Executive Trends: Around the Content Glut (July 2016)

A recent article by Jesse Whittock published at TBI Vision quotes a Miner & Co. report stating that '73% of respondents agreed (that) 2016 has been the 'summer of peak TV'', in reference to a statement by John Landgraf, president at FX Network, using the term "peak" to describe 'what he sees as over-saturation' of the scripted television market. FX and other sources agree that 'more than 400 new series have been launched last year', a figure that is expected to be even higher this television year.

Crossing the Atlantic Ocean, at the NATPE Budapest trade show held last month in Hungary, several major European broadcasters complained that 'Hollywood is no longer providing' the sort of programming 'we need and have been purchasing for years'. The cancellation of "CSI: Las Vegas" and other procedural shows was quoted as an example.

This apparent contradiction merits some attention. On the one hand, it suggests that Hollywood, although partially dependent on the international markets from the revenue point of view, will not continue producing a show that it considers is lagging in audience terms at the domestic market. On the other hand, this scarcity is moving the European broadcasters to increase their domestic output, and try to sell it to neighbor countries, which further reduces demand for Hollywood product.

Concerning co-production deals, the Budapest powwow confirmed the notion that product designed for various markets at the same time has often to be adapted to the particular requirements of the partners, a process that may result in the loss of value for one or more of them: 'If you have a writer in the team, protect him', decreed one of the keynote speakers. A couple of years ago, a producer of a series to be aired by both HBO and BBC described in Prague --where NATPE Europe was held that time-- that he ended with essentially two different versions because there was no way to compromise the conflicting requirements of the partners regarding sex, nudity and profanity language.

Market fragmentation
At the same time, it doesn't come as a surprise that 77% of the people polled by Miner & Co. believed that 'there (is) no such thing as "too much" good TV'. So, maybe there's no real glut. What is probably happening is that the television audience is becoming more selective and part of it will not watch programming that it would have accepted years ago. Eyeballs watching "The Night Of", "Mr. Robot" or "Person Of Interest" are less likely to spend much time watching lighter programming. The Latin American "telenovela" producers are not only fighting competition from countries such as Turkey and Korea in their homeland, but also find it harder to sell their inventory to Central and Eastern Europe nations that years ago were enthusiastic buyers and turned Latin American actresses into local celebrities.

Fragmentation brings another issue to the table: production costs. The largest series producers have reached levels of $4 million per one-hour episode, which appears unsustainable when facing fragmented audiences. Technical matters, such as shooting in 4K UHD (soon, in 8K) raise the tab further. Now, since OTT experts warn that the Internet audience does not care about image quality (which is understandable considering the downgrading practiced by the providers) we may conclude that a sloppy way of showing things on OTT screens does not affect viewership; therefore, the irony is that the producers are pursuing at the same time screen quality and --through the OTTs-- an additional audience that does not care about it.

The silver lining is that Netflix and the other OTTs have extended the food chain for television product, adding a stage where viewers search into the past for earlier episodes of a series or hopefully product that has not retained enough audience to remain on air, as it happened with "Community" and "Arrested Development", among other cult series. This, in addition to crowd pleasers such as "House of Cards".

Yet, curb your enthusiasm: Netflix will have to sit down some day and reckon that it is spending too much on in-house content if it wants to keep its shareholders happy. Its recent financial results, with slower growth and smaller earnings despite remaining on the right track, may be considered a warning from Wall Street. Amazon's case is different because it is a machine for selling things: nobody will care about if Jeff Bezos loses or makes money on TV product as long as its Sales and Internet database services keep running. The telcos, a picturesque zoo ranging from AT&T and Verizon in the States to América Móvil, Telefónica and Millicom in Latin America, share a disadvantage: they come from a world where their users produce and distribute the content they use; therefore, it's difficult for the telcos to create or distribute fare that will be attractive to these users.

 

See other EXECUTIVE TRENDS Editions:

Programming cost may end linear pay TV as we know it
-June 2016
Entrepreneurs, not customers, drive technology
-May 2016
OTT vs. VR vs. Linear television
-April 2016
And the winner is...
-March 2016
Digital pennies vs. Analog dollars
-February 2016 
The owner of content is King
- January 2016 
What to expect the day after OTT 
-December - Part 3: Linear TV fragmentation
-November - P. 2: The dark side of "Content is King"
-October- Part 1: Some definitions, background
Digital platforms may be good to television 
- September 2015

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