Why Apple and Facebook Should Spend More on Video

Source: Company Filings. Chart by Mike Sullivan.

Apple and Facebook’s tentative steps into video programming has fuelled a debate about so-called “peak TV”—the idea that there’s a bubble underway in the amount of new TV shows being made. But a look at how much more established media firms are spending on TV suggests these newer entrants will have to be much more aggressive if they want to make an impact—and grab some of the enormous TV-related revenue that still flow to traditional media.

Last year, four of the biggest entertainment companies—Disney, NBCUniversal, Time Warner and CBS—spent a total of $36 billion on TV programming and production, 29% higher than in 2010, according to company disclosures in SEC filings. (See above chart for a company-by-company breakdown.)

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Apple has the money to solve this problem. It could buy Netflix, for instance. Whether it needs to go that far—at current prices, Netflix would cost $75 billion—Apple will need to step up to the plate and spend at least $5 billion to $10 billion a year on programming if it wants to be a contender.

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