The Age of Peak TV Is Ending. An Age of Austerity Is Beginning.
Hollywood studios and major streaming services are cutting back on programming after years of unfettered growth.
By Lucas Shaw
Bloomberg
July 4, 2022 at 5:30 PM CDT
The sudden decline in Netflix’s share price and the growing fear of a recession have forced Hollywood into a new period of fiscal austerity. This manifests in ways big and small. A TV director who made $4 million a year is now getting $750,000. Mid-budget movies are being shelved. Broadcast TV budgets have dropped more than 30%.
In the latest new trend, networks are canceling shows that they already agreed to make. Peacock shelved plans for a “Field of Dreams” TV series from the co-creator of “Parks and Recreation,” while HBO Max canceled “Demimonde” from “Lost” co-creator J.J. Abrams.
Each cancellation has a different story, but these are not small decisions. Networks already spent money on the projects, and decided losing a few million dollars with nothing to show for it was better than spending tens of millions of dollars on a show that might not work.
This is a significant departure from the last few years when media companies tripped over themselves to produce any halfway decent idea. The industry made 559 scripted shows last year, up more than 200 since 2013, the year “House of Cards” debuted. That doesn’t include all of the unscripted programs, including competing docuseries on the same subject.
“The days of the drunken sailor spending are gone,” one agent said this past week. “I’ve never seen so many shows canceled and returned.”
Certain sanguine Hollywood executives have been predicting a market correction for years. To someone like FX chief John Landgraf, it seemed obvious that services were spending too much money on too many shows without regard for quality or profit. The golden age of TV gave way to the age of peak TV, as companies produced far more programming than anyone could ever watch.
And yet, companies kept making more — and were rewarded with new customers and a higher share price.
That was until Netflix warned it would have a slow start to the year. Optimism about streaming, hailed as the future, has dissipated ever since, and all but disappeared when then the streaming giant reported it lost customers in the first three months of the year. In the past few months, pessimism and uncertainty have proliferated in a town already prone to insecurity.
If Netflix started the fire, the macroeconomic situation has poured on some lighter fluid. Rising interest rates have made it harder to borrow, and made companies less eager to be in debt. It’s also limited financing for major deals, which forces everyone to be more cautious.
The market for new projects has slowed. Netflix, once the biggest spender of them all, has broadcast that it isn’t going to spend like it once did. Amazon has grown more budget-conscious since it hired Mike Hopkins, though it will spare no expense for certain series (like “Lord of the Rings”).
The biggest contraction of all is underway at Warner Bros. Discovery, which is scrutinizing costs after a debt-fueled merger. HBO’s buying has slowed in recent months, and the company has given up original scripted programming at TNT, TBS and in much of Europe.
Apple is just about the only place that can still spend like money grows on trees. Newer players Roku and Amazon’s FreeVee are buying but have modest budgets, while stalwarts Disney, Paramount and NBCUniversal have never been known for profligacy.
This doesn’t mean the flood of new shows will dry up. Talent at the top-end will still get paid. Media companies need to keep growing, and neither cable networks nor the theatrical movie business is the solution. Streaming remains a big part of the future.
But the age of peak TV is coming to a close, and that will impact almost every sector of an industry where budgets, valuations and strategic plans were predicated on a booming market for new programming.
Just a few months ago, any production company with a few credits to its name was suddenly worth hundreds of millions of dollars. (It helped if you were aligned with a celebrity like Reese Witherspoon or LeBron James.) Now many of the companies looking to raise capital or sell themselves are having a harder time.
Media companies that merged and restructured to position themselves for the streaming future now see that Netflix — the inspiration for many of these moves -- is cutting staff. Employees who’ve survived regime changes are bracing for more. Falling stock prices for all of these media companies could precipitate yet another wave of consolidation.
As one successful producer said this past week, the Hollywood train is still moving but the brakes are starting to squeak. — Lucas Shaw
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