Digital Players Could Put Squeeze On Linear TV Content

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.

1 comment about "Digital Players Could Put Squeeze On Linear TV Content".
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  1. Ed Papazian from Media Dynamics Inc, December 30, 2017 at 10:22 a.m.

    Wayne, it is hardly surprising that the number of "scripted" shows is rising as there are many more channels and these must fill up their time with something. More important, when one refers to "scripted" shows, the thinking zooms in on the first runs of primetime entertainment types such as dramas and sitcoms, however these are far from all that "linear TV" provides to its massive viewer base. While about 30% of the viewing takes place in primetime---including many shows other that the "scripted" kind----and about 50-60% of the ad dollars are placed in such content, the remaining shows---early AM, day, early evening, late night, weekend----generate most of the profits. Which is fine with the networks. Why? Besause the expensive "scripted" shows make money in other ways for the networks.   When a network buys a "scripted" show, which it often helped to create, it usually becomes the producer's partner, meaning that it shares ---often 50/50--- in the very lucrative syndication runs after the network airings lay the foundation for future "off-network" profits. Also, one of the primary reasons why the networks are garnering huge retransmission fees from the cable systems and other content distributors, is the appeal of their primetime "scripted" shows. Finally, when these shows appear in syndication, they often stock the schedules of the basic cable channels which the TV networks own---Bravo, USA, etc., thereby enabling these channels to make their impressive profits and contribute them to the corporations' bottom lines.

    When people complain about too many "scripted" shows and higher production costs, but ignore the way these fit into the current business models of the TV networks and major cable channels, they are not presenting a realistic picture. For those who are interested in learning more about how TV makes its profits we present a most interesting analysis in our upcoming edition of "TV Dimensions 2018", which will be released shortly. 

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