FX CEO John Landgraf declared the television industry reached "peak TV" over three years ago. Since then, the number of original scripted series on television has only continued to climb. FX puts out a report every year detailing the number of releases from broadcast, basic cable, premium cable, and subscription video on demand (SVOD) platforms.
2018 set a new record for original series -- 495 -- but it's up by just eight total series from last year, according to FX's latest report. The 1.4% increase for the full year is also a slowdown from the 5% year-over-year increase in scripted shows on television Landgraf counted midyear.
It appears we've reached peak "peak TV," but there are a few important catalysts that could reaccelerate growth in 2019. Here's a closer look at the major changes driving a slowdown in new shows.
All about streaming
If you only look at the number of scripted series released by broadcast and basic cable television in 2018, you'd think there was a mass exodus from the TV business. Broadcast series were down 4.6% from 2017. Basic cable series were down 17.7% from 2017 and down 21.3% from two years prior.
But streaming video services like Netflix (NASDAQ:NFLX), Amazon Prime, and Hulu made up for the decline. The number of scripted originals on streaming services climbed 36.8% in 2018. Likewise, premium cable channels released 7.1% more series in 2018 compared to 2017 and 25% more than in 2016.
It's important to note most premium cable channels -- HBO, Showtime, Starz, Epix, etc. -- now offer an over-the-top version of their network. In essence, they've become more like Netflix and Hulu than basic cable networks.
Investors should expect the shift in television programming from broadcast and basic cable to streaming services to continue. Consumers are spending less time watching linear television and more time watching video on demand.
But 2019 promises to bring even more subscription video options. AT&T's (NYSE:T) WarnerMedia and Disney (NYSE:DIS) are planning their own streaming services. Disney already has plans to release several exclusive series for its Disney+ service. Netflix and Hulu have shown original content spending is key to attracting subscribers.
Meanwhile, Facebook is producing new originals for its Watch platform and Apple is working behind the scenes creating content as well. More big tech players are interested in producing shows that would otherwise have a home on television. The launch of new services this year could mean a continued spike in the total number of scripted original series produced in 2019.
Another important consideration is that FX's report only counts scripted series. Several networks have shifted more of their programming to unscripted shows.
Unscripted shows can be less expensive to produce than scripted series without sacrificing much of an audience. Netflix even saw an opportunity to drive efficiency in its content spending by creating more unscripted originals, and it's found a lot of success with series like Queer Eye and Nailed It.
The shift to unscripted ought to continue as networks aim to spend more efficiently. If not as many people are tuning into a specific network, that network's production budget ought to get slashed. But those networks still have to fill their lineup with something. Unscripted shows offer a more efficient way to spend money and mitigate the risk of a flop since they generally cost less up front to produce than scripted originals.
When it comes to linear TV viewing, live events are, by far, the most popular shows, but the cost of obtaining the rights to air sports or award shows is climbing. Investors should expect companies to make the most of those rights by producing content around those events (pregame and red carpet shows, for example).
What it all means for the industry
The number of original scripted series might continue to climb in 2019, but where consumers watch those series and who's producing them will continue to change.
Investors can expect deep-pocketed media companies like Disney, WarnerMedia, and Netflix to release more scripted series. Additionally, tech companies interested in the space with cash to spare will produce more scripted series as well. Meanwhile, smaller media companies, particularly those in basic cable, should see a decline in scripted series on their networks as they look to save money.
As viewing shifts from linear TV to streaming video, those companies with an SVOD service will increase the number of original series they release (and their content budgets to go along with it). That might mean lower profits for those companies as they work to grow their streaming products in an increasingly competitive environment. Long term, however, it will enable those companies to produce greater profits as linear TV viewing continues to decline.
Check out the latest Netflix earnings call transcript.