Netflix is the chief online rival of media companies and has planned to lay almost $5 billion out on new and vintage films and TV shows this year. The amount is higher than that of any network. Other streaming firms Amazon and Hulu also have plans of spending heavily, and this has led media companies to settle on the strategy of spending big to check their declining viewership.
Netflix forcing media companies to spend big
Prior to Netflix, it was possible for cable companies to fill their schedules with reruns and cheaper shows and still count on viewers. Now just offering filler is no longer enough since the streaming video giant is churning out quality entertainment in the form of shows such as House of Cards and Jessica Jones.
Increasing expenditures on programming is what media companies such as Discovery Communications, Viacom and Starz are planning, according to their statements made in recent weeks. While speaking during their earnings calls, media executives said that to maintain the supply of new programs to meet viewers’ demands and take advantage of the growing markets online and internationally, a lot of spending is needed.
Einhorn’s FOF Re-positions Portfolio, Makes New Seed Investment In Year Marked By “Speculative Exuberance”
It has not just been rough year for David Einhorn's own fund. Einhorn's Greenlight Masters fund of hedge funds was down 3% net for the first half of 2020, matching the S&P 500's return for those six months. In his August letter to investors, which was reviewed by ValueWalk, the Greenlight Masters team noted that Read More
“All these companies have been raising the amount they’re spending on programming pretty consistently. TV is losing audiences, and you’re trying to have new stuff to keep audiences engaged with your programming,” said Doug Creutz, an analyst at Cowen & Co.
Growing costs for networks
According to projections from research firm MoffettNathanson, the cost of programming at Discovery’s cable networks has grown 55% from 2013 to 2016 excluding sports, and a rise of more than 25% was seen in Viacom’s expenses. Viacom, which has added an entire new night of original programming at VH1, has also doubled its capacity for animation at Nickelodeon and plans to air more events on its networks.
Discovery, which is home to reality TV hits such as Deadliest Catch and Gold Rush, has made a move into scripted programming and is working on 10 new shows with Lions Gate Entertainment. The Starz premium channel made a huge investment of $250 million last year into original programming to sustain momentum that began with its most-watched shows, such as Outlander, Survivor’s Remorse and Power.
Only time will tell if this increased spending from the networks will help them to overcome the Netflix threat, but we can be sure viewers will be the biggest beneficiary in this spending war.