STREAM OF OPPORTUNITY
Anna Nicolaou looks at how Netflix changed the small-screen landscape.
New Year’s Eve I became gripped by a migraine that would keep me in bed for two weeks. Each morning, with the lights off and curtains drawn, I opened up Netflix to see what the TV and film streaming service was promoting to me that day. As I slipped in and out of sleep, I watched everything.
There was Spinning Out, a teen drama about a bipolar figure skater; Virgin River, a romance about a Los Angeles woman who moves to a rural cabin for a “fresh start”; You, in which a former teenage pin-up plays a sociopathic stalker who locks the women he dates in a glass cage.
It turned out that my enforced Netflix spree, with endless days spent in sweatpants, was a harbinger of what was to come for the population at large only weeks later. The coronavirus pandemic has taken hold of everyday life so quickly that things suddenly feel like a science-fiction film, albeit one in which being a couch potato is part of our civic duty.
In a sense, television companies have inadvertently been preparing for this moment for years, making more TV than could ever have been conceivably justified by consumer demand. Even if I had spent every single day of 2019 watching the full season of a release, there would still be hundreds of shows I wouldn’t have time to get to.
Last year the industry in the U.S. made 532 original scripted TV shows, doubling the 266 shows made eight years earlier. After years on the sidelines, giants such as Disney and
Warner have joined Netflix in pouring billions into a battle for the future of TV. Amazon and Apple, two of the richest companies in the world, are doing the same, resulting in a perfect storm of endless television. Hollywood spent an estimated $120 billion on original programming last year, with Disney alone splashing out $28 billion to build a content war chest for its planned Netflix-killer, Disney+.
When HBO’S Game of Thrones concluded last year, some media pundits postured that this was the end of an era, after shows such as The Wire and Mad Men had ushered in critical acclaim and cinematic quality for the small screen.
In the past, TV networks were confined to a broadcast schedule that gave them a finite number of hours to fill. Producers knew exactly how much programming to make, and had no incentive to create more. But the streaming giants have no such schedule: they can make as much TV as they want, throw it online and see what happens.
One former chief executive of a major TV company put it bluntly: “It feels like we are entering into an age of massive mediocrity … there is an unbelievable amount of ‘just OK’ out there.”
“Development is getting lost because there is a real premium on quantity at the moment,” says Cyma Zarghami, former president of children’s TV channel Nickelodeon. “It used to be: you made 20 episodes, then 40 episodes, and then T-shirts and toothpaste followed. A hit was born. How a hit comes to be in the streaming world is not yet clear. Everyone is just throwing stuff against a wall, hoping to see how it will work.”
This upside-down system traces back to a decade of low interest rates, which allowed a startup called Netflix to borrow billions in junk-rated debt that financed a spending splurge that every other media company would eventually mimic. The dawn of today’s gold rush is almost unanimously traced back to 2013, when Netflix paid $100 million for two seasons of the political thriller House of Cards. The show’s widespread acclaim put Netflix on the map with audiences and Hollywood, and laid bare the strategy that the company would pursue for years: spend big to outbid rivals.
Netflix spent $15 billion on content last year, while burning $3.3 billion in cash and taking its long-term debt to $14.8 billion
— a dynamic that the streaming service has promised investors will improve over time as subscriptions rise.
It would take years for the media incumbents to realize that Netflix was not actually a friendly new distributor, but rather an existential threat to their business. Disney finally sounded the alarm in 2017, announcing that it would pull its movies from Netflix, and over the past few years other old media companies have followed suit, causing a mad dash to build new streaming services.
The ethos of excess has also hit the production ecosystem. Get Out producer Jason Blum recently explained that because streaming companies pay creators a percentage of the budget, rather than sharing future profits with them, producers are actually incentivized to spend more money. “What the streamers are telling us, in the way they pay us, is to make TV series and movies as expensively as possible,” he said. “If you have a movie for
$15 million and make it for streaming, you make it for
$40 million. Why wouldn’t you?”
Netflix offers large sums of money for shows, but the streamer typically holds ownership of the intellectual property, meaning creators won’t profit much if their programs end up scoring success. While a hit like Seinfeld has allowed producer Larry David to earn millions of dollars in royalties decades after the show ended, “that money is now being kept by the (streaming) platforms,” says Eli Holzman, creator of hit shows such as Project Runway. “Privately, we all say, people won’t strike it rich off of a few shows any more, the way (Cosby Show producer) Tom Werner and Aaron Sorkin did.”
Television has come a long way over the past century, from the introduction of colour in the 1950s to the advent of cable, which spawned the bloated TV packages of hundreds of channels that infiltrated American homes — only to be dismantled now through streaming.
The 1990s and early 2000s saw an explosion of television options as prestige programmers such as HBO and Showtime ramped up their output, and when breakout series such as Sex and the City reigned supreme. This revolution would persist through the 2000s, as sophisticated shows such as Mad Men made TV a cultural force that was increasingly regarded as the creative equal of film. But all that pales in comparison to the number of shows — and sheer dollar spending — of today.
Among longtime Hollywood executives, no one can point to a reliable precedent for this era. The closest comparison is the early days of cable TV, when viewers were suddenly inundated with dozens more channels to watch and networks such as Discovery and A&E scrambled to fill hundreds of hours of television.
Tim Brooks has spent his four-decade career working for TV networks including NBC and the USA Network, where he oversaw a surge in original programming as the channel sought to move beyond sitcom reruns.
But unlike today’s streaming wars, Brooks says, the cable revolution was “financially stable.” At USA Network, new shows “rarely made money on the first showing, but you could rerun them a lot and it would make the money back that way. You would pay
$10 million for the first batch of shows, and eventually you have to make $10 million back,” he says. “Whereas for the streaming networks, it’s about: can you get subscribers? This is a bubble.”
The production bonanza has come to an abrupt halt in recent weeks as governments have ordered their populations to stay home in response to the coronavirus pandemic. New seasons of hits ranging from HBO’S Succession, Netflix’s Stranger Things and newer fare such as Apple’s The Morning Show will be delayed as Hollywood lots have gone dark. Analysts who weeks ago predicted that we would see another record year for television production are now anticipating that the number of new shows will at least halve, as studios brace for the possibility that they won’t be able to make anything new for a long time. 2020 The Financial Times Ltd. All rights reserved. Please do not copy and paste FT articles and redistribute by email or post to the web.
It feels like we are entering into an age of massive mediocrity … there is an unbelievable amount of ‘just OK’ out there.