Unprecedented lockdowns by worldwide governments have affected everyday life in ways once thought impossible.
If normalcy ever returns, there will be lasting effects on the development, financing, production, and delivery of content.
As a result of diminishing content availability precipitated by production delays and cancellations, there will be large programming gaps for traditional television networks and OTT platforms to fill over the next two years.
Broadcast television networks earn the bulk of their revenue through the sale of large blocks of advertising space. Between 50-80% of all network ads in the United States are sold during the upfronts in May each year. In 2019, over $20 billion worth of ads were purchased during the upfronts.
The remainder of advertising slots are sold in the “scatter market,” which is much more flexible for advertisers but more costly, ranging from 20-40% higher.
Even with the bulk of upfronts canceled this year, many would assume that the networks generated more advertising revenue in 2020 because people were forced indoors, not so. Advertising revenue fell by more than 27% in 2020 despite a massive spike in viewership. This downward revenue trend was the same for OTT platforms that rely on advertising, e.g., Hulu.
Most advertising agencies delayed buying large blocks of ad space and are instead relying on the scatter market to adapt more efficiently to their needs. These agencies are asking for decreased rates, and by mid-2020, they started exercising cancellation clauses in their contracts for ads they bought in 2019.
Even when production resumes, networks will be slashing development and production budgets significantly. Also, most networks were unable to order any pilot episodes due to the lockdowns.
These factors and more will lead to fewer new shows, large programming gaps, and further reliance on gimmicks, such as reunion shows and zoom-style reality programs.
To fill this programming gap, traditional networks and OTT platforms alike will need to acquire more licensed content, especially feature films. To uncover what SVOD platforms pay for diverse film content worldwide, take a closer look at the Film Streaming Value Series.
Also, to discover what Starz pays to license films for its pay television and streaming services in the United States, check out the Starz Licensing Value Report.
Just as advertising revenue models are adapting, changes in programming schedules will force networks, studios, and other stakeholders to find innovative ways to develop and deliver content.
Relic of the Past
The practice of upfronts was already antiquated before the draconian lockdowns started. Most networks complained for years about the process, and some had begun paring down their presentations in favor of more modest meetings.
Furthermore, the entire broadcast scheduling process will likely change as OTT platforms pull more viewership away from traditional television networks. In the world of on-demand entertainment and binge-watching, adhering to a rigid broadcast schedule of releasing new seasons in the fall through May and a truncated summer season from June to August is a relic of the past.
Netflix and other non-traditional platforms create content on an ongoing basis, making them more agile in securing talent and production crews.
As traditional networks search for additional revenue streams and divert more resources to their streaming platforms, e.g., HBO Max, a subsidiary of WarnerMedia, these strict programming schedules of the past will loosen.
A significant drop in quality has gripped the film and television industry for years, which only shows signs of accelerating with the lockdowns.
The continued consolidation of media empires has forced a dumbing down of episodic content and films. Combined with the overt political pandering of many content creators and producers, a mass exodus of audiences is underway. Younger demographics favor gaming and amateur short-form entertainment, while middle-aged and older viewers seek out award-winning films of yesteryear and classic shows.
However, as the availability of quality content shrinks, there are enormous opportunities for independent filmmakers and producers to create and program niche offerings to targeted audiences outside the confines of the mainstream media monoliths.