Though this remains a Golden Age of original TV programs, it is also an age of excess. There are so many shows—good shows—that no one can conceivably watch them all.
“I never got through the last season of The Americans, and I love The Americans,” says Herb Scannell, CEO of BBC Worldwide North America, talking about the shows stacked up on his DVR. “I don’t think my experience is uncommon. I think that there is now this sense that there is so much good stuff out there.”
Must-see TV has morphed into must-record TV. DVRs fill up and days pass (C3), weeks pass (C7), months pass (C30), then something’s got to go because there’s something else to TiVo, if not actually watch.
In fact TiVo, looking at a week’s worth of activity by 56,000 subscribers, found that users opted to record 85 hours of programming. About 20% of those recordings were viewed during the first three days. But after 42 days 33% of the recordings remained unwatched.
Too much of a good thing (spoiler alert) can be a problem for viewers who can’t keep up with the shows their friends rave about. The challenge for the TV industry is much bigger.
The multi-channel, multiplatform, on-demand, online streaming, mobile, TV Everywhere environment has created an unlimited amount of time slots, or shelf space, that needs to be filled. For now, the expanding programming universe seems infinite. But someday the bubble could burst.
The Party’s Over
“There definitely is way too much scripted programming,” says Nick Grad, president of original programming for FX Networks, which airs The Americans. FX calculates that in 2014 there were 371 scripted original series, nearly double the 211 that were available in 2009.
The proliferation of program and networks—not to mention competition from Netflix, Hulu, YouTube, Crackle, Yahoo, etc.—has fragmented audiences and pushed ratings lower. Thirty years ago, The Cosby Show, the top-rated scripted show, averaged 28.9 million viewers. Last year, The Big Bang Theory averaged 19.1 million—and that includes delayed viewing. On cable, despite several gaudy hits in recent years, competition is intense enough that shows are often renewed after averaging a few hundred thousand viewers.
“Ratings are an unmitigated disaster and so at some point a lot of these companies that are trying to lure consumers with original programming will have to cut back,” says analyst Richard Greenfield of BTIG Research.
“Not only are all these new shows competing with each other, they’re also competing with every great show ever made because of the availability of deep libraries on SVOD. The reality is you compete with everything ever created now and that’s really hard,” Greenfield says.
He recalls that a few years back, the movies studio cut back on production so they weren’t opening five blockbuster films on the same weekend. ‘There’s definitely too much con-tent being created in television right now, and we’ll probably find equilibrium over the next few years, just as we saw in film.”
Investing In Ammunition
Instead of backing away from this arms race, most media companies are boosting spending on original TV programming. They’re starting studios so they can control rights to the shows and squeeze out all the revenues they generate.
“There certainly is a war for content in the business right now because everyone is striving for original content,” says David Levy, president at Turner Broadcasting.
“It’s a battle for people’s time, because there’s so much choice,” says Paul Buccieri, president of A&E Network and History. “It’s quality of content as much as quantity. The quality will break through.”
Companies like Turner and A&E are increasing their investments in programming because while ratings are falling, the sky isn’t. Networks are still generating high profit margins and ratings are just one indicator of financial success as the business changes.
“As live ratings continue to decline, you need to find new metrics and new revenue opportunities,” says Levy. “In order to play in these new fields you need to own your own content.”
Those new sources of revenue include ad revenue from data-based ad sales, product integrations and sponsorships, video-on-demand advertising, and syndication to new streaming VOD players like Netflix, Hulu and Amazon.
Still, original content in ever-larger quantities seems to be the strategy for solving any number of business problems. Are advertisers complaining about under delivery? Promise more original programming. Got a tough carriage negotiation with a big cable operator? Show them a plan to increase original programming. Wall Street concerned that reruns no longer attract viewers? More originals can send the stock higher.
And if the domestic market isn’t growing like it used to, and you want to open up international territories, original programming is just the ticket.
“It’s not just to support our domestic channels, but to have quality content around the world in an international model,’ says A&E’s Buccieri.
Ratings Aren’t Everything
Nevertheless, the TV business has long been ruled by ratings and it looks like bad business to spend more money on original programming as ratings for those shows decline. That notion would seem to be supported by evidence that marketers are spending less money in this year’s upfront.
