The Economics of Convergent TV in 2025

Five big questions re: TV’s business model:
1) How much revenue does streaming generate per household compared to traditional pay-TV?
2) Which types of entertainment make the most money per hour?
3) Which TV content makes the most per hour?
4) Why does revenue per hour matter?
5) Without generating more revenue per hour, how can media companies increase profits?

How much revenue does streaming generate per household compared to traditional pay-TV?

Monthly revenue per household according to Doug Shapiro:
1) Traditional pay-TV - $171
2) Streaming TV - $37

Wow: Linear TV generated close to $5 per household for every $1 streaming made.  The gap grows to $8 for every $1 when we look at advertising alone.

Advertising revenue per household/month:
1) Traditional pay-TV - $69
2) Streaming TV - $9

Be smart: Streaming has a 60% advantage in the total number of households and has room to grow advertising revenue, while linear is in decline.

Total number of households according to Doug Shapiro:
1) Streaming TV - 116M
2) Traditional pay-TV - 72M

A perfect example: Linear TV monetizes a single hour of viewing at 2X ($0.57) what Netflix does ($0.27) and close to 3X YouTube ($0.18).

The big picture: A few streamers, such as HBO Max and Peacock, monetize an hour of viewing better than almost anyone else, but are still losing money. Their challenge is a lack of overall viewing hours. YouTube has the opposite problem, as it has more of our attention than anyone else while generating low revenue per hour.

Which types of entertainment make the most money per hour?

Revenue per hour by entertainment type, according to Doug Shapiro:
1) Video (TV + digital) - $0.41
2) Gaming - $0.30
3) Audio - $0.15

Which TV content makes the most per hour?

Revenue per hour by TV content type, according to MoffettNathanson:
1) Linear TV - $0.57
2) Peacock - $0.42
3) WarnerBros Discovery- $0.36
4) Hulu - $0.31
5) Disney+ - $0.28
6) Netflix - $0.27

NFL = 💰: $2.95 per hour or $9.44 per game!

Why does revenue per hour matter?

Quick answer: From 2010 to 2025, average daily watch time grew just 3 minutes (↑ 1%). If people aren’t watching more, companies must earn more per hour to grow.

Quote from Doug Shapiro - Former Chief Strategy Officer @ Turner Broadcasting:
“Streaming is a direct substitute for linear and since overall video consumption isn’t really growing, time spent streaming replaces time spent with linear more or less 1-for-1. The significantly lower monetization per hour of streaming shows why the continued transition from linear to streaming is inherently deflationary. And since linear is still roughly 2/3 of every video dollar in the U.S., it has a ways to go.”

Without generating more revenue per hour, how can media companies increase profits?

Spend less on content: MoffettNathanson says Netflix could cut content costs by 26% using YouTube-style creators.

Why this matters: Netflix’s margins (42%) already rival linear TV (44%). Adding low-cost creators like Ms. Rachel could boost profits even more.

Bottom line: To make money in streaming, media companies have four main moves.
1) Get more users - More people = more chances to make money.
2) Get users to watch more - More time watching = more hours to earn from.
3) Make more money per hour watched - Higher revenue per hour = faster growth.
4) Spend less on content per hour watched - Lower costs = higher profits.