At the end of a series of never-ending panels at the TCA summer press tour, leave it to John Landgraf, FX Networks’ CEO and soothsayer, to pour cold water over the proceedings.
“I want to address the elephant in the room at TCA, which is the massive transformation [and] disruptions that the business is undergoing,” he said.
Landgraf sparked much debate and controversy when he declared we’re in a state of “too much TV” two years ago. No one’s arguing with him now. On Wednesday, Landgraf had a lot more to say about the ever-expanding enormity of the TV business, and how it reflects the greater American economy, referencing Jimmy Carter, Deep Blue’s battle with Gary Kasparov and the struggling middle class.
The thoughtful CEO continued to trumpet the problems with the current state of TV while simultaneously attempting to forge a successful path for FX amidst its growing competition with ever-expanding coffers.
Landgraf explained that TV has gone from an optimal number of shows to an unmanageable number of shows. While there has been an increase in “more great, more diverse TV” each year, it doesn’t seem as “special” because of a “glut in the marketplace.”
“Scale has become the only absolute measure of value in the economy,” he said. “That’s why there’s more television than you or anyone can possibly watch.”
This massive shift in the share of consumption goes beyond television.
“We’re all watching an epic battle for who will control human attention, a finite resource and the most valuable on earth,” he said. “Wal-Mart and Amazon, Facebook, Google and Apple, Instagram and Snapchat, Netflix and Amazon, are creating an exhilarating race to the top, but it is also creating a depressing a race to the bottom.”
Even though FX Networks (FX, FXM, and FXX) make up the number-one basic cable network group in video-on-demand (VOD) through June in 2017, it’s been obvious to Landgraf and company that they need to adapt to survive.
“For awhile now, it has been obvious to us [that] we have to considerably improve our strengths, and transform our consumer model if we’re going to thrive,” Landgraf said. “You’re not going to be able to maintain the usage of your content if you’re counting on linear. We had to really lean into non-linear consumption.”
This is how FX and FXM has remained stable in viewers from 2016 to 2017, while FXX has increased by 5 million in the same time frame.
FX’s non-linear consumption has increased each year, doubling from 2014 to 2016.
“I want to underscore, if we’re doing well relative to our peer set, that’s not good enough,” he said. “You have to break out of the model that you’re working in.”
This is because of the effect Silicon Valley (ie. Amazon and Netflix) have had on the TV industry.
“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,” he said. “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.”
Landgraf referenced HBO and AMC as allies in the “titanic struggle” ahead.
“We wanted to use the platonic ideal of brand expression, which we think is HBO’s expression,” Landgraf said. “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.”
That direction is the recently announced FX Plus (or FX+), an ad-free subscription service coming to Comcast’s Xfinity platform on September 5. All episodes from their umbrella of networks will be available simultaneously without commercial interruption, as FX Networks becomes the first ad-supported network to offer all seasons of a majority of its library.
While FX+ offers over 1,000 episodes of programming immediately, a notable increase over AMC’s similar partnership with Comcast Landgraf made sure to note, FX expects to complete FX+’s roster in 2018.
Right now, Hulu or Amazon or Netflix subscribers aren’t in any danger of losing FX shows, but it’s clear FX is trying to reverse course and retain ownership all of their programming.
“It’s not an easy business pivot to do,” he admitted.
For now, what content there is will be available through Xfinity On Demand, the Xfinity Stream App and website, and FXNOW, all for $5.99 a month, but FX is already planning to meet with other MVPDs (multichannel video programming distributors) to expand FX+’s output.
Landgraf acknowledged the inherent problem with every network creating their own streaming service, a trend he expects to continue.
“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.”
But he believes that bundling still has a “tremendous economic value to the buyer and seller” for large families or households with varied tastes.
The most important thing is that FX+ offers viewers a choice.
“This is voluntary,” he said. “What they don’t like is the lack of choice.”
To Landgraf, FX didn’t have much choice—FX+ was a necessary move for the network.
“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. “We’re layering a new subscriber business on top.”
And Landgraf thinks that FX’s diverse programming will be what sets it apart.
“We think there’s value in the curation we bring,” he said, comparing FX to a newspaper or magazine’s editorial voice.
“We’re going to have to evolve with the times. Our strength is not the ability to pump 20 billion dollars into hundreds of hundreds piece of content.”
Landgraf believes (and hopes) that brands “will still have value to people,” noting that amidst a deluge of content, people “tend to fall back on brands.”
But will FX be one of the ones that survives?
“There’s going to be a culling. You just have to be at or near the top to really thrive,” he said. “We’re working as hard as we possibly can to evolve the business and improve [our] quality and depth of our offerings so that we can be in the echelon to survive.”
For right now, the expansion continues. Amid the proselytizing, Landgraf updated the tally of original programming in 2017 compared to last year.
There are 342 shows year-to-date, compared to 325 this time last year. 62 of those are from streaming services, versus 51 last year, with 79 additional series that have not yet aired.
And that doesn’t even include Apple’s forthcoming arrival in the content wars.
“Yeah, it’s going to continue to grow,” he said, clearly resigned. “Wait for the epic titanic fight for talent.”
“Beyond television we’re all watching an epic battle unfold for who will control human attention. For who controls attention, controls its monetizing.”
Landgraf cited a lack of market regulation that has allowed a single company or a tiny handful of companies to become oligarchs.
“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 charts these origins to the Jimmy Carter administration with the deregulation of railroads and airlines. It accelerated under Reagan and Clinton, and has regardless of party since the 1970s.
To Landgraf, competing against Netflix, Amazon and soon Apple and Facebook, is like “getting shot in the face with money every day.”
This is because “we can’t spend more than we make each year,” something Netflix doesn’t have to worry about, operating at a 2.5 billion dollar loss. If FX could, Landgraf would have 9 billion dollars more to spend on content.
“We can’t do what they do and I don’t think I’d be the guy if we could. I don’t want the world’s largest all you can eat buffet with something for everyone.”
The “tsunami of content creation” in the industry seems to indicate that many want exactly that, but Landgraf promises to fight, banking on the quality of their relationships with talent and creators.
“I’m not interested in world domination,” he said. “I’m interested in running a nice little brand that takes care of its own and does really good work. 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 go down the road with your typewriter and work for another company.”
Landgraf worries that will no longer be the case, warning not of monopolies, but monopsonies, a market system where there is only one buyer.
“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.”
“I want the humans to hold their own against the emerging strength of the machines.”
The battle lines have been drawn.