Back after the Break: Streaming services outbid UK broadcasters for TV rights of pre-pandemic productions
September 7, 2020
2 min read
What's going on here?
Following a significant decline in revenue during the COVID-19 pandemic, British broadcasters are being consistently outbid by Netflix for new shows, supply of which is limited due to lockdown restrictions putting production on hold.
What does this mean?
Lockdown restrictions sent the television production industry into a global shutdown, causing a significant shortage of new shows. This has generated high demand for completed shows, allowing production companies to charge more for broadcasting rights.
British broadcasters, such as the BBC and ITV, suffered a dramatic fall in ad revenue during the pandemic, as its financial fallout forced companies to cut spending on advertising. ITV reported a 43% drop in ad revenue in the second quarter, the steepest drop in its 65-year history.
This coronavirus-induced decline in revenue has left broadcasters struggling more than ever to compete with Netflix’s huge content acquisition budgets. In 2019, the streaming giant disclosed that it had a £400m budget for the acquisition and production of its British-made TV shows and films. Netflix’s model has meant it is better placed financially to buy up completed shows than its competitors, who are outbid and left with bare schedules.
What's the big picture effect?
Across the board, the pandemic has accelerated existing industry trends. Supermarkets, for example, have had to scale up their capacity for online orders and deliveries as consumers stay away from stores. In television, the pandemic has raised the stakes between traditional broadcasters and modern streaming sites.
For some time, consumer preferences have been shifting towards on-demand streaming services. Over half of UK households subscribe to a streaming service. This trend is generational, with the average age of a BBC One viewer in the 60s. When you factor in the present controversy surrounding the BBC licence fee (to see our article on that, click here), it has been a difficult few months for British broadcasters.
The primary distinction between traditional broadcasters and streaming sites is how they are funded. Broadcasters typically have two main revenue streams, production and advertising, both of which have plummeted during the pandemic. On the other hand, streaming sites’ main source of revenue is user subscription fees, which have remained substantial and reliable. Streaming sites’ revenue is therefore less fragile and better insulated against risk.
Television viewing figures are always particularly high in autumn, and this year people are staying at home more than usual. This means that demand for new shows has never been higher, yet supply is startlingly low. If broadcasters can’t fill their autumn schedules, they risk pushing viewers further towards streaming services. They will need to innovate in order to win contracts and fill schedules. For example, director and producer Michaela Coel chose the BBC to air her comedy-drama series “I May Destroy You” because it gave her greater control and ownership of the show’s intellectual property.
It is likely that streaming sites will one day supersede traditional broadcasters, and the pandemic has certainly given them a helping hand. However, all is not lost. If traditional broadcasters can innovate to endure the next few months of scarce programming, then they will live to fight another day.
Report written by Isobel Deane
Share this now!
Check out our recent reports!