At global analyst firm, Informa Telecoms and Media, the TV and Digital Media practice works closely with many of the world's leading content producers, distributors and broadcasters. An emerging trend we’re paying close attention to is something we're calling the "squeezed middle" of the TV world: firms not quite at the top of their league, but who have made decent livings so far, and are starting to see threats to their revenue streams.
"Golden age of television" shows like "Game of Thrones," "Breaking Bad," and "Mad Men" continue to gather critical plaudits and, more importantly, profitable audiences for their host channel. Upstart challengers including Netflix have waded into TV production too, with hit shows such as "House of Cards" and "Orange is the New Black" drawing in additional subscribers to their services. It's fantastic news if you're HBO, Showtime, Netflix, or any of the production companies seeing rising revenue from these big budget shows, and it's allowing pay-TV providers such as the UK's BskyB to innovate around channels and bundles – Sky Atlantic basically being the exclusive first run "HBO channel" in the UK.
But at the other end of the scale, firms such as Vice and Twitch are creating superb, long-form online video for consumers in their target (global) market –young adults, in Vice's case, and gamers for Twitch. These firms are disproving many of the myths about Internet video: that people will only watch for 1-2 minutes; that you need to anchor such videos to other TV mediums or celebrities; that you need a managed network to deliver to large audiences. Advertising money, sponsorship and, in Vice's case, music releases, books and events have followed these new eyeballs. It's a winning streak that firms including Machinima, and other YouTube channels, are aiming to replicate as they target their own vertical interest groups. All these firms have low overheads, create at least 90 percent of their own content (which they own the rights to), and don't rely on traditional 'celebrities (who are expensive) to front programming.
But there are still many firms – probably the vast majority – that are neither channel titans with big budget shows, nor plucky indie-internet-video firms. These media organisations form the "squeezed middle" of TV. Traditional TV channels such as CBS, or the UK's Channel 5, probably also fall into this category, along with the middling pay-TV firms being bypassed by both Internet video services and direct offerings from Netflix, Amazon and HBO.
These folks find themselves in a vicious cycle:
- They can't afford to buy the hit shows (or these are owned by rival services)
- Their audiences fall (or in CBS's case die of old age), or subscribers drop channels
- Advertisers leave for greener pastures
- Less revenue flows in
- Less budget is available to invest in premium content creation – back to no.1
Don't get me wrong: these firms still have robust businesses and hit shows, but risk sliding into history if they aren't able to stop the rot.
One firm that has successfully broken free of this cycle in recent years has been the UK's ITV. 2009 saw a sharp drop in revenue due partially to the financial crisis, but also because of strong competition from the BBC and Sky. That their main fare was reality shows, game shows and tired dramas didn't help here. However the past two years have seen a heavy investment in original drama that has been both critically and commercially successful. "Broachchurch" and "Downton Abbey" have been added to well-liked detective shows such as "Law & Order UK" and "Scott & Bailey." This, along with a renewed obsession with all things British amongst US audiences, has turned the firm's fortunes around.
The old adage about content being king hasn't changed with the arrival of Internet services. If anything, the fact that consumers can now get video entertainment from so many sources has heightened the need for unique, quality shows to draw in audiences to a channel or prevent subscriber "churn."
Of course, sport remains the absolute golden goose of content – so long as channel and services have access to popular sport coverage, they can fend off other revenue challenges. But even here, (regulation allowing), premium, top-tier services are undeniably stealing away rights from traditional broadcasters.