Financing for Scripted TV Shows At Risk in Online Media Environment, Starz Executive Says
SANTA CLARA, Calif. -- There’s not enough cash coming into the online video business to support the continued development of high-quality scripted TV programming, John Penney, executive vice president of strategy and business development for Starz, told a Parks Associates conference Wednesday. He said it costs about $3.5 million to create an hour of scripted TV programming, which works out to about $99 million per season of a broadcast TV show. “If there’s no return, obviously no one is going to be making these things,” he said. Online distributors don’t show enough ads to support those costs, he said. “There’s not enough revenue from those online distributors yet to really backfill the transition that’s going on in the economics of television,” he said.
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Either the price of ads or audience size needs to increase dramatically or online distributors will have to start showing far more ads during programming, Penney said. Showing viewers just four ads per half hour of programming is fine for old shows that have already made their money back, he said. “But that’s not going to support doing new episodes of House,” he said.
The issue of how to finance programming is the single biggest issue content companies are wrestling with, Penney said. “If you really want to be topical … think about how technology can partner better with this ecosystem for content and distribution,” he said. He asked the group to brainstorm possible solutions.
Subscription revenue could be a part of the answer, but companies would have to collect $70 a month per viewer just to replace the traditional ad and pay-TV affiliate fee revenue already in place, Penney said. Online, companies could also limit consumers’ ability to skip ads and show more of them during programs, he said. “The problem is: Will consumer gravitate to that? And will technology companies that make devices and platforms for content distribution see that as a viable model?"
Similarly, the prospect of consumers buying shows a la carte has some promise, and it can help finance shows, but it’s not the solution, Penney said. “It is really hard to get 3.5 million people a week to pay a dollar for a show, and know it’s going to happen” week after week, he said. “Yes, it can help, but I don’t think it’s the solution for now,” he said. If it were the solution, iTunes revenue would play a much larger role in the industry today, he said. For now, international revenue seems to be the most promising avenue to fund scripted programming, but such revenue is limited to content with broad, global appeal, he said.