Good afternoon from New York, wherever you may be. I'm in town for the Upfronts, the one week every year where network executives gather to pitch advertisers (and the press) on their upcoming shows.
The deeper we get into the world of streaming, the more this event feels like an anachronism. The audience for live TV dwindles. The number of people watching broadcast TV is at best flat. Why are all the new shows released in the fall instead of throughout the year?
And yet, advertising sales have held firm. Sales aren't going up, but they aren't going down. As audiences shrink, prices rise because TV is still the best way for advertisers to reach millions of people at the same time in a safe environment.
TV networks typically use these events to boast about how well their shows are doing, and why their lineup is better than their peers'. In recent years, they've added a dig at internet companies for their inability to police inappropriate content. This year, they added another boast: we are spending a lot of money!
After years of criticizing Netflix for spending too much, the world's largest media companies are now racing to prove they are spending even more.
NBCUniversal will spend $24 billion on programming this year, the company's head of ad sales Linda Yaccharino said on stage Monday. She didn't specify what that figure includes. Just a couple weeks ago, CBS chief Joe Ianniello boasted that his company will spend $8 billion this year — up $1 billion from a year ago.
Media companies have historically tried to shield how much they spend on programming. Movie studios offer lowball estimates of budgets for their releases, and TV studios would do the same. Higher spending translates into slimmer profits at the media giants that own them.
Yet Netflix has changed the calculus. The streaming service's aggressive pursuit of deals with top producers has created the perception that it will pay more than the old guard studios. The company has done little to counter reports that it paid $300 million for the services of Ryan Murphy, or committed $20 million per comedy special.
Media companies first pushed back by deriding the outlays as irresponsible, and talking up Netflix's growing pile of debt. But Netflix's customer base has grown at a record pace — and the fight for talent has escalated.
TV studios have adjusted their dealmaking to secure top talent, shelling out nine-figure paydays for showrunners like Greg Berlanti and "This Is Us" creator Dan Fogelman.
Now executives are releasing their own spending figures to demonstrate their might. The weird part? Wall Street is happy about it! Here's what ace media analyst Michael Nathanson told me: "It shows the markets that they are not backing down from Netflix's escalation in spend and that they hope proves that the future isn't zero sum." — Lucas Shaw
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