How Hollywood’s Horrible 2022 Impacted Content Spending

Streaming Spending is Declining
Cheyne Gateley/VIP

The great media market correction of 2022 has, at long last, ushered in a new cost-conscious era for Hollywood. Studios are now scrambling to reduce expenses and improve margins on their direct-to-consumer operations as the boom phase of the streaming wars comes to a definitive close.

As part of that contraction, the long-looming reduction in commissioned content is beginning to manifest on companies’ balance sheets as the industry officially closes the book on 2022.

Netflix, which long led the DTC content-spending charge, actually reduced its expenses in 2022 by about 5 percent, from $17.70 billion in 2021 to $16.84 billion last year. Warner Bros. Discovery, which has yet to report full-year results, is expected to trim even more; Morgan Stanley analysts estimate WBD spent $18.3 billion on content in 2022, a whopping 20 percent decrease from WarnerMedia and Discovery’s combined 2021 figures.

While spending at other major media and tech companies continued to increase last year, signs of the impending austerity were still visible almost across the board.

Disney shelled out $29.9 billion for content during its fiscal year — a record high for the company, yet notably below the $33 billion it had forecast at the start of the year. While spending will remain “in the low $30 billion range” this year, as CFO Christine McCarthy explained on last week’s earnings call, the Mouse House is planning to trim $3 billion in annualized non-sports content costs going forward, a sign of the times if ever there was one.

Spending likewise increased at NBCUniversal in 2022, though it grew by only about half as much as it had between the last pre-pandemic year of 2019 and 2021. CEO Jeff Shell recently stated that 2023 will represent peak spending on the company’s streamer Peacock, but expenses may have to be reduced quickly if Wall Street sours on the company’s mounting DTC losses.

And then there’s Amazon, whose financial largesse has helped shield it from the turbulence in Hollywood, though the tech giant has faced its own economic headwinds of late. Amazon’s “total video and music expense” for 2022 leaped up 28 percent to $16.6 billion, versus $13.0 billion in 2021, an increase driven by marquee Prime Video programming like “The Rings of Power” and the NFL’s “Thursday Night Football.”

Amazon CFO Brian Olsavsky added that “approximately $7 billion” of that budget was spent on “Amazon Originals, live sports and licensed third-party video content included with Prime,” up from $5 billion the year before.

For now at least, the industry-wide belt-tightening seems likely to continue in the new year. If content spend is not going to drastically decline at most Big Media companies in the long run, the rate at which studios grow their spending, particularly with regard to streaming content, is likely to slow substantially going forward.

Ampere Analysis forecasts global content spend to increase just 2 percent year-over-year in 2023, marking the lowest growth in over a decade (excluding the COVID-depressed figures of 2020).

That total figure, however, remains far elevated from the days before the streaming wars. Hollywood increasingly finds itself facing the thorny proposition of cutting costs without kneecapping streaming growth, and must-watch programming will remain an essential investment even as the free-spending days of the peak TV age come to an end for now.

As chaotic as last year was, this year may well be even more so, as the major players attempt to determine the right strategy through the only method possible: trial and error.