WHY THIS MATTERS
The number of scripted originals has doubled in five years-good news for content creators, Darwinian news for others.
Though this remains a Golden Age of original TV programs, it is also an age of excess. There are so many shows-good shows-that no one can conceivably watch them all.
I never got through the last season of The Americans, and I love The Americans, says Herb Scannell, CEO of BBC Worldwide North America, talking about the shows stacked up on his DVR. I don't think my experience is uncommon. I think that there is now this sense that there is so much good stuff out there.
Must-see TV has morphed into must-record TV. DVRs fill up and days pass (C3), weeks pass (C7), months pass (C30), then something's got to go because there's something else to TiVo, if not actually watch.
In fact TiVo, looking at a week's worth of activity by 56,000 subscribers, found that users opted to record 85 hours of programming. About 20% of those recordings were viewed during the first three days. But after 42 days 33% of the recordings remained unwatched.
Too much of a good thing (spoiler alert) can be a problem for viewers who can't keep up with the shows their friends rave about. The challenge for the TV industry is much bigger.
The multi-channel, multiplatform, on-demand, online streaming, mobile, TV Everywhere environment has created an unlimited amount of time slots, or shelf space, that needs to be filled. For now, the expanding programming universe seems infinite. But someday the bubble could burst.
The Party's Over
There definitely is way too much scripted programming, says Nick Grad, president of original programming for FX Networks, which airs The Americans. FX calculates that in 2014 there were 371 scripted original series, nearly double the 211 that were available in 2009.
The proliferation of program and networks-not to mention competition from Netflix, Hulu, YouTube, Crackle, Yahoo, etc.-has fragmented audiences and pushed ratings lower. Thirty years ago, The Cosby Show, the top-rated scripted show, averaged 28.9 million viewers. Last year, The Big Bang Theory averaged 19.1 million-and that includes delayed viewing. On cable, despite several gaudy hits in recent years, competition is intense enough that shows are often renewed after averaging a few hundred thousand viewers.
Ratings are an unmitigated disaster and so at some point a lot of these companies that are trying to lure consumers with original programming will have to cut back, says analyst Richard Greenfield of BTIG Research.
Not only are all these new shows competing with each other, they're also competing with every great show ever made because of the availability of deep libraries on SVOD. The reality is you compete with everything ever created now and that's really hard, Greenfield says.
He recalls that a few years back, the movies studio cut back on production so they weren't opening five blockbuster films on the same weekend. There's definitely too much con-tent being created in television right now, and we'll probably find equilibrium over the next few years, just as we saw in film.
Investing In Ammunition
Instead of backing away from this arms race, most media companies are boosting spending on original TV programming. They're starting studios so they can control rights to the shows and squeeze out all the revenues they generate.
There certainly is a war for content in the business right now because everyone is striving for original content, says David Levy, president at Turner Broadcasting.
It's a battle for people's time, because there's so much choice, says Paul Buccieri, president of A&E Network and History. It's quality of content as much as quantity. The quality will break through.
Companies like Turner and A&E are increasing their investments in programming because while ratings are falling, the sky isn't. Networks are still generating high profit margins and ratings are just one indicator of financial success as the business changes.
As live ratings continue to decline, you need to find new metrics and new revenue opportunities, says Levy. In order to play in these new fields you need to own your own content.
Those new sources of revenue include ad revenue from data-based ad sales, product integrations and sponsorships, video-on-demand advertising, and syndication to new streaming VOD players like Netflix, Hulu and Amazon.
Still, original content in ever-larger quantities seems to be the strategy for solving any number of business problems. Are advertisers complaining about under delivery? Promise more original programming. Got a tough carriage negotiation with a big cable operator? Show them a plan to increase original programming. Wall Street concerned that reruns no longer attract viewers? More originals can send the stock higher.
And if the domestic market isn't growing like it used to, and you want to open up international territories, original programming is just the ticket.
It's not just to support our domestic channels, but to have quality content around the world in an international model,' says A&E's Buccieri.
Ratings Aren't Everything
Nevertheless, the TV business has long been ruled by ratings and it looks like bad business to spend more money on original programming as ratings for those shows decline. That notion would seem to be supported by evidence that marketers are spending less money in this year's upfront.
But the ratings may not be all they're cracked up to be.
An inestimable, and growing, amount of time viewing content on tablets, smartphones and other video devices isn't included in ratings. And while scale remains important, networks and media buyers are using more advanced data and analytics to steer ad campaigns towards target
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