Has ‘Peak TV’ jumped the proverbial shark?
The cancellation and deplatforming of Warner Bros. WBD. Discovery Inc.,
“Westworld,” which had lasted four years, “The Nevers” and “Minx” is another sign that the golden age of what many in the entertainment industry call Peak TV has reached, well, its peak. The glut of content that consumers used to enjoy, even expect, for the simple cost of a monthly subscription is waning.
After years of strong growth for streaming services and subscribers turbo-charging the number of TV shows produced each year to record levels, the streaming explosion has lost steam. Streaming services like Warner Bros. Discovery and Comcast Corp. CMCSA,
to market leaders Netflix Inc. nflx,
and Walt Disney Co. SAY,
they respond by cutting costs, which includes curbing the number of shows they greenlight and adjusting their strategies (such as Peacock’s shift from comedy to drama).
According to Ampere Research, the number of adult scripted series ordered by US TV networks and streaming services fell 24% in the second half of 2022 compared to a year ago, and has plummeted 40% from 2019.
The reduced content has coincided with subscribers overwhelmed by too many shows and a decline in subscription growth. According to FX Research, the number of original scripted shows aimed at adults grew from 182 in 2002 to 559 in 2021. Earlier this year, Wells Fargo & Co. WFC,
estimated that the nine largest media and technology companies would spend $140 billion on content by 2022.
At the same time, According to the Advertising Research Foundation, US household penetration of major streaming providers was relatively flat year over year in 2022.
The tipping point appeared to come in April, when Netflix reported that it had lost subscribers for the first time in a decade, sending its stock tumbling and resetting Wall Street’s attitude toward media and stocks. streaming to focus on profits rather than subscriber earnings. That has forced cost-cutting by Netflix, which has invested $17 billion in content this year after spending $13.6 billion in 2021, as well as Disney, which is seeing its worst annual performance in nearly 50 years.
See also: Netflix lost its streaming crown to Disney. Here’s how executives hope to win it back.
“Well, it sucks,” Netflix co-CEO Reed Hastings told employees at a town hall in April, referring to declining subscribers, the Wall Street Journal reports. The company has since laid off more than 400 employees and said it would maintain spending on new film and TV programming and clamp down on shared accounts, while adding a layer of advertising.
Losses at the three-year-old Disney+ streaming service more than doubled in the latest quarter to $1.5 billion, prompting the company to hire consulting firm McKinsey & Co. to study an extensive cost-cutting plan weeks before CEO Bob’s ouster. Chapek at the end of November.
See also: Disney shares on track for worst year since 1974 after Avatar sequel disappointment
Returning CEO Bob Iger immediately promised to take a “hard look” at costs. “Instead of chasing subscriptions with aggressive marketing and aggressive spending on content, we need to start chasing profitability,” Iger said during his first meeting at the company, according to a transcript seen by the Financial Times. “In order to achieve that, we have to take a very, very hard look at our cost structure in our businesses.”
The emphasis on profits from Disney’s streaming services, including Disney+, Hulu and ESPN+, underscores the dramatic shift in investor sentiment this year about the high costs of chasing subscribers. And it has led to speculation that Disney could spin off ESPN to “give it the operational flexibility to move to [direct-to-consumer],” Wells Fargo analysts said in a note this week.
Read more: Disney to spin off ESPN in 2023, allowing it to stream sports directly to fans, analysts predict
As Netflix and Disney disengage, Apple Inc. AAPL,
and Amazon.com Inc. AMZN,
— both of which get the vast majority of their revenue from services other than streaming — are a different story. Both companies continue to pour money into content to boost subscriptions, although Apple has shown a propensity to be selective in the shows it buys.
Apple spends roughly $6 billion a year on Apple TV+, which focuses on high-quality original releases. The limited library approach is part of the company’s strategy to establish itself as a creative storyteller rather than playing to a mass audience.
Meanwhile, Amazon is in the midst of expanding its media business to help drive Prime subscriptions and more purchases on its main e-commerce site. The company spent $13 billion on content for its video and music streaming services last year, up from $11 billion in 2020, and its ambitions appear to know no bounds.
The retail giant, which acquired MGM Studios for $8.45 billion this year, plans to spend $1 billion a year on 12 to 15 films, Bloomberg reported, citing people familiar with the matter. Amazon declined comment.