Netflix co-CEO Reed Hastings didn't even hesitate when he made his prediction, delivering it with the nonchalance of someone making a passing comment about the weather outside.
"It's definitely the end of linear TV over the next five to 10 years," the tech boss said, without a hint of doubt, before continuing to discuss Netflix's financial results for the second quarter of the year.
What's staggering is that this statement came as the popular streaming company reported 970,000 cancellations around the world over the three-month period – around half what they initially forecast they would lose.
Even in the parallel universe of Silicon Valley business, so often beholden to different success metrics, Hastings conceded this attrition was less than ideal.
"We're talking about losing one million instead of losing two million, so our excitement is tempered by the 'less bad' results."
The departure of these users from Netflix is indicative of the winds of fresh competition sweeping through the industry and introducing a range of new streaming options – some of which come without the baggage of a subscription charge.
While Netflix stagnates, free ad-supported streaming services such as Pluto, Tubi, Roku and Peacock have doubled their user base in the US in recent months.
It was enough to make the cantankerous media critic Bob Hoffman gloat: "Remember when advertising was going to die because the web and streaming were going to kill it? Well, it turns out the web is the world's largest repository of that which it was supposed to kill, and now here comes advertising to save streaming's ass."
If anything, it's evidence that Hoffman's 2015 analysis that "TV isn't dying; it's having babies" is perhaps out of date now, because it appears that the babies TV had are themselves having babies now.
New Zealand is still playing catch-up in terms of our ad-funded options, but the local streaming market has also become more diverse with the entry of a range of new subscription services.
The latest data released by researcher Roy Morgan shows that subscription streaming services are now watched by more than 2.95 million New Zealanders aged 14 and older in an average four-week period – encompassing well over two-thirds of the population.
Netflix remains by far the most popular service, attracting 2.2 million viewers with hit shows like Stranger Things. This reach is up around 100,000 from what it was for the same period 12 months earlier.
But Hastings' business is well off the pace when it comes to growth. The title of the fastest-growing paid streaming platform belongs to relative newcomer Disney+, which has ballooned by 481,000 viewers to reach an audience of 1.2m on the back of shows like Star Wars spinoff Obi-Wan Kenobi and sex-fuelled hit Pam & Tommy.
And after around six years in the local market, Amazon Prime also saw a decent surge of around 166,000 to now reach 460,000 viewers. This platform will be the one to watch in the coming 12 months, given the company's huge splurge on the Lord of the Rings series – estimated to be the most expensive TV show ever made.
Interestingly, the second largest subscription television provider is the Sky portfolio (Sky TV, Neon and Sky Sport), which remained relatively stable reaching an audience of around 1.39 million people. It turns out that locking the All Blacks within your walled garden can still pay dividends, even in a changing media landscape.
Sleep is our enemy
The Roy Morgan data viewed in isolation confirms what we already know: more Kiwis than ever are streaming their favourite shows online.
But the telling insight comes from looking at the amount of time viewers spend on different platforms over the course of the day. The best data we have on this comes from the NZ On Air "Where are the audiences" report, the most recent of which was released in August 2021.
This data shows the amount of time New Zealanders spend watching television has declined from an average of 160 minutes per day in 2014 to 118 minutes in 2021. Meanwhile, SVOD streaming surged from almost zero in 2014 to 86 minutes in 2021.
At the same time, the overall reach of television among New Zealanders has declined from 83 per cent in 2014 to 56 per cent last year. SVOD streaming, as you can imagine, shot from a measly 6 per cent to 51 per cent.
The decline in media minutes is telling because this is the limited resource media companies crave. Media minutes are the reason why Netflix boss Hastings famously said that sleep is their biggest competitor.
The television industry has long been able to drum home the fact that it still commands the most media minutes of all channels, and it's long been a persuasive argument to advertisers.
But data out of the US in the past few weeks showed that streaming viewership had surpassed cable for the first time.
And given that the NZ On Air report is already a year out of date, there's every possibility that we could be on the verge of the same transition point hitting New Zealand. And once that happens, it won't be a question of whether TV could ever claim it back again but rather how many media minutes television will ultimately be able to hold onto.
Beyond the Big Smoke
Asked for his thoughts on the opinion of the Netflix boss that linear television is on life support, TV Three boss Glen Kyne can't hide a grin. He knows a corporate jab when he sees one.
"Well, of course, they have the interest to say that," says Kyne, who now serves as the senior vice president across Australia, New Zealand and Japan for Three's new owner Warner Bros Discovery.
"Look, the way we think about the future of television and video is increasingly digital-first and I don't think that's a surprise to anyone. It's just the way consumers want to engage with their content now. Even large-screen television set manufacturers are increasingly digital first."
