Streaming Now: Los Angeles Takes Center Stage in Race for Content
I’ve come to realize I simply don’t have enough time left on this planet to watch all the shows I want to. When we said goodbye to Tony Soprano in 2007, it sparked weeks of discussion about that blackout and what happened. Now, while we’re finding out who takes the Iron Throne, we’re likely watching one or more of the nearly 500 scripted shows out there. Netflix (NFLX) launched its streaming service in 2007, and by 2009 we could choose from 210 scripted shows across all sources. In 2019, that number is expected to soar to a stunning 530.
Los Angeles is the epicenter of original content creation. Studios have called Burbank home for decades and are crossing over into the streaming realm, and the new media players that dominate the online domain are now looking for studio space to produce their own content. Streaming services represented 2 percent of the 266 original series produced in 2011 and as of year-end 2018 they represented a staggering 32 percent of the 495 original series created, according to FX Network Research.
This immense growth has had interesting effects. For example, annual demand for entertainment- and production-related space in the Greater Los Angeles region has more than doubled, impacting our area’s industrial sector. In the San Fernando Valley, an area with a high concentration of suitable space, more than 1.7 million square feet of production space were leased in 2018 compared with 780,000 square feet in 2011, according to our CBRE (CBRE) research.
It’s not just about quantity, though. These new media companies are competing for, and winning, major entertainment awards, an unprecedented feat. This success in turn generates more subscribers and leads to larger investments by these companies and the need for more production space. The top five content creators are located in LA and have quickly ramped up spending over the past decade with $24 billion expended on content last year alone.
In West LA, this race for content has spurred a space grab—a strategy used by the FAANG occupiers (FAANG being Facebook, Apple (AAPL), Amazon (AMZN), Netflix and Google (GOOGL)) to account for future growth with the added benefit of keeping competitors away. New construction ensued and preleasing activity in Los Angeles is now above 60 percent, as compared with 20 percent historically. Currently, about 2.5 million square feet of the 4.1 million square feet under construction or set to break ground in 2019 are already preleased.
Alongside this growth, the way in which all this content is consumed is also evolving, and leading indicators point toward additional future growth. Millennials are not couch potatoes who channel surf between commercial breaks. They are cutting the cord in favor of new media. Over the last five years Los Angeles and Orange County attracted 58 percent of the venture capital funding in the U.S. for media, entertainment and mobile startups. During that same time, 5 million square feet of tech and tech-related tenants signed leases in LA with the large majority spoken for by FAANG tenants.
In this vein, when the 2028 Olympics come to L.A., they will on many levels be “Content Games” because the way we will watch them will be completely different than we did in 1984. Every spectator will have a phone or device that will be able to relay stats and relevant information immediately and each event will be broadcast through digital channels in ways that are still being invented.
So, while the seemingly endless supply of entertainment content and the development of ways to consume it all might overwhelm me on any given day, its impact is so grand that it could even extend the current real estate cycle in L.A.
The ongoing shift toward streaming services for entertainment consumption and further confluence of the technology and media industries will not only further drive real estate expansion, but also become a more important source of economic growth for this region and across the world for years to come.