Follow-up to the 'Illusory Silver-Bullet'
Underlying changes to the TV series model will offset some pressures, but the future remains challenging
Looking at this year’s network upfronts, I wanted to follow up on my last post, which argued that original TV series were not the “silver-bullet” Netflix, Microsoft and Amazon were making them out to be – and that all networks, including the likes of Fox and HBO, should be worried. A lot of this hinged on reality that consumers’ ability to “consume” television was not infinite – and that we were already approaching the point in which there was “too much” good TV to watch. The number of new original series each year is up 270% since a decade ago and growing at close to 15% each year.
There are two caveats that offset some of this growth. First, networks are increasingly looking to schedule content year round, rather than just the traditional 9-11 week Fall and 13-15 week Spring seasons. While streaming services have meant that off-seasons can still be spent catching up on TV, there are clear gaps in which new content can be released. In particular, many networks view Summer as the next priority growth area.
Secondly, seasons are getting shorter. TV series are increasingly replicating the miniseries model – albeit on an recurring basis – rather than the traditional 22-24 episode seasons. At the upfronts, Fox announced that “24”, which ended its 8-season run in 2010, would be returning in 2014 as an annual, 12-episode “event series”. One of the drivers of this trend is the tight schedules of Hollywood actors, who continue to invade the small screen . Kevin Bacon, who starred in this year’s biggest new new drama , “The Following”, stipulated no more than 15 episodes be produced each year. Other series, such as “LOST”, spread its last 48 episodes over three 16-episode seasons, instead of 24-episode seasons (as it had done in the past) in order to better fit story “arcs” and make its intensive production cycles more manageable.
While these changes will increase “industry capacity” for individual series, it will not eliminate the underlying challenges posed by industry growth. Worse still, they will put additional pressure on TV economics. However, increased competition for viewer eyeballs has driven the broadcast players to launch more series starring Hollywood brandnames – Robin Williams, Greg Kinnear and Michael J. Fox will be the likes of Kevin Bacon and Kevin Spacey in the fall. In addition, networks depend on a series’ episode count to drive their ROIs. Behind every hit TV show are dozens of failed shows – most of which never even aired, but nonetheless cost millions to develop, film and audience test. Competition from more network or digital distributors is also driving up investment costs. With so many would-be buyers, a promising TV concept can no longer be secured by a pilot commitment. One of the reasons why Netflix beat the broadcast giants for “House of Cards” was its commitment to producing two full seasons (at a cost of $100M). Furthermore, long runs are critical to the amortization of upfront costs (pilots are typically the most expensive episode to film and involve significant investments such as set constructing, casting, marketing etc.). The sale of a series into syndication or to an OTT service such as Netflix, is also heavily dependent on the number of episodes produced.
Industry-advocates will argue that the cable networks have proven that short-seasons and high costs can still be profitable and that there is still an appetite for new TV series. That may yet be true. However, rising costs, splintering audiences and increased competition will slowly emaciate the profitability of individual series and compress returns. Original content is a necessary, but not sufficient basis of competition. It’s worth noting that the newest entrants to original content – Amazon, Microsoft and even Netflix – neither depend on nor expect their new TV series to be profitable in and of themselves. Unfortunately, that’s a luxury the traditional networks don’t have.