Every industry has its folklore. The business practices and methods of operating that everyone "knows" is the truth. Even though more often than not, the accepted narratives range from slightly mistaken to outright ludicrous.
Chairman of FX Entertainment, FX Content & FX Productions John Landgraf is a very smart guy and obviously cares very deeply about the television industry. He also is acutely aware that reporters in any industry respond to seemingly frank talk. That's especially the case in the television business, where network executives have proven in recent years to be reluctant to speak to TV critics during their network's presentations in front of the Television Critics Association (TCA) twice-a-year gatherings in Pasadena.
But Landgraf makes regular appearances during the TCA gatherings and even better for critics, he comes armed with lots of cool charts and data points the reporters can use in their coverage. It's a smart PR move on his part and his willingness to participate in the process has meant that he has had an outsized role in shaping the conventional wisdom of the television and streaming business.
One of his over-arching themes during the past few TCA gatherings is the idea of "peak TV," a phrase he coined back in 2015. Each year he brings out data compiled by FX's research folks, which among other things tracks the number of new English-language originals released over the past year in the United States. And as the number rises each year, the trend has sparked an entire cottage industry of think pieces that argue the television industry produces too many new shows.
That theme of "too much TV" has become the overarching folklore of the television industry and is cited as the underlying cause of so many of the problems faced by the industry.
"Streamers losing money?" Too many originals. "Slowdown in subscriber numbers?" "Rising subscriber churn?" "The collapse of linear television?" All of those new streaming originals are confusing consumers. And so on and so on.
On Thursday, Landgraf was back in front of the TCA and revealed that in 2022 there were 599 English-language scripted series across all platforms, up from 551 in 2021. He also said that he felt as if this might be the high water mark for new originals and that the number would slowly decline in the years to come.
"In August, I said it would be the 2020s you would find the market peak of scripted TV series and that is still my bet, while noting with humility that I’ve been wrong on this prediction twice before," Landgraf told critics. "I saw an article by John Koblin in The New York Times in which he tracked a decline in series orders year on year, which is a leading indicator of the next year's output. Between his reporting and the fact that you see s 16 percent deceleration - in other words, you were up 14 percent in the first half and down 2 - a 16 percent swing between the first and the second half of the year. I think we have a strong indication that we're going to start to see a decline beginning in 2023."
But whatever the number might be, does it really matter? Obviously it's a lot of new shows and the number feeds into people's notions that there is entirely too much great television for anyone to keep track of every week. The idea that "Peak TV" is bad for the industry has become deeply embedded in the psyche of the entertainment world and it's nearly impossible to convince people that it is overblown. I suspect that I would be hard-pressed to convince Landgraf that nearly 600 new show figure isn't all that important.
But I am going to give it a try.
The number of streaming originals is often used as a proxy for the complaint that the industry has replaced a profitable legacy linear ecosystem with a streaming business that is less profitable. And in a just-published interview with Vulture's Joe Adalian, Landgraf argues the industry is going to consolidate back to a business model that more closely resembles the glory days of linear television:
But we don’t have a compact business model — a limited number of retailers and a limited number of wholesalers, all of whom are profiting from the ecosystem. We will arrive at that place again, in my opinion. But the reason we’re seeing so much difficulty right now is that there are so many participants in that ecosystem, and they have been spending to pursue a beachhead to the future following the Netflix model. So as the old ecosystem declines, and the new ecosystem is not yet fully consolidated, there’s pressure across the board on profitability.
His argument is essentially that once the industry consolidates and there are fewer streamers, they will be able to cut back on their content spend while also somehow increasing profitability.
Now executives who grew up in the golden days of linear television long for those 40 percent margins (and larger) that were made possible by market consolidation, few choices for subscribers, and a carefully crafted assembly line of markets that allowed new TV shows to move from broadcast & cable first-run to physical product, on-demand and then through various levels of syndication. Every stop along the way provided another bit of revenue as well as plenty of residuals.
Streaming is a very different business, but it's worth noting that it's not inherently unprofitable. I was amused to hear a Warner Bros Discovery financial exec shrug off the company's streaming business by noting that it's only a "20 percent margin business." For those of you who aren't CFO's or financial reporters, it's worth mentioning that in nearly any other business, a 20 percent margin is considered to be the sign of an extremely profitable business.
And that is the core of the problem right now. Media executives and shareholders are accustomed to seeing margins that are unrealistically large in any but the most unusual times. So they blame the streaming business instead of recognizing that the gravy train days of printing money without worrying about competition from other forms of entertainment is coming to an end.
It's difficult to imagine a scenario in which any combination of streaming consolidation and price hikes could provide linear era margins in the media business. That model isn't going away overnight - it still provides plenty of profits. But it's also impossible to recreate in a world filled with a myriad of viewing choices, at all possible price points.
