Netflix’s $5 Billion Budget Sets Off an Arms Race in Cable, Media companies accept acclimatized on a action to action crumbling viewership at their TV networks: spend, spend, spend.Discovery Communications Inc., Viacom Inc. and Starz accept all said in contempo weeks that they accept to absorb added on programming. While that’s acceptable for viewers, who get to watch an aberrant bulk of new TV shows, it’s awkward for investors who accept already beatific media stocks aerobatics over apropos about shrinking TV audiences and crumbling commercial sales.
“All these companies accept been adopting the bulk they’re spending on programming appealing consistently,” said Doug Creutz, an analyst with Cowen & Co. “TV is accident audiences, and you’re aggravating to accept new being to accumulate audiences affianced with your programming.”
Media executives, speaking on the latest annular of balance calls, say the spending is bare to advance the accumulation of new programs that admirers are ambitious today, and yield advantage of growing markets online and internationally. Netflix Inc., their arch online rival, affairs to lay out about $5 billion on new and best films and TV shows this year, added than any network. Amazon.com Inc. and Hulu are aswell spending heavily.
“We accept been planning for years to abound our aboriginal programming allotment of our programming account in the able double- digits annually,” John Martin, arch controlling administrator of Time Warner Inc.’s Turner Broadcasting, said at an broker appointment in February.
Before Netflix, cable companies could ample their schedules with reruns and cheaper shows and still calculation on viewers. But with the streaming-video behemothic churning out a battery of superior entertainment, from “House of Cards” to “Jessica Jones,” it’s no best abundant to just action filler. Old episodes of “Full House” still air on Viacom Inc.’s Nickelodeon, but its adapted sequel, “Fuller House,” is accessible for alive on Netflix.
Discovery Spending
The amount of programming at Discovery’s cable networks, added than sports, is growing 55 percent from 2013 to 2016, according to projections from researcher MoffettNathanson LLC, while Viacom’s costs rose added than 25 percent.
Viacom, based in New York, has added an absolute new night of aboriginal programming at VH1, angled its accommodation for action at Nickelodeon, and will air added contest on networks like BET. Discovery, home to the absoluteness TV hits “Deadliest Catch” and “Gold Rush,” has confused into scripted programming and is developing 10 shows with Lions Gate Ball Corp.
The Starz exceptional channel, meanwhile, invested about $250 actor in aboriginal programming endure year to sustain drive that began with “Outlander,” “Survivor’s Remorse” and “Power,” the network’s most-watched show. The ambition for the network, which has added subscribers, is to access anniversary assembly of aboriginal shows to 80 to 90 episodes from about 75 endure year.
“Our action is not just centered about the aggregate of programming, but aswell the across and address of that content,” CEO Chris Albrecht said on a Feb. 25 alarm with analysts.
The aftereffect of all that spending was narrower margins at abounding companies endure year, including CBS Corp., Discovery, Walt Disney Co., 21st Century Fox Inc. and Viacom, Todd Juenger, an analyst at Sanford C. Bernstein & Co., wrote Wednesday in a note.
“If you are a TV arrangement executive, you aren’t active to airing into your boss’ appointment and say, ‘Revenues are beneath pressure, here’s what I anticipate we should do -- cut aback on programming,”’ Juenger wrote.
Hits Accumulate Coming?
Competition is authoritative hits harder to appear by. Netflix will absorb at atomic $11 billion over the next 5 years. Hulu LLC, endemic by Fox, Disney and Comcast Corp., is dispatch up its aboriginal programming with the accident alternation “11/22/63,” produced by J.J. Abrams, and blur acquisitions like the Sundance Blur Festival ball “Joshy.”
That’s led John Landgraf, CEO of Fox’s FX Networks, to advance there’s “too abundant TV,” citation the 400-plus scripted shows he abstracts were fabricated endure year. FX’s own big hit in aboriginal 2016: “American Crime Story: The Humans v. O.J. Simpson,” a 10-part album featuring Cuba Gooding Jr. and John Travolta.
“You can’t even calculation the bulk of TV shows accurately,” he said.
The affair for investors is that the spending, rather than stemming eyewitness losses or reigniting ad sales, may become a abiding annoyance on profit. The Standard & Poor’s 500 Media Index, a criterion that includes Viacom and Discovery, has beneath 13 percent back aboriginal August, if Disney appear on subscriber losses at ESPN and triggered a slump in ball stocks.
Catching On
“This is one of the affidavit why this industry has performed so ailing the endure several months, because humans are communicable assimilate this,” Creutz said. “There may be allowance compression for abounding years to come.”
So far, the spending hasn’t led to bigger audiences, according to Nielsen data. Viewership at cable networks in the 18-to-49-year-old age accumulation approved by advertisers is down 5 percent in the accepted TV season. It’s down 6.4 percent for broadcasters.
One ablaze atom for all of the programmers is that the exploding examination options are creating opportunities for them too: to advertise shows to streaming-video-on-demand casework like Netflix and Amazon, to go anon to consumers with their own online casework and to bazaar programs internationally. The catechism is how abundant those can account problems in the calm TV market.
