January 07, 2019
Peak TV Has Not Peaked
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Three years ago, FX Networks CEO John Landgraf coined the term “Peak TV” to describe how the explosion of scripted original shows across online services, broadcast, and cable TV was overwhelming consumers with too much choice. With a record 495 original scripted shows produced in 2018 — largely driven by a 37% increase from streaming services — many industry insiders are warning that the pace of growth is unsustainable; that too much content is being made relative to audience needs; and that consumer choice has reached its econometric limits.
But TDG’s analysis in January 2018 forecasted that this rapid proliferation would continue and highlighted the growing importance of original content in its Big-3 SVOD & The Original Content Arms Race report. In fact, we projected that content spending by Netflix, Hulu, and Amazon would increase dramatically over the next five years and that the amount invested in originals would triple to $10 billion annually by 2022.
What explains these contrasting views?
TDG expects the pace of original productions to continue, as streaming services continue to shift their focus from licensed content to developing more original programming. An expanded array of high-quality originals is seen as the best way to differentiate themselves from the competition, gain new subscribers, and reduce churn.
And this strategy is paying off, especially for Netflix, which continues to post strong subscriber and revenue growth. TDG’s original research from early 2018 showed that roughly 50% of Netflix users now cite original programming as “very important” or “absolutely critical” in their decision to sign up for the service, with more than 60% stating the same for their continued use.
Subscription streaming services and premium cable networks also have proven that high profile original programming such as Game of Thrones, The Handmaids Tale, and Stranger Things can lift a brand and earn the respect of Hollywood. In other words, it is highly unlikely that these networks will pull back on original content spending any time soon, especially with new players joining the originals arms race (e.g., YouTube and Apple) and intensifying competition.
The benefits of high-quality originals have content providers investing in new productions at an annual cost that is unsustainable over the long term. This much is certain, though it has yet to limit production schedules or the pace of investment.
But is the vast array of entertainment options overly intimidating for today’s quantum consumer?
The explosion in content makes it more challenging for customers to find what to watch, especially when shows are fragmented between linear TV and a growing array of streaming apps. However, new technologies will ultimately make massive content catalogs a positive for customers and not a burden. The emergence of voice-activated search on streaming devices and AI-driven content personalization
Netflix’s Ted Sarandos goes a step further, countering ‘the paradox of choice.’ He recently told Variety that “the notion of Peak TV is a completely
The escalation of original programming will continue over the next few years, as high-profile streaming services from Disney and AT&T’s WarnerMedia are set to launch late in 2019. As more major studios jump into the direct-to-consumer streaming space, they will continue to pull back the licensing rights to their owned IP and force further investment in originals.
All TV services and networks are battling for consumer attention, and with the competition intensifying, high-profile original shows are of paramount importance. Over the long term, the mounting production costs will cause the pace of growth to slow, but we still have a way to go before we hit that peak.
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