Hollywood’s Cash Content Spend to Rise This Year, But Below 2022 Levels

With U.S. media players having survived two strikes and focused on profitability for their streaming platforms, the obvious question is when will Hollywood’s content expenditures bounce back to where it was in 2022?

Don’t expect a quick recovery in content spending as the major studios’ spend-at-any-cost to produce peak TV dramas has ended, says a March 8 report from MoffettNathanson researchers. The number crunching points to overall cash content spending by Hollywood media players expected to grow by 5 percent in 2024, after an 8 percent drop in 2023 — which still leaves a shortfall from 2022 spending levels.

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“We believe 2024 represents the new base level of spending for the industry as it exists today and project low single digit increases in the years ahead,” the MoffettNathanson report stated.

Besides spending on pricey TV dramas having slowed post-strikes, the report focused on a studio’s content amortization spend, or the accounting cost of specific content spread out across its audience viewing lifespan. And each Hollywood studio has its own content spend needs and strategies.

“Looking ahead, we see a step up in spend on an amortized basis in 2024 at most companies except for Fox and Warner Bros. Discovery … We project Netflix to return to growth in content amortization along with its other digital players – Amazon and Apple, albeit off a much lower base,” the report added.

Paramount Global CFO Naveen Chopra gave a window into current studio thinking content spending levels post-strikes during his company’s recent fourth quarter earnings analyst call, where he said his company was “looking at spending really only 50 percent of, call it ‘the strike savings,’ back.”

MoffettNathanson researchers also forecast the continuing pullback in U.S. scripted content production will be even greater as more international dramas are produced or acquired, and the appeal of cheaper unscripted reality series continues.

“We prioritize lower cost formats, like unscripted and those shot abroad, while maintaining our strength in franchises,” Paramount CEO Bob Bakish tellingly told analysts on the quarterly earnings call, noting that his studio’s NCIS Australia spinoff “was produced in Australia at a much more efficient price point.”

And the recently unveiled sports streaming venture formed by Walt Disney, Warner Bros Discovery and Fox Corp accentuates how major studios are expected to shift more content spend to sports-related programming. “We expect a major stepdown in non-sports spend relative to 2022 across most traditional media companies, with the exception of small, Tubi-driven step up at Fox and a slight step down at NBCUniversal,” the report stated.

Only Apple and Amazon are expected to dramatically increase their production of non-sports content, given their forays into theatrical movies. But even here, both tech giants are looking to stream more live sports, as Amazon leads with NFL Thursday Night Football.

The MoffettNathanson report, while focusing on where U.S. media players can cut costs to get closer to streaming profitability, does caution key drivers for subscriber growth and cutting losses remains content spending.

“The strikes undoubtedly played a role in the declines we saw in cash content spending in 2023. Yet, we believe it behooves any media company to use this opportunity to reevaluate and rationalize its content spending to more sustainable levels,” the report concluded.

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