Too Much TV: Your TV Talking Points For Friday, March 11th, 2022

The (mostly) mythical content apocalypse.

Here's everything you need to know about the world of television for Friday, March 11th, 2022. 

THE (MOSTLY) MYTHICAL CONTENT APOCALYPSE
This week has brought a few think pieces about television that have variations of the same warning: spending on content is at an all-time high and streaming companies continue to search for profitability. How long can this madness continue?

One example of this point of view comes from The Entertainment Strategy Guy, who wrote a column entitled "Content's Bubble And The Sum Of All Fears" for The Ankler. A subscription is required to read it, so I am only going to include a passage that is publicly accessible. But you'll get the drift of where he is going with this excerpt:

If you want a great symbol for anxiety, there’s nothing better than a giant comet heading towards earth. It wiped out the dinosaurs, why not us? Just such a premise anchored, in fact, one of Netflix's biggest films of 2021, Don’t Look Up.

In the film they’re looking at a gigantic comet (ostensibly an analogy to climate change, but really an analogy for COVID-19, if you ask me). What’s the supposed lesson? That a bunch of really smart (and also really dumb) people can just choose not to acknowledge impending tragedy. Tragedy that often seems incredibly obvious in hindsight.

So let’s imagine that, instead of a bunch of politicians looking at a comet, it’s entertainment executives looking at this chart that FX research (yes, that FX) puts out of English-language series released in the U.S. over time:

Want to know why I’m anxious? That chart. What if that frothy spending in Hollywood over the last decade, the budgets that funded that huge increase in the number of shows, comes to a screeching halt? Last year, Hollywood made more TV shows than ever before. And not by a little bit. The town added 349 series since 2009! A 166 percent increase! Not even the price of gas is going up that fast!

But but, but…what if, instead of a glide path towards entertainment’s streaming nirvana, that chart represents a bubble that’s about to burst? 

The Entertainment Strategy Guy is super smart about the industry and his column has some great insight about the possible problems with spending more money than you bring in. And it's true that Wall Street has apparently decided - at least for now - that spending large amounts of money on content is not sustainable.

But....

The first question I always ask when people bring up spending on content is a simple one. Every piece of data I've seen shows that the leading contributor to subscriber growth and retention is new content. So what's your plan? 

Either streamers spend less money on original content and come to terms with the slower subscriber growth or they continue to spend at current rates and hope the revenue eventually follows. I don't see another option.

Consolidation doesn't bring increased margins. While the further combining of media companies can break some increased negotiating power and some cost savings thanks to layoffs, larger media companies face the same challenges as smaller ones. They just tend to have higher overhead and less flexibility to respond to a rapidly changing entertainment marketplace. I am especially skeptical of the upcoming Discovery/Warner Media merger, which seems to be driven more by executive bonuses and lawyers fees than it is by a rational business plan. "Hey, we'll be much bigger" isn't a business plan. It's a marketing slogan. 

And when it comes to the amount of content spend, it's important to note that not all spending is the same. There is the cost of live sporting event rights, which every major media company other than Netflix is dealing with at this point. The number of "new" shows can also be misleading, due to growing number of co-productions and other cost-sharing deals that allow content spend to go further. Content costs also include licensed programming and in many cases, that money is simply shifted from one division to another as all of the streamers have begun focusing on the content created by their parent company.

As for stock prices, it's tempting to see those as some indicator of a company's ability to execute a successful business plan. But before I was writing about television, I was a financial news reporter and I can tell you from experience that stock prices often have a hivemind of their own. They’re driven by emotion, conventional wisdom and an often depressing amount of nonsense. I can recall very smart stock analysts arguing at the time that the Time Warner/AOL merger was "the future," or that Amazon was going to implode because it was spending too much money expanding into non-core businesses.

I would agree that Netflix stock has been overvalued. But is it really worth only 2/3 of its peak price several months ago? I would argue the market over-corrected and obviously I'm not the only person who believes this given that several Netflix executives have purchased blocks of stock since the dip in price.

All of which is my way of saying that the stock price of Netflix, ViacomCBS or any other media company is an interesting data point, but you shouldn't read too much into it. 

The core problem in this discussion is that streaming is a lower margin business, but that's just the way it is. Linear television has higher margins because customers are essentially captives to the bundle. And while media analysts continue to argue the time of the "great rebundling" is coming, there doesn't seem to be much evidence of it in the wild. Consolidated billing is not the same thing as a bundle, given that no linear TV bundle allows you to subscribe or unsubscribe to individual portions at will. And involuntary bundling is the only way to squeeze out those high margins.

The real question about the cost of content isn't whether the industry is headed for a slowdown of spending. The real question is how difficult will it be for streaming companies to evolve a business model that allows for a reasonable return while still cranking out the massive amounts of original content required to juice subscription numbers.

On one level, the "when can we stop spending so much on content?" discussion is a variation of the one in which people moan about the lousy economics of streaming music. The business is what it is and the smart companies will figure out a way to thrive. In the music industry, that involved a combination of consolidation and the music labels maximizing their revenue by screwing everyone else in the industry. Given the way things are going, that's likely the way things are headed in the streaming video industry. Less money for writers, crew and lower-level actors. A few big paychecks for the stars and a stable bottom line for the streaming services.

And the content spend will continue.

DISNEY TO PAUSE FLORIDA POLITICAL DONATIONS
Disney CEO Bob Chapek said earlier today in an email that the company is pausing and "reviewing" all political donations after massive backlash for their silence on Florida’s Don’t Say Gay bill. Since 2020, 80%+ of Disney’s donations have gone to Republicans, including every sponsor of the bill. Here is the text of the email:

ODDS AND SODS
* Here's a review of the new Netflix series Life After Death With Tyler Henry.

* CNN+ will be launching on March 29th. Early subscribers that sign up within the first four weeks after the launch directly with CNN+ will receive 50% off the monthly plan – for life – as long as they remain subscribers.

* Longtime Entertainment Weekly TV reporter Lynette Rice will be joining Deadline as a TV Editor.

WHAT'S NEW FOR FRIDAY
Here's a quick rundown of all the new stuff premiering today on TV and streaming:

A Perfect Pairing (Netflix)
Charmed Season Four Premiere (The CW)
Dynasty (The CW)
Embrace The Panda: Making Turning Red (Disney+)
Formula 1: Drive To Survive Season Four Premiere (Netflix)
Life After Death With Tyler Henry Series Premiere (Netflix) 
Once Upon a Time... Happily Never After (Netflix)
Pete The Cat Season Premiere (Prime Video)
Raven's Home Season Premiere (Disney)
Selling The Big Easy Season Premiere (HGTV)
Sinister Stepsister (LMN)
The Adam Project (Netflix)
The Craftsman Series Premiere (Magnolia)
The Ghost Town Terror (Travel Channel)
The Last Days of Ptolemy Grey Series Premiere (Apple TV+)
The Snoopy Show Season Two Premiere (Apple TV+)
Turning Red (Disney+)
Upload (Prime Video)

Click Here to see the list of all of the upcoming premiere dates for the next few months.

SEE YOU MONDAY! 

If you have any feedback, send it along to Rick@AllYourScreens.com and follow me on Twitter @aysrick.