Confessions of a production studio exec: ‘TV budgets can be 10 times digital’

What price point does digital support?
When new [content-buying platforms] come in, they take their first swing, and they’re willing to experiment. Then, they see that approach does not work, and they realize that the costs need to come down. [Go90 and YouTube Red] can support up to a $1 million budget. But creating good content on a $1 million budget — especially with guilds and unions wising up — is really, really hard. That gives us a bit of an advantage because we already know how to deal with that.

Companies like BuzzFeed, they are able to differentiate because they have a brand and an audience, and they can test and iterate to see what works. But it’s not about production value. As you try to do these shows, you need to have a premium production value, which is hard at that digital price point.

Are Go90, YouTube Red and other big digital content buyers pulling back?
It’s fair to ask Go90: At what point are you going to say, “Where is the economic justification for this?” I don’t think it’s coming soon because the opportunity is still so vast. Go90’s not spending as much or as loosely as they were in 2015. But in the next 10 years, if I’m betting on who’s still going to be around, it’s probably anyone affiliated with a telecom company. It makes sense, right? You’re a service that provides data. So why not subsidize content that causes people to consume more data? That’s a rational business argument for why they should continue investing in content.

Is this all sustainable, though? There are a lot of places looking for shows, but they can’t all be around in a few years.
To me, the bigger question is, what are these digital companies that have raised tons of money going to do when there isn’t as much investment dollars coming in anymore? I have serious concerns about the long-term viability of all these companies that are making a lot of content now, but not at top dollar and with no clear long-term plan behind it.

I’ve heard that digital media publishers are increasingly looking to work with production studios on original content.
It’s true. I can’t name specific names, but we’re working with at least two of the big social-first media companies, where we are leading on the development and production of premium video content.

What are they bringing to the table?
They still have a great brand that we can tap into. Do I want to spend time and money to stand up a consumer-facing brand? That takes years and millions and millions of dollars. I don’t have the time and resources to make that happen. I’d rather just produce the content. So it becomes a pretty complementary relationship.

Are you looking toward traditional TV?
More and more every day. TV budgets can be 10 times digital. The economic dilemma is, when you’re a digital studio, you usually retain ownership over the content you sell to a Go90 or a YouTube Red. Once their license expires, we own the show and can sell it elsewhere. These days, for digital studios, if you sell to a TV network, they own that show. So it’s not quite as lucrative in the long term.