Can Streamers Fail By Spending Too Much On Producing, Acquiring TV Shows And Movies?

Billions of TV and production dollars going into major streaming platforms might eventually ding big legacy media players. Do they have an alternative path, evolving with more streaming low-cost options? And what about cutting costs?

So if you are a Disney+, HBO Max, Peacock, Paramount+, discovery+, AMC+ -- you need to walk this tightrope.

But also look out of the corner of your eye.

As we enter the upfront TV advertising season, observe those new free, ad-supported video-on-demand platforms that do not always need scores of top original, fresh produced content.

Consider Fox Corp., which won't be making huge capital expenditures on entertainment-focused content, since it isn't playing in the premium streaming space that others are dancing around in -- where there is a need to spend at least $8 billion to $10 billion a year.

(Even then, what will that bring when Netflix is spending $17 billion?)

In a recent earnings phone call, Lachlan Murdoch, chief executive officer of Fox Corp., says the company has the ability to kind of transform business to where it can tightly control its programming costs in a way that really has not been achievable before.

Murdoch cited the Bento Box acquisition of a few years ago -- "so we can control more of our animation costs." And then buying TMZ, to produce "high-quality factual content and specials."

Fox also made another production company purchase, MarVista Entertainment, which is focusing in part on boosting Fox's free, ad-supported platform, Tubi.

But the push for Tubi into "originals" seems extremely modest. Fox is not thinking about billions of dollars in original programming content going to that free, ad-supported service.

Maybe it's enough -- as well as that for other more modest free, ad-supported services: Paramount Global's Pluto TV, and Roku's The Roku Channel.

If you believe free, advertising-video on demand services -- also known as FAST, Free Advertising Supported Television -- will continue to grow, wonder what happens when, in a few years' time, cost-saving consumers might be looking for advertising-free Netflix and Disney+ costing consumers $25 a month each, with the forthcoming HBO Max/Discovery+ combination going for $32.

All of a sudden streaming is not cheap. But we are all too hooked by then.

When consumers' growing frustration again hits this new “pay” TV business, many of those in business will be thankful they have a real low-cost, ad-free service around.

Free, that is, for consumers. The downside? They will probably be paying $120 a month for some good 5G service by then.

1 comment about "Can Streamers Fail By Spending Too Much On Producing, Acquiring TV Shows And Movies?".
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  1. Ed Papazian from Media Dynamics Inc, May 13, 2022 at 12:07 p.m.

    Wayne, it makes little sense for the TV network/cable streaming services and this includes Disney+ when it launches its AVOD service shortly, to spend huge amounts of dollars on high risk "original" series and movies designed to lure streaming subs when they have so much already produced content---national and local news, all sorts of syndicated entries on their station affiliates plus the vast and ongoing bulk of linear TV content prsented by their broadcast TV networks and cable channels. These types of programmig willl constitute 85% or more of the time allocated to their service by subscribers who stick, as opposed to those who "subscribe"  to watch a  10 or 12 part "original"  drama only to cancel immediately after seeing it.

    It seems that the folks at Discovery already understand this and the lesson will be learned by the others I believe.  Sure, once in a while do an "original movie" or edgy drama series and see it that ploy still works  to add---and keep---new subs. But don't over do it---like Netflix has to---if you want to have a profitable streaming business.

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