“I want the humans to be able to hold their own against the strength of the machines.” That was perhaps the most ominous line spoken from the stage at the summer Television Critics Association press tour, and it came not from an actor or showrunner but FX Networks chief John Landgraf.
He wasn’t describing the plot of a new scripted drama. He turned to the classic science fiction trope as a metaphor for the situation that he and other cable programming executives now find themselves in as Netflix, Amazon, Facebook, and Apple engage in a “titanic struggle” — Landgraf’s words — for domination in the video entertainment marketplace.
“If you look at the Silicon Valley model it’s to use platforms and algorithms and scale to serve people what they need and grind out the margins of brands,” Landgraf said Wednesday. He added, “It’s about scale, it’s about data and technology and finance to bring billions upon billions of dollars of investment. That’s a very stiff headwind for anybody who’s not in Silicon Valley. I’m raising my hand on behalf of my team,” as well as HBO, AMC and others brands in the traditional pay-TV space.
Landgraf, who has made it habit to deliver esoteric, data-fueled manifestos on the state of the television business at TCA — and engage reporters in spirited Q&As after — stepped up his game Wednesday, connecting the evolution of the pay-TV ecosystem to broader economic and political trends going back to the late 1970s. Along the way he touched on the deregulation of railroads under President Jimmy Carter, Apple’s eventual need to repatriate large stores of cash from overseas, and Garry Kasparov’s series of chess matches against IBM supercomputer Deep Blue.
“I’m not Garry Kasparov,” Landgraf said. “But we, collectively — I, Casey Bloys, Richard Plepler, Charlie Collier, — we’re playing Deep Blue.”
The part of Deep Blue in this analogy is played by Netflix and Amazon, as well as newcomers Apple and Facebook, which are taking their first steps into the scripted-programming space and are empowered to potentially spend billions in their efforts.
Noting that FX parent 21st Century Fox earns roughly $7 billion per year and that Netflix loses roughly $2.5 billion, Landgraf said that facing emerging digital competitors feels “like being shot in the face with money every day.”
FX’s most recent move to counter that assault is FX+, the ad-free subscription service announced this week, set to roll out on Comcast’s Xfinity platform in September. Landgraf said that the product came about as a result of Comcast, which struck a similar deal with AMC Networks, approaching FX with the idea. FX had already been developing a product, with plans to approach MVPDs in the near future.
Landgraf said that FX is in the process of negotiations with other MVPDs to support FX+.
“We wanted to use the platonic ideal of brand expression, which we think is HBO’s expression,” Landgraf said, in reference to the Warner Bros.-owned brand’s mix of pay-cable linear channels and a direct-to-consumer video service. “We wanted to raise our hand and say that’s right, and that’s the direction that we need to go in to be competitive.”
But with more brands moving direct-to-consumer, Landgraf also warned that the market would not be able to support an endless number of individual subscription-video offerings.
“I don’t think the average home is going to have 20 streaming services,” he said. “I think we’re talking about a very, very significant reordering of the structure of television.” He also praised the “relative strength” of the MVPD ecosystem, while stressing the peril of staying contained within that ecosystem.
“I think the reality is that non-linear consumption and subscriber fees is a growing industry and we’re at least flat inside the business that we’re in,” he said.
Landgraf opened his remarks touching on a familiar theme — the idea that there is “too much TV,” or more original scripted programming in the television universe than is healthy for consumers and the marketplace. Discussing “why there is too much TV and why that now seems likely to continue for some time,” Landgraf looked at broader economic trends.
“If we want to understand the roots of the underemployment and stagnant wage growth that afflicts the U.S. economy and that underpins today’s uncertainty and anger and political polarization, we should look no further than the lack of market regulation that has for the last 40 years allowed one sector of our economy after another to be swallowed up by a single company or a tiny handful of giant oligarchs.”
Landgraf pointed to air travel, finance, retail, internet search and advertising, social media, and online payment as business sectors where monopolies, duopolies and triopolies now reign.
“I’m not interested in world domination,” Landgraf said toward the end of his Q&A session. “I’m interested in running a nice little brand that takes care of its own and does really good work.” In the traditional entertainment economy, “You’ve always had six, seven, eight companies where, if you’re an artisan and you want to work, you could pick up your briefcase and you go down the road with your typewriter and you go work for another company.”
Current trends threaten that reality, Landgraf said, warning of monopsony — an effective monopoly where one buyer has outsize influence on the marketplace.
“You can’t be in a certain business and not sell to Amazon or not sell to Wal-Mart,” he said. “You have to reckon with them, because even though there are other buyers, they’re the only buyers that matter. I don’t want artists to find themselves in a situation where there are only two buyers. That just doesn’t seem like a good outcome.”