Investment in entertainment is a complicated subject to digest, as we’ve explored previously. Yet, funding for a production does draw some parallels to investing in startups.
Companies that began as startups in Silicon Valley, such as Netflix and Amazon, hold a powerful presence in television industry in Hollywood. Could this mean venture capital could get involved in the television industry?
How The Television Industry has Changed
1. Streaming platforms dominate traditional television
Ask any third grader in the United States if they have heard of Netflix, they will instantly respond “obviously.” They will then list off their five favorite shows and probably share that they know how to get into their older sister’s account. Streaming platform’s presence in the lives of young adults is prominent, some say kids watch Netflix fifteen times as much as they play outdoors. With popularity amongst the younger generation, online streaming platforms exist as a preferable choice to watching television shows than traditional cable/broadcast television. Huge libraries of content, commercial free viewing, a fairly inexpensive subscription cost are several factors that account for Netflix’s whopping 150 million in 2019.
2. Streaming platforms growing their businesses
Streaming platforms are recruiting successful showrunners to exclusively work for them. A showrunner is a term used to describe the single role of a writer, producer, creative authoritative, and management of a show. Netflix made a deal with Shona Rhimes who created Grey’s Anatomy, Scandal, and How to Get Away with Murder. Netflix offered Rhimes a mega one hundred million dollars to create content for them.
This rocked the entertainment world: big name showrunners were leaving broadcast and cable companies. Not only can streaming platforms afford showrunners with due to their increasing popularity, but they can provide creative freedom to showrunners, unlike most cable and broadcasting companies who put an emphasis on ratings. Other renowned showrunners, such as Ryan Murphy and David Kelly, have signed deals with streaming platforms to create content for them as well.
Big studios, faced with competition from online streaming platforms, are strengthening their online streaming services. Disney, who originally only owned a part of Hulu, now owns all of it. Also, Disney is releasing an online streaming service called “Disney +” that is rumored to have exclusive shows. Disney + is going to become available in November 2019.
3. Budgets for television shows rise to match blockbuster Hollywood films
Television shows have gained attention for their increasing budgets. The HBO series Game of Thrones had a budget of 15 million per episode- with six episodes in their season, their total budget was around 90 million. Their production budget nearly matches Quentin Tarantino’s new film Once Upon A Time in Hollywood, which has a budget in the 90 million range.
Game of Thrones exists as one example of how television production costs are hitting record highs. Amazon, with wanting to compete with HBO GO and Netflix, is rumored to putting into the works a 1 billion dollar production of a Lord of the Rings TV show. As different companies compete with each other, and with the signing of production talent exclusively to them, the budgets for television shows will surely continue to be outrageous.
4. Movie stars playing key roles in television shows
The recent HBO series Big Little Lies cast stands out with stars such as Shaliene Woodley, Nicole Kidman, Reese Witherspoon, and Meryl Streep. First glance at this cast, one would think that it seems fit for the newest multimillion dollar budget blockbuster drama. Yet, despite these actresses key roles in popular films such as Divergent, Batman Forever, Walk the Line, The Post, and many more, they all appear on the same television set.
Although movie stars doing television is not necessarily a new concept- as seen with American action drama television series 24 starring Kiefer Sutherland in the 2000s- the large budgets for television show productions are increasingly attracting star actors and actresses.
So, why should the venture capital world care?
It’s no secret that there is a lot of money in the television show industry- hundred million dollar deals with renowned showrunners, ninety million dollar budgets for a single season of a show, star talent drawn to television, etc. Yet, not only only are the budgets and deals astronomical, the profits that television series return on their investment- similar to the return on a successful startup- can be enormous.
And, it’s technology, such as that which we find in Amazon and Netflix, that is disrupting Hollywood. With this shift in the entertainment ecosystem, venture capital should get creative in how they can get involved in the profitable industry. Whether it’s looking into a startup that can benefit the creative process- such as AI products that can read and analyze scripts- or learning more about the funding of shows, there could be a business opportunity for venture capital as the entertainment industry continues to break from its traditional ways.