But the ratings may not be all they’re cracked up to be.
An inestimable, and growing, amount of time viewing content on tablets, smartphones and other video devices isn’t included in ratings. And while scale remains important, networks and media buyers are using more advanced data and analytics to steer ad campaigns towards target audiences that are better defined than simple demos like adults 18 to 49. That data is supposed to make TV advertising more effective and more valuable.
“The biggest challenge for us is that the research currency that we’re dealing with today has to catch up with the media technology,” says Turner’s Levy.
If viewing on all platforms—including delayed viewing—is counted, audiences are probably up instead of down, Levy says. And if revenue from all sources, including sponsorships and SVOD not just advertising was counted, programs created today probably generate more money than before.
As an influx of data changes TV from a mass advertising vehicle to a more targeted one, quality programming remains a key to increasing ad revenue. TV’s digital competitors have data, and analytics, but not the kind of reach and quality content TV offers, Levy says. “Now we’re getting the data and ad products that offer target marketing. If you can sell that kind of audience-based marketing, and audience-based guarantees in premium content with the reach we have, and get a currency to monitor all these different platforms, yes, I think overall we’d get more.”
Problems for Programmers
In this environment, it’s a great time to be a content creator. FX’s Grad says that when high-profile packaged programs go on the market, a feeding frenzy can break out, pushing up the price. On the other hand, the network has found a way to create successful low-budget comedies like It’s Always Sunny in Philadelphia. “It doesn’t take the same village it used to take to mount a production. You just have to be in business with the right people who are incentivized to make it on budget,” he says.
Reality shows are less expensive than scripted and getting cheaper, but they appear to be out of favor. Reality doesn’t drive the viewership it once did and it’s back end revenue potential is limted. And with YouTube, it seems anyone with a camera can make a show that draws viewers, advertisers and eventually interest from big media companies, such as Smosh, which has a movie coming out.
But it’s a tough time for programmers. Scannell, who is set to exit BBC after helping engineer the sale of a majority stake in BBC America to AMC Networks, says running a network is harder now than ever before.
Thought the bar is set lower in terms of the ratings a network expects a series to generate, more effort goes into deepening the attachments between fans and the shows they watch.
With programs like Orphan Black and Doctor Who, BBC America uses social media to connect with fans, even between seasons. “Your job is now 24-7-365 if you’re looking for a path to longevity,” he says.
Those types of original shows define networks, so cutting programming would leave a channel without an identity and unable to compete.
“The AMC effect was a couple of shows do make your network,” Scannell says noting the way acclaimed shows like Mad Men and Breaking Bad transformed AMC from a sleepy movie channel to a high-profile programmer (The Walking Dead, the highest-rated scripted show on TV, helps).
“Cable networks are more and more like that. They need four to six hits,” he says.
FX wants to continue to increase the amount of original programming it airs. “If you want to be a brand that’s going to last in this environment, you can’t just have one show. You have to have lots of great shows all year round,” Grad says.
Welcome to the Jungle
But with 500 channels—and Netflix, You- Tube, AOL et al. breathing down TV’s neck—not every network will have four to six hits. And not everyone can pursue the same strategy and succeed.
“I think all bubbles burst. I think there are plenty of other cable networks out there that will realize what deep pockets that it takes to be in the quality scripted original business and who don’t have the scale and will have to exit out of it,” Grad says.
Agrees Levy, “It’s Darwin’s survival of the fittest. I don’t believe all these networks are going to survive.”
Networks with the wherewithal and backing to create scripted shows are likely to survive, while weaker independents dependent on reality and reruns will vanish, and not just because of their programming choices.
There are other, equally powerful consumer forces at work that will determine the destiny of big content companies in the pay TV business, where cord shavers, cord-nevers, and skinny bundles are changing how many networks cable operators can afford to carry. These forces are putting networks under more pressure than ever to justify their value to distributors and viewers.
Survival will boil down to having a great eye for content and possessing the distribution strength and marketing savvy to launch shows and ferry them to a second and third season, Levy says. “I want to make sure I have the platforms and the brand to help be able to launch these shows and attract the best talent.”