Netflix and Amazon are spending more money on original series every year, and that could hurt the TV industry’s bottom line, Ben Silverman, Chairman of Electus said Wednesday at the Milken Institute’s Global Conference in Beverly Hills.
The arrival of Netflix and Amazon created a huge secondary market for TV shows, much like syndication did years ago, awarding TV producers millions in new revenue. Now that those companies make series of their own, some fear they will not spend as much on other people’s shows.
“The real concern is about cannibalization of the backends of TV shows,” Silverman said. “Most of Beverly Hills is built on the backends of TV shows and movies. That is a concern as everyone moves into originals and exclusive content.”
Netflix has been the most successful new player in this regard, commissioning “House of Cards” and “Orange is the New Black.” Yet Amazon, Hulu and Microsoft are making TV-length shows of their own — turning avid buyers of TV shows and movies into competitors.
Lionsgate Vice Chairman Michael Burns agreed with Silverman to a point, but he countered that growth in international markets would more than make up for any shrinkage in the United States. Sky One also has a monopoly in the United Kingdom’s pay-TV market.
“They had deals with all the major studios and treated us like the red-headed stepchild,” Burns said. Then Amazon and Netflix moved in.
“Now there’s a bidding war for product in the UK, and it’s a more profitable territory for us,” Burns said. Disney executive Kevin Mayer concurred, arguing more players made for a better market.
“These burgeoning digital businesses help,” he said. “They are friends; they’re not foes.”
This change in philosophy with respect to digital businesses can be seen in Hollywood’s approach to another company – YouTube. Though once the subject of lawsuits, Hollywood now recognizes an opportunity — one it cannot waste.
That is why Mayer, Disney’s EVP of Corporate Strategy and Business Development, spearheaded his company’s acquisition of Maker Studios — one of the largest networks of YouTube channels in the world.
Some analysts and executives have scoffed at the price Disney paid for a company that does not make money, but Mayer said Disney wanted to make the deal because it had a “minor position” on YouTube.
“If you want to reach a younger generation of kids you need to have a real presence on YouTube; the last thing we want is a vacuum any place where there are a lot of eyeballs,” Mayer said.