Analyst: TV market competition boosts content spend
October 25, 2019
Research by Ampere Analysis reveals that the growth of streaming services has intensified competition across the TV landscape driving an upsurge in content spend. Ampere found that global spend on TV, film and sports content expanded from $100 billion (€89.91bn) to $165 billion between 2008 and 2018 – a 65 per cent increase.
Nearly $50 billion of this growth was in the last five years alone. Ampere’s analysis indicates that this rapid increase has not stemmed primarily from investment by SVoD players, but rather from the established TV companies who need to assert themselves in an ever-more competitive market.
Over the last five years in particular, broadcasters have reacted to the entrance of the new online video services by increasing the proportion of revenue which they devote to content and rights expenditure. Back in 2013, a typical broadcaster or network spent roughly 41 per cent of its revenue on content rights. Ampere expects that by the end of 2019, this will have increased to 50 per cent.
The golden age of spending
This era of content production has been hailed as ‘The Golden Age of Television’. Between 2013 and 2018 content expenditure grew by $49 billion. Ampere estimates that if TV companies had continued with their 2013 strategy of spending an average of 41 per cent of revenue on content, natural TV market revenue growth would have delivered an increase in global content expenditure of roughly $23 billion. However, TV companies have increased their spending above historical levels as a reaction to increased competition, contributing an additional $26 billion in global content spend – more than half of the growth in the entire market over the last five years.
Subscription OTT services an important catalyst for growth
A huge amount of money has been invested in content by SVoD platforms such as Netflix, Amazon and Hulu over the last five years. SVoD service content spend increased from $2 billion per year in 2013 to $19 billion in 2018. Despite this growth, the vast majority of content spending remains in the hands of commercial and thematic broadcaster groups, which made up $111 billion of the $165 billion spent in 2018. And it is their reaction to the entrance of the new OTT players which has fuelled the global content boom. The leading US networks are driving the majority of spend, with Disney increasing its outlay from $10 billion in 2013 to $13 billion in 2018. Similarly, NBCUniversal’s content expenditure has risen by over $4 billion between 2013 and 2018.
Market growth shifts from acquisition-led to origination-led
OTT services pursued content acquisition strategies aggressively during their early years and the majority of the leading SVoD players continue to devote the bulk of their content spend to film and TV acquisition – Netflix, Amazon and Hulu spent over $13 billion on purchasing content in 2018. Historically, outlay on original content by the OTT players has been comparatively smaller than the other big global spenders. Broadcasters and cable network groups such as NBCUniversal spend nearly $8 billion on original content every year. In 2018 Netflix spent $1.5 billion. However, Netflix’s cash investments in new content is only now hitting the market, and the roughly 300 brand new series it has in the pipeline illustrate how this is about to change.
Incumbent OTT services face an imminent threat as the market shifts to a Direct to Consumer (DTC) model and studios retain content which previously would have been licensed out. With a loss of content from US studios, OTT platforms have begun to invest in huge volumes of original programming, which will shift content market growth from being acquisition-led to being dominated by increased original content spend. However, the shifting sands also present opportunities for producers and rights holders not focusing on driving their own DTC services to help fill these gaps.
“Where SVoD has led in content spend, others have followed and this has resulted in a positive feedback loop, stoking the fires of competition for content and driving up spending,” advises Daniel Gadher, Research Manager at Ampere Analysis. “But the nature of competition is soon set to change as the big studio groups pursue their own services. This will create opportunities for local and global indie producers as Netflix and other streaming services seek to replace the content retracted by existing content partners.”