Where Kyne differs from Hastings is in his opinion of much longer linear television can survive amid this digital migration – particularly in this country.
"In New Zealand, there are still many people who are going to continue to consume television in a very traditional sense for a very long time – either by free-to-air or by the Sky platform," he says.
"Both those platforms have a stranglehold on regional New Zealand viewership because broadband penetration is still mixed in this country."
Kyne says it's important not to take the worldview of the Auckland metro media folk as representative of what's happening across the country.
He isn't wrong. You only have to consider that the single biggest local TV story of the last few months was sparked by local farmer Geoff Ross' unconventional methods showcased on an episode of Country Calendar (New Zealand's second biggest TV show after the news) to understand that the rural community is still tuning in religiously.
"We tend to live in a different world than regional New Zealand, where people still like to watch the All Blacks on a Saturday night on Sky and then tune in to The Block on a Monday, Tuesday and Wednesday night."
Habits take time to break, and Kyne sees the future of New Zealand television being defined by two timelines: the steady decline of traditional television on the one hand and the uptick in digital viewing on the other.
Eating the TV pie
The positive in this broader trend is that TVNZ and Three's on-demand platforms have both grown quickly in popularity and revenue.
The recently rebranded TVNZ+ reaches more than two million New Zealanders while ThreeNow has seen 145,000 new accounts registered in the year to date.
For New Zealanders who don't want to fork out subscription fees for streaming services, these are the go-to media channels – and they also offer a supplementary service to those who are paying monthly subscriptions to one of the SVOD providers.
Revenue is also growing quickly in the digital realm, with figures from the Advertising Standards Authority showing that the amount spent on digital television in 2021 had risen to $71m from $44m a year earlier.
This is still relatively small compared to the $534m made from television advertising in 2021, but the growth on the digital side bodes well for TV providers.
The monopoly local providers have had on the digital television streaming revenue is set to come to an end as the international juggernauts sharpen their knives for a cut of the advertising pie.
After years of living the good life and burning through billions chasing passion projects, streaming companies are facing pressure to start paying the pipers who gave them the resources to draw in so many eyeballs so fast.
This is part of the reason why Netflix recently announced that it would break its cardinal rule and launch an ad-funded tier that would offer a lower subscription fee for those who don't mind watching a few ads during a binge-viewing session.
You need only look at how effective Google was at vacuuming up classified advertising from print media in the last two decades to know that the behemoths of Silicon Valley could have taught Daniel Plainview a thing or two about drinking a competitor's milkshake.
As Netflix enters the advertising market, it will look to draw money from other media channels. New Zealand's advertising sector isn't a central bank and won't generate more marketing dollars out of thin air.
Marketers have set annual budgets and will put their money toward the channels that have the largest audiences and the most cultural relevance – two areas where Netflix is dominant. The challenge for the company will lie in how it goes about introducing ads without upsetting the existing customer base, which has become used to ad-free content.
TVNZ chief executive Simon Power will be keeping a close eye on the company as it evolves its offering in this market.
"Competitors like Netflix, Disney and Amazon are prepared to lose billions of dollars a year to create a successful offering, and we're not naïve to the scale of the challenge," he says.
Power increasingly sees TVNZ as playing a complementary role to the content that's being offered by these streaming giants.
"Our sustainable point of difference remains TVNZ's commitment to ensuring local content is at the heart of our offering."
This point is driven home by the fact that eight of the top ten rated shows over the past year were all locally made TVNZ productions. It's telling that nothing on linear TV was more popular than 1News (with an average audience of 660,000) and Hyundai Country Calendar (average audience of 591,600).
Asked whether TVNZ was considering the option of countering Netflix's advertising offensive by finally pulling the trigger on an ad-free subscription version of TVNZ+, Power argued that it probably wasn't the right time in the middle of a cost-of-living crisis that's left many New Zealanders questioning which subscriptions they can afford to retain.
Despite this, Power did leave the door slightly ajar on the possibility of introducing a few new tiers in the future.
"We expect multiple customer propositions will be required to meet the evolving content needs of our different viewer segments, and this may include the ability to have a subscription model, but for now TVNZ+ remains a free service ... The goal in developing our digital offering is to add to what we currently do rather than take anything away."
Old rivalry, international flavour
Like a modern media consumer, TVNZ's attention will have to be divided as the company still has to contend with its old rival in this market: Three, which is now owned by the entertainment beast Warner Bros Discovery.
The transition of Three's ownership from a private equity fund to an entertainment company is significant because the local arm of the business is now backed by a firm with a war chest of content and an innate understanding of how the entertainment business works.
