Original TV Series: The Illusory 'Silver Bullet'
Streaming services such as Netflix and Amazon see original TV series as the path to success. It's not. But consumers win.
It is a great time to be a lover of television. Content, for one, has never been better. Not only have many declared today the “New Golden Age of Television”, some such as Vanity Fair’s James Wolcott, have gone as far to ask questions such as if “anyone thinks The Artist (which had recently won the Academy Award for Best Picture) is better than Mad Men?”. The rise of digital distribution and portable, media-focused devices has also fundamentally increased potential “demand” for this content. The ability to watch content whenever (and wherever) we want means that we can watch more shows than was realistically possible when we were tethered to 2-3 hours of “appointment TV” per night (and we could watch only one show per primetime slot). Not only does this save older shows, such as The Sopranos, from irrelevancy after airing, it opens up the creative medium. Hyper-serialized shows such as LOST and Game of Thrones would not be possible without the ability for viewers to easily catch-up on a missed episode (or “marathon” past seasons). Digital-only distribution (such as Netflix’s House of Cards) has further freed creatives to pick scene lengths or runtimes based on the needs of the story, rather than the need to cut to a commercial break every 4-7 minutes or fill out an hour-long timeslot.
Market behavior clearly illustrates the New Golden Age hypothesis. Movie stars are increasingly moving to the TV screen (from Ewan McGregor or Zooey Deschanel) and many TV stars are bigger celebrities than most movie actors (such as Kim Kardashian, regrettably). TV budgets have also exploded. Game of Thrones costs upwards of $60 million for a 10-episode season and many hour-long dramas at the Big Four broadcasters can cost $40-75 million per season ($2-4M/episode). Content has also become an increasingly important differentiator for cable networks such as HBO and AMC, which traditionally focused on films and one-off specials, but are now defined by and dependent on hits such as Girls and The Walking Dead.
This increased competition has made television even better – offering viewers more options and raising the bar for quality. In 2012, there was an astounding 268% more new scripted TV series premiering in the United States versus a decade ago. The 2013 season looks to be even bigger: Hulu and Microsoft have both announced plans to offer original content, while Amazon has already produced eight comedy pilots (which will receive full-season orders depending on viewer reception). Canada’s own History channel released two critically acclaimed and popular original series in 2012, The Bible and Vikings, with more due this fall.
The purpose of this new content remains the same: to drive subscriptions. However, if customers are being won on the margin (i.e. individual shows), how many of these subscription services will consumers really sign onto? Plus, with considerable overlap across each service’s underlying catalogue, consumers will essentially be paying for original content a la carte. This will also come with the need to manage redundant user accounts and fracture recommendation engines. One of the reasons aggregators exist is to simplify the user experience. Imagine if you needed a different cable box and remote for HBO, AMC and Showtime to watch your favorite shows.
Though it may seem that way today, original content is not a “silver bullet”. Though tablets and smartphones have increased the amount of content we can consume, we cannot watch everything. We’re getting to a point where there’s too much “good TV”. Even if we might consider subscribing to Amazon only for 1-2 shows we’re interested in, we may not need them to satisfy our TV needs. Increased programming availability has also fractured audiences. 30 years ago, hit shows could achieve more than 30% share of households. Today, Modern Family is an outlier at 5%. These same factors have also made developing a hit TV show even more difficult and prone to failure. With more potential buyers, content owners are rapidly increasing their prices. To quote Hollywood super-agent Ari Emmanuel: “I have never cared what something costs; I care what it’s worth… If it’s worth more to Google TV than it is for Fox, than I’m going (sell content rights) to Google TV (or Facebook)”.
With competition intensifying, viewership going down and costs going up, the notion of original content being a “silver bullet” may be as illusory as the monsters they supposedly slay. After all, Apple (and Comcast, and Netflix) have shown that aggregation and distribution business models can thrive. Original content may just be an opportunity to drive initial viewers to the service, whether individually (the nascent Amazon Instant Video) or collectively (to legitimize the nascent Subscription VOD industry).
At the same time, what will convince subscribers to pick Netflix over Hulu, or Amazon, or Roku? Even if they decide to pick two or three? They can’t compete by buying the same content – and the cost of exclusive rights should (in theory) consume all of the concomitant benefits. Furthermore, services such as Comcast’s StreamPix or Verizon’s RedBox Instance are often bundled free with a cable subscription and include the entire catalogue (including the current season) of many top-prated TV shows (reducing Netflix’s all-at-once advantage). That being said, original, high-quality may simply be the cost of staying relevent.
Netflix claims that it is using its acclaimed customer analytics engine to make smarter programming decisions. Their $100 million House of Cards investment, for example, was based on the individual popularity of Kevin Spacey, David Fincher and BBC Dramas. However, content production is not a science – and will not overcome the general content overload problem. In addition, they would need to serve each microsegment with several different programs to keep them engaged – a very expensive proposition. Focusing on only select users (such as House of Cards fans) would limit growth and make them essentially cable networks. At the same time, it may just be that original, high quality series is the cost of “playing the game” and staying relevant.
I don’t know the answer here. The future and sustainability of SVOD services remains controversial. What I do know, is that “original content” is not the solution it’s made out to be – and that it’s a great time to be a TV fan.