Cable Networks' Budget Woes Seen Coming Down on Programmers

Cord cutting, declining cable-TV subscribership and consumers using DVRs to skip commercials are "a triple threat" leading to cost cutting at cable networks trickling down to production companies, said John Ford, general manager of nonfiction video content trade group Npact, Monday at the Realscreen Summit. Ford said series, when renewed, often see budget cuts not bumps, while contending with pushes for smaller casts and shorter editing times.

Margin pressures have some small production companies "at the knife's edge," Ford said. The cable ecosystem isn't adapting quickly enough to proliferation of DVRs and that reruns are dying out as consumers increasingly have first-run content stacked up to be watched. The streaming service universe "kind of looks good but is largely unprofitable," he said.

Such services are as revolutionary a step in TV's evolution as the emergence of content-specific cable channels like HBO and CNN, said CuriosityStream and Discovery Communications founder John Hendricks. He said Discovery experimented in the early 1990s with "near video on demand" service Your Choice TV. Enthusiastic consumer results showed "whenever this revolution happened, it would be a big success," he said.

The business models for VOD haven't been solved, with big challenges being consumers who are used to free TV content and networks not used to having to market themselves to consumers, Hendricks said. Streaming "is a whole different world" than dealing with MVPDs, Hendricks said. He said CuriosityStream will spend $60 million to $80 million this year on marketing and eventually needs to get closer to double that "just to have a chance" of people discovering its content. Industry will find the right models in the next year or so, he said.

Consumers will start hitting a price wall on how many streaming services to which they subscribe, Hendricks said. He said the norm likely will be subscribing to one or two primary services a month featuring big theatrical scripted content, and a limited number of specialized services, with those having to charge closer to the $1 to $2 per month, he said. The broader those specialized services can be, the better chance of their success, Hendricks said, saying CuriosityStream -- with a focus on nonfiction content such as history, science and current events -- aims to be "a full-category player" akin to ESPN crossing all sports.

Speakers said networks and production companies must collaborate more closely on economizing strategies. "We're all on the exact same team," said Scripps Networks Interactive Chief Officer-Programming, Content and Brand Kathleen Finch.

Critical Content CEO Tom Forman said budget issues are raising the bar for what networks will accept, with a program needing to have particular talent attached or based on notable intellectual property. Programmers no longer can pitch "just an OK show," he said.

ITV America CEO Brent Montgomery said streaming services "play by very different business models" than linear cable: "Netflix apparently doesn't have to make money yet." Meanwhile, the cable business is "more run" by chief financial officers than ever, he said. Streaming services “have more money than God, but don’t have the infrastructure yet” to rival a Scripps or Discovery, he said. Montgomery said the types of projects being sought by streaming services and cable networks are largely synonymous, with one exception being Facebook, which has been green-lighting notably shorter content of 12 to 14 minutes in length.

Finch is “jealous” of streaming services’ ability to decide on programming based largely on the content itself, without having to focus on cable-TV issues like advertiser interest or how it pairs with other content on that night.

The wave of consolidation such as Disney buying much if Fox and Discovery/Scripps will benefit programmers if the companies are financially stronger than they were before and if they invest their savings from synergies into content, Ford said. But such deals pose a danger if the companies end up with big bureaucracies that are difficult to navigate, he said.

Realscreen organizers said this would be the annual event's final year in Washington. Realscreen 2019 is to be in New Orleans.