Glen Kyne, Warner Bros Discovery senior vice president across Australia, New Zealand and Japan, makes no secret of the advantage the new ownership structure has given the business.
"You're talking about a company that has 50,000 employees around the world," Kyne says.
"It's the biggest media business in terms of content output, with a number of big brands. You've got Game of Thrones, the DC Universe, you've got all of the traditional Discovery content and you've got all the free-to-air stuff."
It's almost incongruent to see this confident swagger in the executive ranks at Three. It wasn't long ago that the television company's former news boss wrote a series of scathing op-eds claiming that the local market was stacked in favour of state-owned TVNZ.
When it comes to linear television, those old advantages are still apparent in the overall ratings showing TVNZ well ahead of Three when it comes to the breakfast timeslot, the 6pm news and current affairs programming at 7pm.
But this is now only one element of their competition and doesn't offer a reflection of what's happening on the digital side.
While TVNZ is mulling the possibility of finding new sources of revenue in the online streaming space, Warner Bros Discovery has been experimenting in this space for years and is even ahead of Netflix in some aspects.
Warner Bros Discovery owns HBO Max and Discovery Plus, both of which have a subscription and ad-funded tiers already operating in the international market. The technology has been tried and tested and it's only a matter of time until those services are eventually rolled out in New Zealand.
"Our operating model is about being highly diversified and having our content operating in every market segment possible," says Kyne.
"We want to be in free-to-air, we want to be in pay TV, we want to be on BVOD [broadcaster video on demand], we want to be on SVOD."
Kyne says there's been a marked shift internally at the business over the last year.
"The future of ThreeNow is where we're focused at the moment. We went from years of under-investment to heavy, aggressive investment in the past 12 months. We've focused on increasing our distribution to more connected TVs and that will continue to happen over the next couple of months."
The point here is that the battle for the Kiwi eyeballs will be fought in the messy streaming landscape, where New Zealand content will be pitted against walls and walls of content from all over the world.
As this unfolds, the tricky bit will be ensuring that New Zealand stories still find an audience among all that choice – and this is really where the cultural challenge lies.
TV is dead, and we have killed it
The narrative surrounding the death of linear TV is somewhat analogous to Friedrich Nietzsche's assertion that "God is dead". It's easy to gleefully pick up the phrase and dance on the grave of the fallen institution. But what's often missed in this jubilation is the deep sense of consternation Nietzsche expressed immediately after that phrase: "God is dead. God remains dead. And we have killed him. How shall we comfort ourselves, the murderers of all murderers?"
It's true that television is dead, dying or at the very least changing, but what will we lose in the process? What do we give up when our stories are no longer guaranteed an audience in this changing world?
A 2020 study conducted by Colmar Brunton on behalf of NZ on Air found that New Zealand children are increasingly consuming stories, songs and games on international media platforms and missing out on local content. To put this into context, YouTube reached 51 per cent of children under 14 while TVNZ 1 only hit 16 per cent.
The Broadcasting Standards Authority expressed concern that was having an impact on their sense of identity and belonging, perhaps best reflected by the fact that nearly two-thirds of children don't have a favourite NZ-made show.
Anecdotally, parents are also starting to notice the impact of this on the way their children talk: "cookies", "candy", "diapers" and "gas" have become common substitutes for their Kiwi predecessors "biscuits", "lollies", "nappies" and "petrol".
But it's not only children who are affected by this. True watercooler TV moments are becoming rarer as streaming options expand – and they're even rarer for New Zealand content.
Speaking to the Front Page podcast earlier this year, Spinoff founder and media critic Duncan Greive noted that audiences of perennial favourite Shortland Street are sitting at roughly 200,000 to 250,000 in terms of overall audience – around a third of where it was at its peak.
Yes, Shortland Street does still attract hundreds of thousands of catch-up streams every month, but the cultural relevance of a show that once had us clinging desperately to its cliffhangers is no longer as strong as it once was.
As linear television continues to decline, local shows like Shortland Street will increasingly compete with the likes of Game of Thrones, Lord of the Rings, The Bear, Pam and Tommy and whatever other spaghetti the streaming giants are throwing at the digital wall.
Make no mistake, global executives sitting in their head offices oceans away from New Zealand have little to no concern about regional variations in taste, local cinematic traditions or our collective memory.
Even if we did continue to pour money into telling those local stories, there's no guarantee that New Zealanders will opt to watch these shows in place of those coming from other parts of the world.
So what happens when our stories become the trees falling in the empty forest? I guess we'll just have to wait and see.
Maybe Netflix will have a tell-all documentary about it one day.
