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SVOD Services’ New Originals Shake Up the Market - Broadcasting & Cable

SVOD Services’ New Originals Shake Up the Market

More content doesn’t mean less money for TV’s biggest series
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As if there’s isn’t already enough content to occupy viewing hours, in the past few weeks several subscription video-on-demand (SVOD) services, including Microsoft’s Xbox, Amazon and Yahoo, announced plans to add multiple new series to the mix.

Amazon, which recently introduced its $99 Amazon Fire set-top streaming box, two weeks ago confirmed that it had picked up four series: Chris Carter’s supernatural drama The After, cop drama Bosch and comedies Mozart in the Jungle and Transparent. It also renewed Alpha House, starring John Goodman, and added two kids’ shows, Wishenpoof and GortimerGibbon’s Life on Normal Street, which join the service’s first three kids’ series, premiering this summer.

Nancy Tellem, head of Microsoft’s Xbox Entertainment Studios, last week announced eight coming drama, comedy, unscripted and documentary series, including a stop-motion animation show from Seth Green, and a sketch comedy series from Michael Cera and Sarah Silverman.

Also last week, outlets reported that Yahoo is close to ordering four half-hour comedies, while AOL renewed four shows.

You can add all of that to Netflix’s high-buzz originals— including House of Cards, Orange Is the New Black and the upcoming Marco Polo—Hulu’s original slate and the many high-end original series airing on premium and basic cable networks.

Meanwhile, the off-network market has never been hotter, with CBS recently selling Elementary to WGN America and Hulu Plus for approximately $2.7 million per episode. With SVOD services piling up originals, will they still have room or budgets for expensive off-net fare?

Money Still There for Hits

“One thing that’s true for all of the SVOD services is that they have to feed their customers,” says one distribution executive. “If you don’t have enough product, you will get a lot of churn. Netflix, Amazon, Hulu and the others can’t produce series quick enough and can’t afford enough of them to make their services viable without supplementing with off-network shows.”

“In the global distribution revenue stream, there’s broadcast revenue, then cable, then SVOD,” says David Bank, analyst at RBC Capital Markets. “The lower you go in the food chain, the less you want to sell those shows to other people, unless there’s a structural revolution in the industry where we see the food chain reversed.”

What that means is that if a show is successful on an SVOD service, it makes sense for that service to keep that show on its own platform. That will likely be the case with House of Cards, which adds value to Netflix’s overall service by attracting and keeping subscribers.

It’s also a model that HBO uses with its in-house SVOD service, HBO Go. After syndicating several of its series to cable networks and TV stations, HBO found that the shows accrued more value to HBO’s brand if the network held them on the premium network’s proprietary platforms.

But for the major TV studios, it still makes the most sense to sell the biggest shows to as many platforms for as much money as possible. And no one sees that money or shelf space drying up anytime soon.

“I measure success in financial terms, and you couldn’t possibly equal the financial success of a mass market broadcast network series on any other platform,” says Bank. “I think if a show is really good, you’ll always have strong demand,” adds the distribution executive.

“I think the market is going to stay healthy and even get healthier because the cable networks might start ponying up for exclusivity over the SVOD services.”

Distribution Picture Is Foggy

Meanwhile, the distribution and revenue picture is far different for all of the new shows emerging from online platforms.

“For the right show, there is undoubtedly an aftermarket,” says Dan Cryan, IHS senior director, digital media. “But it’s a bit more nuanced for shows that aired on those smaller platforms—it depends on the country, the market and the platform. A well-promoted, big show such as House of Cards has full-on domestic and international distribution as well as a strong physical business of DVD and Blu-ray sales. But that’s House of Cards. There’s a real risk of assuming that everything’s like House of Cards and in reality, not everything is.”

For the moment, shows being produced for SVOD distribution try to budget with the assumption that all revenue will come from its first-run SVOD window. Any additional distribution—be it domestic or international, online or on-air—is gravy at this early stage.

“What you end up with is a nuanced and emerging picture as we get used to shows debuting on platforms that can offer them for extended periods of infinite, on-demand watching,” says Cryan. “It’s still early days, and how that’s all going to cash out is not clear.”

As if there’s isn’t already enough content to occupy viewing hours, in the past few weeks several subscription video-on-demand (SVOD) services, including Microsoft’s Xbox, Amazon and Yahoo, announced plans to add multiple new series to the mix.

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