Unprecedented Content Production Demand Shows No Sign of Abating
Sohonet CEO Chuck Parker on the increased demand and investment in high-end content creation and the impact this has on the market
Fighting for audience attention is nothing new. Since the nickelodeons of the past to the tentpoles of today, it remains central to our business. But there’s been a shift to the small screen – we are now an era where television and streaming content owners are aggressively competing to outbid and outshine one another to win the right to entertain viewers.
Although Netflix currently dominates subscription service competitors Amazon, HBO, and Hulu, it will soon also face competition from Apple, AT&T and Disney (which will debut its new Disney+ service later this year). Disney executives predict that Disney+ (which will cost $6.99 per month — about half of Netflix’s most popular option) will garner between 60 and 90 million subscribers in the next five years.
Apple’s plans include newly inked deals to distribute the content of both HBO and Showtime, as well as its own shows, for an as-of-yet undisclosed monthly fee. AT&T’s WarnerMedia sold its stake in Hulu and expects to debut its own service this winter. Comcast’s NBCUniversal is also developing streaming services, while rumors abound of Viacom and CBS re-merging to create their own bespoke service.
The increased competition puts pressure on Netflix to develop exclusive content; 45-million households have already watched comic book adaptation The Umbrella Academy in its first month on the platform. But Netflix also currently relies on classic shows such as Friends and The Office, from Warner Bros. and NBCUniversal respectively, both of which are likely to reduce how much of their content they sell to Netflix as their own streaming services launch.
Netflix spent $13 billion licensing and creating content in 2018 and has earmarked a further $2bn in 2019 as it also set aside another $2bn in debt to help fund it. HBO has also been pouring money into content, with episodes of the final season of Game of Thrones estimated to cost $15 million each, according to Variety.
Disney+ will launch with 7,500 TV episodes and 500 movies that date as far back as 1937 (Snow White). To keep its catalogue fresh, Disney has announced a spend of $1bn in 2019-20 for Disney+, which will reportedly fund 10 original films and 25 original TV shows. Disney+ Originals spend is planned to increase to $2.5bn a year by 2024, according to Ampere Analysis.
Amazon promised $5 billion in production value in 2018, and Apple has also placed at least a $1billion into initial launches on Apple TV+.
The appetite for content among consumers is voracious but the SVOD business model is volatile. Even as consumers in markets like the US and UK sign up to several SVOD services at any one time, the ease with which a person can end their monthly subscription (or ‘churn’ in the jargon) is a massive headache for providers who need predictable, rising revenue to feedback into new content, which in turn is crucial to attracting folk in the first place…
Despite the business model challenges SVOD presents, the only solution in the short term for the existing and soon-to-be-launching players to drive eyeballs and subscription revenue towards their platform is to double down on original content for their platform (in HDR, nonetheless).
So, what’s to come in the next five years? Well, there’s no sign all this original content investment will abate in that time. Happily, for consumers and creators, it will drive up the quality of content on the small screen, as Netflix, Amazon, AT&T, and Disney are now providing and distributing content that goes to cinema and TV with an increasingly narrow gap in production value.
Because the major content creators realize how much appetite there is for high end, well-developed content, they’re willing to take risks by green-lighting shows that would never have been made in the past. This development has put a huge array of creatives and technicians to work–from the set to the editing room to visual effects studios and the sound mix, there is more work. And all these professionals must up their game and innovate.
Crucially, the challenges and opportunities presented may not be solved by the usual suspects in our industry. There’s an inevitable democratization at work which will see an opening up of opportunities in all portions of the content creation value chain to those who understand the intersection of cloud, connectivity, and creativity.