The economics of Hollywood’s TV studios have been strengthened so much by new windows that even Apple won’t be able to disrupt their business, according to a new research report.
Barclay’s says the TV syndication business has doubled its value over the past decade to an estimated $20 billion this year. While cable’s aggressive licensing of broadcast series Stateside has largely fueled that increase, analyst Anthony DiClemente projects continued growth stemming from digital buyers and international syndication, which he says represents the “biggest opportunity” for the studios.
The tangled web of rights that studios control across windows and territories will curtail Apple’s ambitions for control of the living room, according to DiClemente. “It would be very difficult, not to mention expensive, for new entrants to secure the requisite digital and linear rights to provide consumers with a one-stop content offering,” he writes. “We therefore don’t expect Apple to attempt the costly and logistically daunting task of standalone distribution.”
Citing its analysis of the three congloms most exposed to its TV-studio businesses, Barclay’s raised its price targets on Time Warner, CBS Corp. and News Corp. Warner Bros. TV Group is estimated to contribute over $5 billion in revenues to Time Warner this year, accounting for 18% of the conglom’s revenues. Twentieth Century Fox TV contributes nearly $2.8 billion, or about 8% of News Corp.’s revenues, while CBS TV Studios chips in $2.4 billion, or 15% of CBS Corp.’s revenues.
DiClemente believes that retransmission revenues, which he pegs at $1.5 billion this year for the broadcast nets, will also prove beneficial to the studios. “We expect the broadcast networks will invest even more in content, likely creating a more competitive bidding process for the rights to top shows — a positive for studio licensing fees,” he writes.
The TV industry has been bracing for Apple to make good on rumors that the company will make a bold move like manufacturing its own TV set.
But DiClemente predicts that Apple will take a more measured approach, such as manufacturing a set-top box that could work in tandem with other Apple devices, which wouldn’t disrupt either TV programmers or distributors.
In addition to keeping Apple at bay, DiClemente believes the studios could even survive a scenario in which cord-cutting became so pervasive that distributors were forced to do away with their bundled channel packages. That’s because the broadcasters that are their primary clients wouldn’t be affected. “The programs airing on the broadcast nets would maintain the reach needed to create demand for that content in later windows,” wrote DiClemente.
DiClemente deems an un-bundling scenario as highly unlikely. He estimates that Netflix costs its customers 29¢ per hour of usage in comparison to pay TV’s 49¢. But “while the value proposition for Netflix may appear to be better, pay TV has far more content, including both live programming and a rapidly growing on-demand catalogue,” he observed.