Content Spending Levels at Top Media Companies: 2023 Forecast

Note: This article is based on content from Variety Intelligence Platform’s special report “Dare to Stream,” available exclusively to subscribers.

Legacy media companies tried to become like Netflix by mimicking the streamer’s rise to the top: pour money into streaming — and big-budget, high-quality streaming content — in the name of constant, rapid subscriber growth.

But Wall Street isn’t rewarding that strategy anymore, and those companies are now scrambling to figure out what the new model should look like. No one has yet figured it out, but one thing is clear: The way money is spent on content is going to change.

However, content spend is not going to suddenly, drastically decline at most Big Media companies; in many cases, it may not decline at all. But the rate at which studios grow their spending, particularly with regard to streaming content, is likely to slow substantially.

Among companies that have been pivoting from linear to streaming (excluding players like Netflix, Amazon and Apple), direct-to-consumer content spending exploded from $2.7 billion in 2019 to $15.6 billion in 2021, per Wells Fargo data, a compound annual growth rate of over 79%. That spending is expected to grow by more than $7 billion this year, to nearly $24 billion.

In a research note last month, however, Wells Fargo projected that the growth of DTC content expenses will decelerate over the next three years, with a CAGR of just 15% between 2022 and 2025.

Meanwhile, when excluding sports rights, linear content spending is expected to continuously decline in that time, albeit not as steeply as the rate of cord-cutting might suggest. Indeed, when sports are excluded, legacy media companies’ DTC content spend could eclipse linear spending as early as next year.

Thanks to the ballooning costs of sports rights, however, linear content spend is projected to remain above $50 billion over the next few years. Sports are the lifeblood of the pay TV business at this point. Though streamers have been making inroads into live sports, the disproportionate revenue generated by linear, even in its decline, makes it unlikely that legacy media companies will shift their sports deals exclusively to streaming in the near future.

How, then, will spending on DTC content be re-optimized? Given the highly competitive nature of today’s streaming market, must-watch programming will remain an essential investment even as spending is reined in to some degree. But the free-spending days of the peak TV age are unquestionably coming to a close: The volume of original content released by the top SVOD services is set to drop this year, for the first time since the streaming wars began in earnest.

There have already been notable shifts in the content market that may be harbingers of where the business is headed. Expensive scripted series are becoming endangered — Puck recently reported, for instance, that a planned series based on 1970’s “Love Story” was quietly killed at Paramount+ — and it’s likely that massive development deals of the Ryan Murphy or J.J. Abrams ilk are going to become much rarer.

Furthermore, in the current market, some of that investment could actually shift back to linear content. Paramount has already moved one “Yellowstone” spinoff from streaming to its cable network, and another developing series will reportedly follow. Given the current economics of streaming and Wall Street’s changing priorities, that may be as good a spending strategy as any.