/SpaceX CEO [Elon Musk] is pretty chummy with the incoming president and …

Reynolds: Yes, he is.

Fletcher: … who probably … I would be curious. That's something I'm going to keep an eye on to see if maybe Starlink is going to have access to BEAD funding again or if Starlink even wants or needs it. So that's something I'm curious about, too, this year.

Reynolds: All right, John, we've talked about 2024 being a rough year for cable on the broadband side. Is that going to change in 2025?

Fletcher: It'll be a better year than 2024, I'm hoping. But still, the overarching trend is that fixed wireless is growing, and that's just going to be a challenge for cable broadband for the next year. I think a lot of the cable broadband operators are coming to terms with the fact that fixed wireless is not a temporary event. I'm just looking at some new survey data this morning. I published something last year that said of all the broadband technologies out there, fixed wireless customers were the happiest — 55% said they were very satisfied with their broadband. And that's phenomenal for a broadband operator. The new data as of this morning is that number is now 60%. So people are even more in love with fixed wireless, and AT&T Inc., they recently launched another last few quarters. They actually came in at two-thirds very satisfied, which is phenomenal. Broadband operators aren't known for having a lot of love from customers, so these are big numbers for fixed wireless for sure.

Reynolds: John, you were talking about the high satisfaction rates for fixed wireless. Is there more significant growth ahead, or are the easy pickups of those in the rearview mirror? What are your expectations for fixed wireless in 2025?

Fletcher: That's the question. And I think it's both. I think there's more growth ahead. A lot of the easy pickings are in the rearview mirror, but as T-Mobile US Inc. said last quarter — and that would be the third quarter of 2024 — a lot of their fixed broadband customers are coming from cable. They're not people who've never had broadband. So they're stealing customers, and both T-Mobile and Verizon Communications Inc. in the last month re-upped on their forecast. So in 2022, both of them gave a fixed wireless forecast for what their business would be like in 2025. They both crushed it. They beat their expectations, which was a bold forecast to publish. They hit it, and they refreshed it. They said by 2028, I think just between the two of them, they're going to have 17 million fixed wireless customers in three years' time. So definitely more growth ahead for fixed wireless in the US at least. That's an anomaly so far; I'm not seeing this anywhere else in the world.

Reynolds: All right. Seth has talked about this. Are you expecting more "hybrid" video subscription packages from Comcast Corp. and Charter Communications Inc.? It's a combination of linear, streaming, and virtual.

Fletcher: Absolutely. That's the most interesting thing that happened in the second or third quarter of 2024, is that Comcast and Charter started reporting video losses —that's still a losing business — but they started reporting improvements because of these new hybrid packages. In addition, Comcast has a purely streaming package where it's just three of the traditional SVOD OTT streaming operators, whatever you want to call it. So they're going to be more and more flexible going forward.

Both of those operators and Altice USA Inc. just re-inked all their carriage agreements with their programmers in the last year. I think we're going to see a whole lot of interesting new packages coming from these three operators in terms of keeping things so that streaming and virtual is not a separate thing from a traditional multichannel service. They're going to take that bundle into streaming, and I think we're going to continue to see improvements with video losses at those operators, which is a glimmer of hope for what's been going on with video.

Reynolds: Yeah, maybe that's a new way of the world for some. We'll see. Thanks, John, for spending time with us today.

Fletcher: Anytime. Happy New Year.

Reynolds: Thank you. Lynette Luna is up next in the virtual "MediaTalk" house. Lynette is a senior research analyst who covers US consumer mobile and tower markets. How's it going, Lynette?

Lynette Luna: Oh, very well, thank you.

Reynolds: Let's start by talking about standalone 5G. You told me it's the gateway to more advanced 5G services. Can you give us a sense of what that means and what kind of services we are talking about?

Luna: When 5G came along, there was a lot of flexibility in the standard. It allowed operators to launch a service based on their 4G architecture, which kind of simply turned networks into ones that could offer faster broadband speeds. So the real transformation comes with standalone 5G and the move to 5G advanced through releases 17 and 18, and those are complete. So that introduces a 5G core, and it allows additional capabilities like ultra-reliable, low-latency communications and things like massive IoT with really enhanced location positioning — those types of things. And, of course, faster data speeds and better capacity.

Reynolds: Is the industry prepared to hit the accelerator on standalone 5G in 2025?

Luna: Yeah, it's been there actually. T-Mobile launched what it called the world's first SA network in 2020, but a lot of other operators didn't move. It's expensive, and the economy was pretty poor for a while. So it's expensive for some operators, and it's a model where it's "build it and they will come," because these are new capabilities; it's not clear what the market demand is. So you have to throw it out there, market this stuff, and create demand for it.

Reynolds: So if T-Mobile has been ready for a while, if it moves, will others follow? If you don't move, will you be left behind here?

Luna: Not necessarily. It depends on what market. The US is a lot more advanced. Europe is really starting to come on strong. Our most recent 5G tracker tracks 5G launches, but we also track standalone launches, and out of the 290 operators that have launched 5G in about 106 markets, at least 69 in 40 markets have activated 5G standalone networks as of June 30, 2024.

China and the US, along with some other more advanced markets, have transitioned, and smartphones are out there; they're plentiful. It's just a matter of creating that economy of scale and getting everybody to start moving. We'll see T-Mobile starting to push the envelope on that as well.

Reynolds: Artificial intelligence (AI)—I won't say it's ubiquitous, but it's nearly growing rapidly. It's in phones, networks, and customer care situations. How big is AI for the industry here?

Luna: We heard at T-Mobile's capital markets day how big AI is going to play in their network, in terms of everything from being able to do a better job of planning coverage. The carrier market is traditionally one where they have to overbuild to make sure they have enough coverage and capacity. Now, with AI, they can pinpoint the areas where they need to add more capacity or coverage. Customer care is proving to be pretty invaluable for all operators — just being able to predict somebody who might churn or being able to offer the right kind of services to certain segments of users.

So that creates a lot of efficiency. I just saw that T-Mobile said 40% of their post-paid phone ads were all digital, using things like the T-Life app or online, and those all save costs for operators.

Reynolds: All right. So it's in many crevices of all parts of the business. As you look at 2025 overall, Lynette, it looks to be a year for greater automation than ever for wireless operators.

Luna: Yeah. It'll be interesting to see the impact on CapEx and on different operational efficiencies and costs. I'm looking forward to seeing how companies like T-Mobile kind of push the envelope. They have some partnerships with different AI companies like ChatGPT.

Reynolds: So a lot to look forward to as we enter 2025. Lynette, again, best to you in the new year.

Luna: Thank you very much for having me.

Reynolds: That concludes this episode of "MediaTalk." This is Mike Reynolds. Thanks to all of you for listening. We'll catch up soon on the next edition of "MediaTalk." Happy New Year, everybody!