The original scripted series universe will continue to expand a little longer than previously thought, FX Networks CEO John Landgraf said in his semi-annual State of the Industry address at TCA.
As can be expected, the growth is being driven by SVOD services, primarily Netflix, which currently has 71 adult, English-language scripted series, according to FX estimates, plus dozens of kids and foreign-language fare that is carried in the U.S.
“When I pointed out the Peak TV phenomenon at the Summer TCA last year, I wrongly predicted that we’d hit the peak in 2015 or 2016,” Landgraf said. “It now seems clear that, at a minimum, the peak will be in calendar 2017–and there is enough inertial momentum here that we could well see the growth trend carrying over into the 2018 calendar year. Though I was wrong in my estimate of the timing—I don’t think I understood at this point last year that Netflix was going to try and compete with the entire MVPD system and all of its channels on a global basis rather than just, say, match the output of HBO— I WILL STILL stick by my prediction that we are going to hit a peak in the scripted series business within the next two and a half years- and then see a decline—by calendar ’19 at the latest.”
He analyzed data on TV budgets and viewership to explain why the continuous growth is unsustainable.
Landgraf that the price for making and marketing an hour of television has gone about 20% in the past 5 years, to $4-$5 million an hour. “You need a robust monetization to be profitable,” he said.
He cited data that the top 20% of scripted series average 10.5 million viewers, the second 4.6 million, while the bottom two average 1.1 million and 380,000, respectively.
“There is a really big, big difference,” Landgraf said. “You can pay for something in the first, second, and maybe third quinter (if you own it), but there just has to be of a whole ton of shows that are losing a ton of money,” he said.
Another reason that Netflix, the biggest driver of original series growth, would have to slow down — “They can’t double again and double again and again because the entire surface of the planet will be covered by Netflix shows in 20 years,” Landgraf quipped.
Still, “there is more great TV than any time in history,” he acknowledged. However, “I also believe that there is so much U.S. television, we have lost much of the thread of a coherent, collective conversation about what is good, what is very good and what is great.”
Landgraf also provided some info about FX and HBO’s programming budgets. “Our programming budget is approximately one-third of HBO’s and about one-sixth of Nelflix’s,” he said. Since Netflix announced that it is spending $6 billion on original programming, that mens that FX is spending about $1 billion and HBO about $3 billion.
Landgraf touted the advantages of a “uniquely personal”, hands-on, detail-oriented approach to developing and producing TV shows that can only be done on a small scale (FX has 14 original series and the highest that it could go is 20-22, Landgraf said) vs. industrial-type production that focuses on volume.
Addressing Netflix’s fast growing clout (The streaming service now offers more than 20% of the original scripted programming on U.S. TV), Landgraf spoke of Silicon Valley monopolies, citing companies with a dominant market position like Google.
“I think it is particularly bad for storytellers and our culture if one company will be able to seize 40% of storytelling,” he said.
Personally, I have gotten more selective in what I watch because I really don’t want to spend all my free time watching TV. I’m sure I’ve let some good shows slip by the wayside but something has to give.
I am really surprised some cable channels still exist though that may be down to bundling. But even then, viewership has to be small and their margins narrow to continue on. I think a contraction in channels will go hand in hand with the reduction in programming. If those few shows are the reason people are watching the channel and they go away because it is too expensive, what chance does the channel have to keep viewers?
I think a Big Crunch is coming with television though I’m not sure how soon it will occur…