The Emerging Video Content Bubble

The 20,000 Foot View: Subscription Video On Demand (SVOD) services like Netflix, Amazon and Hulu have spurred a scripted drama renaissance and, in doing, so have trigged a content licensing arms race. Traditional TV networks have had to increase their spending to compete with these new streaming TV networks. New entrants such as Facebook and Snapchat are skewing the market further in favour of demand over supply. The poaching of legendary showrunner Shonda Rhimes by Netflix in August 2017 underlines how the tectonic plates of TV content spending are shifting. However, even Netflix has had to acquire debt to keep up. This is no ‘new normal’, but is instead a market being driven by companies using commissioning strategy for user acquisition. The resulting pressure upon content companies, as they battle for market supremacy in the attention economy, is creating a content bubble, and, eventually, all bubbles burst.

Key Findings

• The largest            networks spent            billion on content            2016 – a            increase on            spend in 2012
• NBC, CBS            ABC’s parent companies spent            billon            TV content in 2016
• The three            US-based SVOD services (Netflix, Amazon            Hulu) will spend            billion in                       more than the big three            TV networks
• Netflix currently                       billion of outstanding bonds –            to            of 2016 revenues
• Net revenues            the top            TV networks are                       from 2012 to 2016
• Content costs            increasing twice as fast as            growth
• The ROI            TV content has decreased by            the last five years
• Netflix slashed            hourly cost of programming by            2014 and 2017
           TV network revenues are up            year-on-year, but content costs are up           
• Inflating content            will distort TV networks financially,            reduce their capacity to survive            a post-bubble content environment
           subscription platforms are best positioned to survive a post-content bubble

Companies and brands mentioned in this report: A+E Networks, AMC Networks, Amazon, Apple, BBC,  Disney-ABC Television Group, Canal+ Group, CBS, Comcast, Discovery Communications, Facebook, HBO, Hulu, Instagram, ITV Plc, Lionsgate, Mediaset, NBC,  NBCUniversal, Nippon TV, Rogers Communications, R.T.I S.p.A, Scripps Networks, Shaw Communications, Shondaland, Sky Plc, Snap Inc, The Walt Disney Company, Time Warner Inc, Televisia, Turner Networks, Walt Disney Media Networks, Viacom, Viacom Media Networks, Vivendi, YouTube