Our annual focus on the TV production sector looks at how companies have consolidated to adjust to a changing marketplace. Traditional models are under pressure, but there are many challenges in today’s highly diverse ecology.
The basic business model of production is still going, if not always very strongly. However, this business model has been squeezed. Broadcasters’ revenue structures are under attack as linear TV audiences decline and more eyeballs migrate online and on demand.
IHS Markit Channels and Programming Intelligence data shows a sub-inflationary increase of less than 1% CAGR in original programming expenditure across 26 territories from 2013 to 2017. In Western Europe, spending has declined 3%, in Canada 8%, and in Japan, 5%.
Over the last five years, investment by Amazon and Netflix combined is up 36%, compared to just 2.1% for the mainly linear rest of the world. While China, which overtook the UK as the second largest TV production territory last year, has grown 22%, online giants Baidu, Alibaba and Tencent are mainly responsible.
- The basic business model of production has been squeezed. Broadcasters’ revenue structures are under attack as linear TV audiences decline and more eyeballs migrate online and on demand. Programming has become an investment rather than a cost, and broadcasters are either passing a bigger share of the cost and the risk to their suppliers, or keeping more of the IP for themselves.
- Growing investment by the online platforms must be set against static or declining programming investment by the linear broadcasters. IHS Markit Channels and Programming Intelligence data shows a sub-inflationary increase of less than 1% CAGR in original programming expenditure across 26 territories from 2013 to 2017. In Western Europe, spending has declined 3%, in Canada 8%, and in Japan, 5%.
- Last year, we noted a decline in original drama output on US cable which has continued in counterpoint to the success of tentpole series like HBO’s Game of Thrones. The FOX network has significantly reduced its commissions of scripted drama and comedy in the new 2018/19 season.
- Unscripted genres cause some concern for producers, with market-changing formats like Big Brother and Idol now waning and some of the biggest formats and franchises now 10 years old or more. Endemol Shine Group (which was in the final stages of being sold by its owners 21st Century Fox and Apollo Global as this report was being written), saw a 3.5% decline in revenue in the last three years.
- Another area of concern is an undersupply of talent. The production sector has seen a large amount of consolidation over the last decade, with production companies seeking to gain greater financial security and more strength in negotiations with broadcasters by growing bigger. Now, the largest groups are not necessarily seeking more scale, but rather access to talent.
- Online rights are increasingly a concern for producers. Interviewees highlighted challenges with linear broadcasters including extended catch-up, on-demand and other online rights in what they already pay for programming, as opposed to adding more to their current rates.
List of tables and charts:
- TV programming expenditure 2013-2017 CAGR (%)
- US studio scripted titles, US network TV & SVoD, 2017-18 season
- TV programming expenditure 2013-2017 by region ($ billion)
- North America: programming expenditure by type 2013-2022
- Latin America: programming expenditure by type 2013-2022
- Western Europe: programming expenditure by type 2013-2022
- Central and Eastern Europe: programming expenditure by type 2013-2022
- Asia Pacific: programming expenditure by type 2013-2022
- Production company annual revenues ($m)
- Filmed entertainment revenues of seven US studios, 2017 by segment
- TV production companies ranked by revenue CAGR 2015-2017
- Production company M&As: ten most active groups 2015-2017
- Leading entertainment and reality formats
- US studio scripted titles, 2017/18 season
- Original titles aired, Netflix & Amazon 2014-2017
- ITV Studios mergers and acquisitions 2012-2017
- Content producer M & A deals per year, 2015-2017, split by type
Number of pages: 33
Number of Tables and Charts: 17
Director, Research and Analysis, Programming
Tim Westcott is a director of research and analysis for Programming at Omdia.
Senior Research Analyst, Channels & Programming
Aled Evans is a senior research analyst who covers television, sVOD channels, and programming across international markets.