Balancing The Costs And Value Of Programming For All Parties
The latter are getting compensated for their higher license fees with better revenue and earnings results.
This justifies big media’s efforts to funnel even more dollars into TV production, including increased sports programming costs.
And who pays for those costs? Take a guess. But don’t jump on the pile just yet. The consumers’ need for entertainment shows no bounds -- even considering the tiny, but highly touted, trend of cord-cutting and cord-shaving.
Some consumers are looking to tighten their monthly entertainment belts. But overall all parties -- consumers, advertisers, networks and stations -- seemingly have no problem paying more for content. This is true especially when propagating the point that everyone is still getting more value.
Even theatrical movie revenues continue to climb. Yet one area where big media has been looking to pull back is in film production – by limiting the number of annual theatrical releases to the mid-teens. A few years ago, big movie studios were releasing 20 t0 25 films annually.
What about potential a la carte programming? Consumers’ out-of-pocket costs could be expected to skyrocket -- perhaps to double what they currently pay.
Would even that slow down the still rapidly moving entertainment business? Not until consumers believe the tipping point is out of sync because the value is no longer worth the cost.
Needham & Co’s Laura Martin says the value right now is still there, big time: “Based on average wage and TV viewing data, consumers are paying about 3% of what their TV viewing time is actually worth to them. The average TV household watches about 4,400 hours of TV annually and pays about $720 per year, or $0.16 per hour of TV viewed. Based on an average household income of $51,017 annually, this represents about 1/36 the value of these hours to consumers.”
That sounds like a deal to me.