In September 2022, a few months before his unexpected return to Walt Disney Co., Bob Iger warned that the linear television business was in for “a world of pain.”

Onstage at the Beverly Hilton’s International Ballroom, Iger told interviewer Kara Swisher: “Linear television and satellite are marching toward a great precipice and are being pushed off it… I can’t tell you when, but it’s going to go away.”

It feels like the company has plummeted this week.

On August 7, Warner Bros. Discovery took a $9 billion write-down on its linear cable channels, partly due to the apparent loss of NBA rights and uncertainty about contract renewals. A few days later, Paramount Global took a $6 billion write-down on its cable channels, partly due to the valuation related to the Skydance deal. $15 billion in value wiped out in an instant.

The cable iceberg has been melting for years (it’s worth noting that Iger first warned that cable might have peaked in an infamous conference call in August 2015, “kind of drawing everyone’s attention to the beginning of the decline,” as Bank of America’s Jessia Reif Ehrlich notes), but what was initially a slow meltdown appears to have turned into a near-complete collapse.

“The cable networks are in this terrible, ongoing, never-ending decline,” says Reif Ehrlich. “I think it’s worse than almost anyone expected. Just two years ago, when the writing was on the wall, we thought it would go slower than it actually did.”

The decline is, of course, due to cable cancellations, but in recent quarters the cable business has taken a double hit: Not only is the number of subscribers declining faster than carriage fees are rising, but advertising dollars are also disappearing from television as the proliferation of ad-supported streaming options gives marketers new ways to spend their budgets.

“Cable TV has been a headwind in the linear TV industry for the past few years, and we’re not seeing any real signs of that improving, but the larger recent challenge in linear advertising in the U.S. has taken the pressure to a new level because now you have both revenue streams working against you,” says Robert Fishman, principal analyst at Moffett Nathanson. “That’s forcing these linear cable networks to really figure out what their future looks like from a cash flow perspective, given the challenges they face in the broader ecosystem, and what that means for their revenue. So they’re being forced to essentially cut spending to alleviate that pressure, or at least try to alleviate some of it.”

Over the past 30 years, the entertainment industry has benefited from the economics of pay-TV. Ever-increasing broadcast fees and valuable advertising inventory have led to the creation of a business model that is virtually unparalleled outside the technology sector.

But while some of these traditional entertainment companies are diversified (think of Disney and NBCUniversal’s lucrative theme parks or Comcast’s Internet business) and others are more focused (Fox Corp., where almost all of its revenue comes from sports and news), WBD, Paramount, AMC Networks and others are in a particularly precarious position.

So what happens next?

Analysts say the chaos is just beginning. Cable channels could become the new newspapers: targets for investment funds that want to squeeze money out of them for as long as possible.

Alternatively, cable channels could seek to increase their capacity, either through an existing company or a third-party provider.

“One will spin off its linear assets and another will merge them,” says Reif Ehrlich. “We have all these – let’s call them stranded cable networks – maybe part of larger companies, but no investment area, no growth area. So if you merge a lot of cable networks, I think you can save on the overhead of the company. You can get rid of duplicate advertising functions and distribution, which creates a lot of costs by merging. A merger could make money.”

The problem is that the value of cable channels is in flux, as evidenced by the huge write-downs. How quickly will the pay-TV system fall apart? And how low can transmission fees go? Until there is more certainty about these answers, investors may hold back or wait for more favorable opportunities (such as bankruptcy).

“I think all companies will try to explore different opportunities. But it remains to be seen how much market interest there is in some of these smaller cable networks and how much willingness there is from outside investors to value these assets,” Fishman said.

Despite the Skydance deal, Paramount continues to try to close deals.

“The assets that make up Paramount Global today were built through the rise of the linear business. While we have strong brands and businesses, we need to reshape our portfolio to best compete going forward,” Paramount co-CEO Chris McCarthy said on the company’s earnings call. “The assets under consideration are undeniably strong and have exciting futures, but they are better utilized on their own or as the core of another business.”

Against this backdrop, the huge write-downs may, ironically, provide companies with a clearer path forward.

“It gives them some freedom of choice when they think about shifting some parts,” says Reif Ehrlich, adding that “the asset composition of many of these companies needs to change.”

Or as Bernstein analyst Laurent Yoon wrote about Paramount on August 9: “The $6 billion impairment sounds like a bad headline, but we believe the carrying value of their goodwill is a carryover from previous deals (like WBD) and the upcoming transaction with Skydance is an opportunity to face reality.”

Broadcast networks and live sports are trending, and entertainment is now an integral part of streaming. And for traditional players, streaming is just starting to become a profitable business.

This route may not be as lucrative as the old pay-TV model, but it can still work. The models just need to adapt.

“There is a very important flip side to the coin here,” Gunnar Weidenfels, CFO of WBD, told analysts on August 7. “This is actually a distribution ecosystem in transition, not a content ecosystem in transition. And we are using our content more and more successfully in the streaming area and less on the linear side.”

“We believe there is tremendous upside opportunity in both the D2C business and the studio business,” he continued. “And it’s enough to offset what’s happening on the linear side.”

Now they just have to get Wall Street on board. And that won’t be an easy task.

“This remains a difficult area to invest in,” Macquarie analyst Tim Nollen noted in an August 12 research note.