With their core revenue base (e.g., advertising and carriage fees) shrinking amid cord-cutting and the rise of streaming options, traditional media companies are faced with a growing challenge as the pay-TV ecosystem undergoes changes.
Despite US pay-TV penetration having stabilized after years of decline, holding in the low to mid-50% range among U.S. internet households, it is far below what it once was, according to Parks Associates research. At the same time, SVOD adoption now exceeds 90%, and the average subscription TV household subscribes to more than six video services across pay-TV and SVOD.
Warner Bros. Discovery (WBD) saw its Global Linear Network revenue decrease by 17% YoY in Q2 2026, with distribution revenue declining 9%, predominantly due to domestic linear pay TV subscribers falling by 10%, and advertising revenue falling 27% due to a 17% decline in domestic audience. This decline in carriage and advertising revenue is not unique to WBD. All the broadcast and cable networks are seeing similar declines in network revenue.
Despite this, pay TV still generates significant revenue for traditional media companies. In Q2 2026 WBD Global Linear Network generated $3.991 billion in revenue and had an adjusted EBITDA of $1.446 billion.
The challenge isn't necessarily for traditional media companies to save their broadcast and cable network business but rather to use their existing economies of scale to finance their transformation into something else.
If done properly, traditional media companies can use their existing broadcast and cable network cash flow to build digital subscriptions, advertising, commerce and transactional businesses around those audiences, while simultaneously acquiring complementary assets cheaply and becoming diversified media/platform companies.
Comcast began its transformation into a pure-play broadband and communications company, which will be completed when it spins out NBCUniversal and Sky in 2027, when it spun out its cable networks and select digital properties into an independent company, Versant, in January 2026.
Many might consider this Comcast culling a dead-end business or at least one that is a drag on their balance sheet, and from Comcast’s perspective they might be right but for Versant this presents them an opportunity to reinvent themselves. And in doing so provide a roadmap to other traditional media companies.
Implications for Versant
There are a number of implications for Versant.
- Strategic freedom. Probably the biggest benefit for Versant is that it now has the freedom to do what it wants. Inside Comcast/NBCUniversal, Versant's cable networks and digital properties had to compete for capital and strategic attention with Peacock, Universal Studios, NBC, theme parks and Comcast's connectivity businesses. All of which likely took priority over Versant’s cable networks and digital properties.
As an independent company, management can make decisions purely around Versant, investing in premium content, extending the reach of its brands and accelerating digital-platform growth. According to Versant, its brands reach roughly 100 million people monthly, with about 60% of the audience associated with live news and sports. Whether they are traditional media companies or pure-play digital media companies, these companies are increasingly positioning themselves around high-value audience verticals, building a broad ecosystem of complementary offerings that keep viewers within a single brand family.
- Investment and acquisitions. Independence gives Versant something it didn't really have inside Comcast, permission to invest in businesses that make sense for a mature-media company even if Comcast wouldn't want them. That opens the possibility of Versant acquiring complementary cable networks, sports rights/businesses, digital-media properties, transactional platforms or other assets whose valuations have fallen because of disruption in traditional media. There could even be a broader strategy of rolling-up other broadcast and cable networks, eliminating duplicate overhead, improving negotiating scale with distributors and advertisers, and harvesting cash flow while migrating audiences toward digital businesses.
Some companies will be buyers while others will be sellers. We have already seen some of this occurring with Paramount Skydance’s pending acquisition of WBD, FOX’s acquisition of Roku, and Hearst’s acquisition of Disney’s 50% stake in A&E Global Media. The Hearst acquisition is particularly interesting as we have major media companies on both sides of this deal. Hearst betting that established media brands and large content libraries can still generate significant value if monetized across multiple platforms rather than primarily through linear television. While Disney is selling off a non-core asset and using the $1.2 billion it is receiving to strengths is core properties. This begs the question what will Paramount Skydance do with its cable assets when it acquires WBD, or NBCUniversal once it is spun out of Comcast in 2027.
In addition to rolling up linear programmers there are investment opportunities in tangential businesses. Versant has recently acquired Free TV Networks, INDY Cinema Group, and Full Swing, the golf-simulator and technology company. The Full Swing investment is particularly interesting as it shows how Versant is moving from channels towards audience ecosystems supported by multiple forms of monetization.
- Sports and live programming. Traditional media companies must ensure that their broadcast and cable networks retain value while developing their digital business. Sports and live programming can help them do this. According to Parks Research, 41% of traditional pay-TV (e.g. cable, satellite, IPTV) subscribers subscribe to access live news and TV events and another 37% to access live sports.
This is a key rational behind Versant’s investment in the rights for the WNBA, USGA, Pac-12 and League One Volleyball. Owning these rights makes Versant more resilient than just focusing on entertainment-heavy cable networks that are easier for consumers to replace with streaming. With the rights for the Emmy Award coming up in 2027 there is another opportunity for traditional media companies to retain some tentpole content.
- Digital is the centerpiece. Looking at traditional media company balance sheets, we see that non-pay TV revenue only accounts for a small part of their total revenue. This will have to change. Traditional media companies need to become vertical audience platforms built around strong media brands, rather than simply streaming versions of cable channels.
A measure of success will be what percentage of traditional media company revenue comes from non-pay-TV sources. In 2025, non-pay-TV revenue accounted for 19% of Versant’s total revenue. Within the next three to five years Versant expects non-pay-TV revenue to grow to roughly one-third of total revenue and eventually reach 50%.
While there is a window of opportunity for traditional media companies to transform it will not be open indefinitely.
While cord cutting has seemed to have stabilized somewhat in the short-term, the issue is not going to go away. Traditional media companies need to manage what is essentially a controlled migration away from traditional pay TV. The challenge isn't necessarily to stop linear decline but rather to make digital/platform revenue grow quickly enough that they become less dependent on linear before those economics deteriorate too far.
Michael Goodman is Director of Entertainment Research and a Senior Analyst at Parks Associates and the founder and principal analyst at Nexus Media Research. Goodman is an accomplished media and entertainment analyst with a strong history of providing clients with market intelligence and strategic insight into the evolution of the TV industry. Key areas of research include streaming TV platforms and devices, OTT video, connected TV advertising, video games, and cloud gaming. Prior to founding Nexus Media Research, Goodman was Director, Connected TV Strategies at TechInsights and before that Goodman was Director, TV & Media Strategies at Strategy Analytics.
Parks Associates is a leading market research firm tracking streaming services, consumer adoption, market trends, competitive dynamics, and emerging business models across the video entertainment landscape. Michael Goodman is Director of Entertainment Research at Parks Associates, leading research on streaming video, connected TV, OTT services, advertising, gaming, and emerging entertainment business models. Visit www.parksassociates.com for more information.
Industry Voices articles are opinion columns and don’t necessarily represent the views of StreamTV Insider.