How Content Spending Will Grow in the Post-Peak TV Era
Having tumbled from its peak TV summit, the media business will be scaling that mountain much more slowly and carefully in the years ahead.
Data from a recent forecast by Morgan Stanley provides a new angle on the TV industry slowdown that has dominated recent headlines out of Hollywood and a closer look at how TV content spending will be impacted by companies’ shifting priorities.
According to the forecast, all but two of the major streaming players will grow their spending on “general entertainment” and news — TV content excluding sports, in other words — at rates of less than 10% over the next few years. The two exceptions, unsurprisingly, are Amazon and Apple, but even the Big Tech behemoths will be reducing their spending growth significantly from peak TV-era levels.
Apple, of course, is an outlier in this analysis, having only entered the original content business in 2019 with the launch of Apple TV+. (Its 2019-23 growth rate, at more than 200%, is excluded from the chart above for this reason.)
But Amazon’s example is more instructive: Its TV spending is projected to drop from a CAGR of nearly 22% between 2019 and 2023 to just 12.6% between 2023 and 2026. Even the deep coffers of the preeminent e-commerce giant, it seems, cannot stand against the current crunch hitting the TV business.
Still, it is important to note that, for all the noise about cost-cutting in the industry, content expenses are still broadly expected to grow on an annual basis, and strike-afflicted 2023 will likely remain the low point of spending for most companies over the next few years. Ampere Analysis previously forecast 2% growth in aggregate global content spend for this year, rising to $247 billion from the $243 billion spent in both 2022 and 2023.
This growth is in some ways unavoidable. Production costs are poised to rise further in the years ahead thanks to inflationary factors and new post-strike labor costs. Despite average per-series budgets coming down, TV shows, like almost all goods and services, will simply grow more expensive over time.
Morgan Stanley even expects two companies to see their spending growth increase over the next few years: AMC Networks and Paramount Global.
These are, in a sense, exceptions that prove the rule, however. AMC’s content expenses actually shrank amid peak TV heights, dropping by about 2% over the 2019-23 period, as the contraction now hitting the SVOD space came for cable first. (Original series released by AMC’s cable networks dropped 26% between 2014 — cable’s peak year for output — and 2022, per Luminate data.) The company will spend just $1 billion on content in 2024, according to a previous Morgan Stanley forecast.
Paramount, meanwhile, may be about to undergo a transformative M&A process, which would transform its content strategy as well. It’s not clear that Skydance Media, Paramount’s most likely buyer at this point, would shut down the studio’s SVOD Paramount+ upon taking control, but doing so would free up a great deal of cash to be spent on series that could be loaned out to other streamers and networks instead.
The bottom line here is that post-peak TV strategies are taking shape and are a bit more complex than simply “spend less.” The trick to success in the current market will be spending on the right projects, which will likely be more shows with broad appeal, reasonable budgets and fewer movie stars. Proof positive: Netflix just greenlit its first medical procedural.
