US producers overwhelm European competition in video programming

If proof were needed that US producers are spending massively, the recent interview of Prince Harry and Duchess of Sussex Meghan Markle with Oprah Winfrey provides an example: US and international rights to the interview cost about $9 million.

 “Considering that it got 17.1 million views, it shows that media owners who choose to focus on lower programming budgets will likely, all else being equal, end up with lower audience shares,” a report from ad agency Group M noted.

US video content producers are overwhelming their European competition in programming spend, according to research released by the New York-based Group M on Monday.

“Arguably, whether spending is directed to a streaming service or a traditional broadcast property is somewhat irrelevant; it’s the total amount of spending on quality content that matters,” said Group M.

“Netflix, Disney and others are demonstrating that consumers will likely find a way to get access to content if it is good enough to pay for. As the Oprah interview showed, there is content that can still generate a large audience. The problem many traditional TV network owners worldwide face is that if the global media giants are increasingly responsible for massive shares of spending on content within individual countries, they will likely take viewing share that is somewhat in proportion to those levels of spend,” the report warned.

 As the following statistics from the report show, US producers are averaging a $12 billion programming spend, compared with an average of less than $2 billion by European companies in the coming years.

•  “Disney incurred $21 billion in total content costs in fiscal 2020 for the period ending last October. They have committed to spending $14-16 billion on streaming services by fiscal 2024. They have not indicated how much, if any, will be incremental.
• Viacom recorded $13 billion in content expenses for calendar 2020. They have guided toward $5 billion in annual spending on content on streaming services by 2024. Some of this spending will be incremental to existing levels of spend.
• Netflix spent $11 billion on content during 2020. It would be unsurprising if the company was spending nearly $20 billion annually on content by 2024.
• AT&T incurred $12 billion in programming and production costs for calendar 2020. In 2019, the company stated that by 2024 HBO/HBO Max would spend an incremental $4 billion annually over HBO’s $2 billion expense for 2019, or $6 billion in content for the service. That was before significantly increasing its expected subscriber base during the past week. In 2019, they guided expectations to a range of between 75 and 90 million global subscribers by year-end 2025, but during an investor event on Friday called for 150 million at that time, excluding markets where they presently license most of their content, such as the U.K., Germany, Italy and Australia.”

To complete the context, Amazon’s global video content budget was about $7 billion for Amazon Prime Video in 2020, up from six billion in the previous year, according to Statista.

In contrast, consider the following from some of Europe’s largest free-to-air broadcast TV network owners, according to the report.

• “ITV incurred £935 million in program schedule costs for 2020 and several hundred million pounds in additional content spending for third parties at ITV Studios.
• RTL spent €3.5 billion on content across its portfolio, including France’s M6 and spending on content for third parties from Freemantle. The company has guided towards €350 million in annual spending on content for Videoland and RTL Now by 2025.
• Pro7Sat1 recorded €966 million in programming costs during 2020 for its broadcast business and likely added a few hundred million euros in additional content spending at Red Arrow.
• TF1 spent €833 million on programming during 2020. Along with its co-owners, collective spending commitments on Salto amount to a minimum of €45 million annually.

 “As a result, non-US-based traditional TV network owners who want to sustain their current audience shares need to be prepared to substantially increase their overall commitments to content and be prepared to expand to international markets more than they are planning on presently,” the report concludes.