Rising programming costs
Programming costs are an important cost consideration for media companies. For Comcast (CMCSA), programming costs are have been trending upward for the past few quarters and were up 12.0% year-over-year in fiscal 2Q17. The company expects this trend to continue for the rest of fiscal 2017. But Comcast expects that programming costs will normalize beyond 2017, and it expects them to fall to high single digits.
For Comcast, a major factor fueling the rise in programming costs has been higher retransmission consent fees and rising sports programming expenses.
Time Warner also expects higher programming costs
Comcast’s peer Time Warner (TWX) also expects higher programming costs this year—specifically for HBO, as the company increasingly focuses on premium programming. The company is also focusing on producing content that’s mobile-friendly with broad viewer appeal.
This content includes short-form content, scripted content, and content in local languages. According to Time Warner, it’s emphasizing short-form content because it believes video streaming services such as Netflix (NFLX) are fueling the popularity of serialized edgy programming that works better on video streaming services than linear television networks.