“The apple is accepting bigger and bigger and bigger and better,” CBS CEO Leslie Moonves said Tuesday at a Morgan Stanley appointment in San Francisco. “So you’ll see us do added content, but alone if we apperceive it’s traveling to be profitable. In a lot of cases, that’s the way it is.”
“All these companies accept been adopting the bulk they’re spending on programming appealing consistently,” said Doug Creutz, an analyst with Cowen & Co. “TV is accident audiences, and you’re aggravating to accept new being to accumulate audiences affianced with your programming.”
Media executives, speaking on the latest annular of balance calls, say the spending is bare to advance the accumulation of new programs that admirers are ambitious today, and yield advantage of growing markets online and internationally. Netflix Inc., their arch online rival, affairs to lay out about $5 billion on new and best films and TV shows this year, added than any network. Amazon.com Inc. and Hulu are aswell spending heavily.
“We accept been planning for years to abound our aboriginal programming allotment of our programming account in the able double- digits annually,” John Martin, arch controlling administrator of Time Warner Inc.’s Turner Broadcasting, said at an broker appointment in February.
Before Netflix, cable companies could ample their schedules with reruns and cheaper shows and still calculation on viewers. But with the streaming-video behemothic churning out a battery of superior entertainment, from “House of Cards” to “Jessica Jones,” it’s no best abundant to just action filler. Old episodes of “Full House” still air on Viacom Inc.’s Nickelodeon, but its adapted sequel, “Fuller House,” is accessible for alive on Netflix.
Discovery Spending
The amount of programming at Discovery’s cable networks, added than sports, is growing 55 percent from 2013 to 2016, according to projections from researcher MoffettNathanson LLC, while Viacom’s costs rose added than 25 percent.
Viacom, based in New York, has added an absolute new night of aboriginal programming at VH1, angled its accommodation for action at Nickelodeon, and will air added contest on networks like BET. Discovery, home to the absoluteness TV hits “Deadliest Catch” and “Gold Rush,” has confused into scripted programming and is developing 10 shows with Lions Gate Ball Corp.
The Starz exceptional channel, meanwhile, invested about $250 actor in aboriginal programming endure year to sustain drive that began with “Outlander,” “Survivor’s Remorse” and “Power,” the network’s most-watched show. The ambition for the network, which has added subscribers, is to access anniversary assembly of aboriginal shows to 80 to 90 episodes from about 75 endure year.
“Our action is not just centered about the aggregate of programming, but aswell the across and address of that content,” CEO Chris Albrecht said on a Feb. 25 alarm with analysts.
The aftereffect of all that spending was narrower margins at abounding companies endure year, including CBS Corp., Discovery, Walt Disney Co., 21st Century Fox Inc. and Viacom, Todd Juenger, an analyst at Sanford C. Bernstein & Co., wrote Wednesday in a note.
“If you are a TV arrangement executive, you aren’t active to airing into your boss’ appointment and say, ‘Revenues are beneath pressure, here’s what I anticipate we should do -- cut aback on programming,”’ Juenger wrote.
Hits Accumulate Coming?
Competition is authoritative hits harder to appear by. Netflix will absorb at atomic $11 billion over the next 5 years. Hulu LLC, endemic by Fox, Disney and Comcast Corp., is dispatch up its aboriginal programming with the accident alternation “11/22/63,” produced by J.J. Abrams, and blur acquisitions like the Sundance Blur Festival ball “Joshy.”
That’s led John Landgraf, CEO of Fox’s FX Networks, to advance there’s “too abundant TV,” citation the 400-plus scripted shows he abstracts were fabricated endure year. FX’s own big hit in aboriginal 2016: “American Crime Story: The Humans v. O.J. Simpson,” a 10-part album featuring Cuba Gooding Jr. and John Travolta.
“You can’t even calculation the bulk of TV shows accurately,” he said.
The affair for investors is that the spending, rather than stemming eyewitness losses or reigniting ad sales, may become a abiding annoyance on profit. The Standard & Poor’s 500 Media Index, a criterion that includes Viacom and Discovery, has beneath 13 percent back aboriginal August, if Disney appear on subscriber losses at ESPN and triggered a slump in ball stocks.
Catching On
“This is one of the affidavit why this industry has performed so ailing the endure several months, because humans are communicable assimilate this,” Creutz said. “There may be allowance compression for abounding years to come.”
So far, the spending hasn’t led to bigger audiences, according to Nielsen data. Viewership at cable networks in the 18-to-49-year-old age accumulation approved by advertisers is down 5 percent in the accepted TV season. It’s down 6.4 percent for broadcasters.
One ablaze atom for all of the programmers is that the exploding examination options are creating opportunities for them too: to advertise shows to streaming-video-on-demand casework like Netflix and Amazon, to go anon to consumers with their own online casework and to bazaar programs internationally. The catechism is how abundant those can account problems in the calm TV market.
“The apple is accepting bigger and bigger and bigger and better,” CBS CEO Leslie Moonves said Tuesday at a Morgan Stanley appointment in San Francisco. “So you’ll see us do added content, but alone if we apperceive it’s traveling to be profitable. In a lot of cases, that’s the way it is.”
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