One can make the case that linear TV channels are in trouble. But are traditional TV content providers that fuel those channels?
Proponents would say there is no problem here. Content is still king. But down the road, the cost of content could be an issue as more traditional TV content providers are squeezed by higher costs and competition.
Greg Maffei, president/CEO of Liberty Media, speaking on CNBC, says the challenge is not only the growing number of scripted TV shows -- now up to around 450 series from 200 five years ago -- but the costs as well. He says production expenses have “probably doubled.”
So what happens down the road? The guess is that those companies that can shoulder the expense will grab an ever bigger market share. For example, companies like Amazon, Apple, Google and Facebook have different video monetization methods.
They just need to throw enough money at it.
Amazon Prime virtually gives its subscription TV-video business away to the Prime consumer. “Amazon is getting a return because they are selling a lot of (products) though Prime.” says Maffei. Amazon is spending $4.5 billion on TV/content production next year.
Apple, which has boatloads of cash, expects to spend $1 billion in TV/movie content production in the coming year. Does it worry about making a return here? Not really. That’s because it makes big dollars on selling media devices running entertainment content.
Netflix? It's all about financial scale -- 100 million subscription video-on-demand consumers globally and about 50 million in the U.S. It plans to spend $8 billion next year, rivaling many traditional TV content providers -- the major studios in particular.
For years, established TV production company executives have sneered at new rivals looking to enter the field. They would need big development budgets to stomach high failure ratings that come with the development/production process.
But new players like Netflix are all in. Its digital video platform gleaned predictive data showing what consumers would watch next -- thus lowering its failure rate.
In the near term, traditional content providers may feel the squeeze. Says Maffei: “I don’t care how much binge watching, or how many screens are running on at the same time. That’s going to lead to eventual pressure on the content business.”
This column was previously published in TV Watch on November 17, 2017.