Strategy decay in the world of TV production

  

 

I was amazed to read in the FT this morning that:   

The cost of making a one-hour drama episode has tripled in the past 15 years ….. to $2.7m

When you look at shows like Lost and 24 you can see the special effects and other expenses that have driven the increases and the global success that has justified them, but I guess the reason I was surprised is that the technology costs of producing simple TV are plummeting.

Add to that the increased competition for audiences from social networks and other new media and you have got to expect that this trend will reverse.  One of the main points of the article is to say that spending these amounts to produce TV shows is not sustainable.

Further, one of the reasons production costs have risen is that following changes in regulation in the mid-90s television networks became studios and began producing their own shows.  They were willing to increase budgets because they held on to all of the profits.  In a web world they lose their monopoly on distribution and they will have to start sharing the profits again.

I am not expecting production costs to drop any time soon though, because producing a hugely successful show can transform the fortunes of a television network and the careers of those involved.  According to the FT article:

On the strength of Lost and Desperate Housewives ABC vaulted from fourth to second place among 18-34 year old viewers in prime-time, swinging the network back to a profit 

I think this will become harder and harder though.  Studios will find it harder to manufacture hits as competition from low cost production houses increases and they lose control of distribution to the web.

To me the right thing for studios to be doing is following the trends in the cost of the technology they use and the profits in their distribution channels and starting to produce content more cheaply.  The fat head of TV is going to suffer twice over – once as audiences move to the long tail and then again as they sacrifice TV for other forms of new media.  Becoming lean will be the best way for these guys to survive.

There are signs that studio bosses are starting to understand these arguments.  Accordign to the FT, Brothers and Fox have created speciality labels to do more creative work on lower budgets and NBC has announced it will cut costs by relying more on inexpensive reality and game shows (I will have my fingers crossed for Brothers and Fox…..).  Unfortunately, going from understanding the arguments to gearing your business around their consequences requires a clarity of thought and boldness of action that will be beyond all but the most visionary of media executives.  Imagine changing your production values and dismantling the highly paid teams that have created the highest profile hits on your network.  Not an easy thing to do.

I titled this post “strategy decay” because the longer studios persist with a high cost production strategy the harder it will be for them to change – the quality of their options is decaying.

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  • Hey Nic, I don’t agree with you. You are arguing that larger content owners & studios will start producing lower quality content. To do that, shows like Lost and 24 will no longer be able to pull big audiences. To do that consumers will have to stop enjoying slickly made content, or the tail (and UGC) producers will have to start producing better quality content. Neither of which will happen in my view.

    I think what is now, and will continue to happen, is that we have a market where consumers are very happy to pay top dollar for some quality content (like Ralph Lauren) and happy to snack the rest of the time on cheaper UGC and tail stuff (like Primark or Vente Privee): both products exist together and both have workable models…

  • Hey Nic, I don’t agree with you. You are arguing that larger content owners & studios will start producing lower quality content. To do that, shows like Lost and 24 will no longer be able to pull big audiences. To do that consumers will have to stop enjoying slickly made content, or the tail (and UGC) producers will have to start producing better quality content. Neither of which will happen in my view.

    I think what is now, and will continue to happen, is that we have a market where consumers are very happy to pay top dollar for some quality content (like Ralph Lauren) and happy to snack the rest of the time on cheaper UGC and tail stuff (like Primark or Vente Privee): both products exist together and both have workable models…

  • nic

    Thanks Paul. In trying to keep this post simple I lost a lot of the subtleties of my argument, which is to say, I think there is still a place for shows like Lost and that they will make great money for their studios. This will become harder though, and the AVERAGE production cost will decrease. The cost reductions will (hopefully) be more about less special effects than lower quality, but we will see….

  • nic

    Thanks Paul. In trying to keep this post simple I lost a lot of the subtleties of my argument, which is to say, I think there is still a place for shows like Lost and that they will make great money for their studios. This will become harder though, and the AVERAGE production cost will decrease. The cost reductions will (hopefully) be more about less special effects than lower quality, but we will see….

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  • aaronasjones

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