A second counterpoint to Landgraf's argument is that study after study has shown that the two most influential factors for consumers when choosing a streaming service and deciding whether or not they will stay a subscriber is cost and the availability of new content. And both of those desires would prove challenging in a world with fewer subscription services that cost more while simultaneously providing a smaller number of new originals.
I would also argue that in the same way media executives are never going to be able to reconstruct a linear TV-style money train, we are also unlikely to return to a world in which tens or hundreds of millions of viewers share some simultaneous cultural experience. We live in an increasingly niche culture world and that is driven in large part by a universe in which the viewers' screen time is split between everything from TikTok and YouTube to HBO Max and Shudder. That mass culture experience is increasingly a thing of the past and waxing sentimental about it begins to resemble those music fans who moan that the business was so much better when consumers were forced to purchase full-length albums.
So rather than trying to fight that inevitable change, the television industry would be better served playing to the niches while also being cognizant that those niches have to be served at a reasonable cost. This isn't to say that there won't be mass hits or projects that are appealing to a wide audience. But it's a dance to balance the mix and while producing 600 originals in a year isn't an inherently bad thing, producing 600 shows hoping to be massive cultural experiences with the budget to reflect those ambitions is a bad idea. And that is really what has gotten the streaming industry in trouble in recent years.
I truly believe that producing 600 scripted originals a year - or even more - is sustainable. But it also has to be done wisely and that has proved to be the primary sticking point for nearly every service.
Rather than moan about cost and content abundance, there are some factors that will improve the revenue stream while also helping with the increasing churn rate at most streamers.
Content discovery is an industry-wide problem. Consumers can't remember which show is on which streaming service and that alone is enough to frustrate most people. Several companies have tried to build some version of a modern day TV Guide listings app, but no one has managed to create the killer content discovery app. Something that allows a consumer to put in the services that subscribe to and then be able to search for any show, learn whether or not it is available on some paid service, on-demand, or even AVOD. Because whether the streaming industry is creating 300 new scripted originals a year or 600, they are ultimately just wastes of money if audiences can't find them.
Another challenge in the 600 new shows a year universe is marketing and PR. No streamer or network has the resources to give every new show the marketing push and PR efforts they require. So triage is inevitably being done and the truth is that the wrong decision is made about as often as the correct one.
And then there is the increasingly common decision to let streaming customers organically "find" the show. There is a belief at Netflix and several other streamers that effective placement in the service's UI along with viral buzz can often be as effective as traditional press coverage. It's why you see so many reviews embargoed until the show's release date. The theory is that consumers respond when they suddenly begin hearing about a show just as it premieres.
While there is likely some truth to that, it's also an incredibly inefficient approach. And one in which shows can frequently be missed until it's too late to save them.
In a 600 new show world, smart press coverage is even more important. The average streaming customer is best served by helpful curation and that is a process that is just now beginning to be developed on platforms.
I wrote several years ago about a social component that the entertainment-based vMVPD Philo was testing in-house:
Maybe three years ago an engineer at Philo gave me a rundown of an integrated social sharing tool they were experimenting with in-house. You could share programming suggestions with friends, connect with people who shared your love of a show, and create viewing lists you could share publicly or privately. The plan was eventually to offer networks the opportunity to send direct messages about shows to viewers who opted in. According to the engineer, the features had been very popular internally. But it hadn't been rolled out to the public, because it required a large subscriber base in order to scale correctly.
"Social" is a very mushy term, but in the content of SVODs, it really is about sharing your viewing experiences. Sometimes the sharing is direct - think of the various experimentations with watch parties. But the very nature of the way an SVOD works (and various content restrictions) makes those types of sharing difficult to bring to scale. But there are ways of creating a social experience that doesn't require actual direct social interaction.
Another streamer provided me with a look at an Alpha build of their proposed social component last May and you can read more about that here.
Both efforts show that there are solutions to the content marketing challenges facing the streaming business. And while those solutions might be challenging to implement in the short-term, they are a better solution than cutting the number of scripted originals and hoping it won't drive subscribers to leave.
It's also a better solution than the one being pushed by Warner Bros. Discovery executives, who believe the streaming business can be more profitable if they are fewer subscribers paying more per month.
Peak TV is a real issue. But it's not the cause of so much of the disruption impacting the streaming business in 2023. Producing fewer scripted programs won't bring back the golden days when everyone was talking around the water cooler about the latest episode of Seinfeld.
As an industry, we should not be trying to recreate the past or let fear hamstring innovation. Hollywood loves to mythologize the industry's early pioneers and the courage they showed when they were creating the business that still inspires the world.
Peak TV shouldn't be seen as a warning. It's an indication that the best is yet to come.
