There’s no denying the world of television is changing. Streaming services and DVRs have moved people away from watching TV as it airs. A lot of the coverage has been about how the traditional television industry has been overhauling their ways, though that might not necessarily be the case.
I spoke with Chuck Saftler, the President of Programming Strategy & COO at FX Networks, to find out how the network group is responding to these changes.
The past several years have been a massive period of expansion in the amount of scripted shows. Last year, FX Networks reported there were 412 total scripted series on the air, up 93% from 2009, where there were only 211 scripted shows on the air. A lot of that change come mostly from basic cable (where FX and FXX live on the TV spectrum).
As that graph shows, the number of original, scripted shows on basic cable has tripled in the past seven years. Saftler feels, across their two networks, FX has been reasonable in the face of this massive growth across the industry.
What will likely happen is it will be discovered that 500 shows, because that’s where it looks like it’s headed, is too many shows to sustain. And, as a result, there are going to be less shows that will get made, there will be a bubble. There’s certainly a potential for a bubble if you can’t justify 500 shows standing on their own merits. We foresee that day, and that’s why we have a sober approach to the amount of content we’re willing to create. The last thing we want to do is make promises to the creative community we can’t sustain. Meaning, we don’t want to say we can make double what we’re making today and then find out we can’t, ultimately, [putting] a number of creative people that we support and believe in on the unemployment line.
Still, Netflix’s strategy of spending billions on content seems to be working for them. Their subscriber numbers have reached new highs and their stock is up 71% from where it was a year ago.
However, the future might not be so rosy for the new and developing streaming sites who are paying for huge amounts of content. Industry sources have described what will happen to Netflix in the future. They currently bank on subscriber growth to keep their investors happy. However, these sources see the subscriber growth as leveling off, and once that happens, Netflix will need to answer for how exactly they’re spending money and their shows will need to stand on their own. Though, this won’t happen for several years into the future.
One of the most important deals FX has made in the past few years is their pickup of the digital and on-air rights to the entire run of “The Simpsons”. The deal will ultimately be worth billions over its lifetime. They bought the rights both to bolster their new comedy-based cable channel FXX, which launched in 2013, and their new streaming service FX Now. Though, Saftler says that it might be difficult to do a deal like this in the future.
(Please note: that clip was recorded from a phone interview.)
Traditionally, cable networks wait three or four years into a show’s run before buying the off-network syndication rights, which conflicts with the new SVOD (or Streaming Video On Demand, sites like Netflix, Hulu and Amazon Prime) strategy of buying the episodes very early in a show’s run. Cable likes to air multiple episodes of a show per day, so having many to run prevents them from repeating episodes too quickly. However, SVOD doesn’t need to air the episodes like that. It’s also advantageous for studios to sell to SVOD early because it gives viewers an opportunity to catch up, potentially bringing a new audience to the series.
Yet, just because FX Networks only has one big investment in exclusive SVOD content doesn’t mean that it’s not trying to bolster streaming. The network has created what’s called a “TV Everywhere” platform. TV Everywhere is a special kind of streaming site where subscribers of cable services can log in and view a particular network’s content. Rollout for has been slow, as the networks had to wait until they could make deals with cable companies including these special login rights. It’s taken them a along time to make what’s a crucial transition for the network, as live viewership of programming continues to drop. Saftler describes why he views this to be an important move for the network.
We acknowledge that people are going to want to watch content when they want to watch it and on what device they want to watch it, and on whatever platform they want to watch it, be it if it’s on a TV, tablet or phone … We know people are moving more and more over to those other platforms, we are making sure that we are ready for that transition as it happens. … FX Now is a part of TV everywhere. It’s just our brand version of our TV everywhere and so I think, considering TV Everywhere hasn’t been fully deployed, that’s why I’m so happy with 14 million downloads of our app.
In an age where shows have more value than they ever used to for their producers in the past thanks to services like Netflix buying up the rights. Content ownership has become a key part of the decision-making process at all networks. Two years ago, FOX merged its studio and network operations to run underneath Gary Newman and Dana Walden. In the basic cable world, AMC Networks created AMC Studios to produce content for its network after taking “Mad Men” and “Breaking Bad” from outside studios.
FX Networks has followed a similar path. While they used to bring in their series from outside studios, all 18 shows on their network right now are either produced or co-produced by FXP (their studio arm). This means that they not only get the ad revenue from TV airing, but they also get all the money from syndication, international and SVOD sales. Though, Saftler sees another reason for owning the content he airs:
Self-ownership, and producer deals that we have that are with truly exceptional creators, is our way to get a first look at what could be an exciting new series and have a chance to put it on our air. … That doesn’t mean that if we have an opportunity to buy an amazing project from another studio or content creator, that doesn’t mean that we won’t make an effort to go get it, because we will. We want to put the best possible shows on this network and if we have an opportunity to do that we will.
Another area where TV networks are experimenting with attracting viewers who have moved on to SVOD and cancelled their cable subscriptions is through selling programming directly to them. An example of this is CBS All Access, where viewers can pay $5.99 per month to access current and past CBS content through their portal. HBO and Showtime also have their own way of reaching consumers without cable packages. Though, Saftler doesn’t see FX going down that path in the near future.
The potential reality one day of direct-to-consumer a-la-carte certainly exists but it’s not there right now and as we stand and look today, we’re still very much believers in the MVPD [Multichannel Video Programming Distributer, industry jargon for cable] system. If a change to the ecosystem comes, we certainly haven’t buried our heads in the sand and we certainly see the potential, we still are very much a believer in the bundle. We’re still very much a believer in the economic value that it provides the consumer because we see the a-la-carte pathway as someone that is far more more expensive for the consumer. In essence, channels would have to be priced at a much higher price a la carte than they would as part of the bundle.
While some are saying a-la-carte is the direction the industry is going, it seems that Saftler’s right about this one, as CBS costs $6 when being sold directly to the consumer and reports show that it costs cable companies $3 for the rights to the network.
Saftler sees a part of the future for cable companies lying in so-called “Skinny Bundles,” where consumers can pay a smaller amount for a lesser lineup of channels. FX Networks has gotten involved with one of them: PlayStation Vue, a service offered by Sony through its PlayStation Network platform.
[They] have less technological cost tied to them and hence can be priced at a reasonable price point for consumers that can’t afford the big bundles. We also see the existing and traditional MVPDs going down the pathway of creating these bundles as well understanding that there needs to be an option for every socio-economic class that wants TV. Right now we continue to be incredibly supportive of that pathway in terms of how we offer our content.
Though, the digital era of TV is still new. Even though FX hasn’t overhauled the way they do business based on digital innovation, that doesn’t mean they won’t in the future. Instead, they’re dabbling with products like FX Now and linear and SVOD deals like the one they did for “The Simpsons.”
As Saftler puts it:
Our primary business is still linear. [However] that doesn’t mean that we have our heads buried in the sand and we don’t see the needs of our customers and our viewers. It doesn’t mean that we don’t see the importance of non-linear to our future.