Just prior to the holiday break FX released its latest update on “Peak TV” - the name company president John Landgraf coined a couple years ago to describe the exploding number of original scripted TV programs being produced. According to FX, which is tracking Peak TV, in 2016 there were 455 scripted originals, up from 421 in 2015 and 182 in 2002.

In that 14-year time period, the biggest volume contributor has been ad-supported cable TV networks, increasing from 30 shows in ’02 to 181 shows in ’16. But zeroing in on just the last 3 years, it’s the SVOD providers (Netflix, Amazon and Hulu) that have had the biggest impact. The group tripled their output from 24 shows in ’13 to 93 in ’16 while ad-supported cable TV rose from 161 to 181, broadcast TV bumped up from 131 to 145 and premium TV (HBO, Showtime, etc.) was basically flat, from 33 in ’13 to 36 in ’16. Put another way, in 2013, SVOD accounted for just 6.9% of all scripted TV and in 2016 they tripled their share to 20.4%.

But increased share only tells part of the story of how SVOD has changed the dynamics of TV and will continue doing so. Arguably more relevant are the exploding sums SVOD providers are spending on scripted originals, to attract A-list actors (with compensation now approaching $1 million per episode) and to fund ever more lavish productions. The bigger budgets are creating more cinematic-like experiences in TV. And as they do, viewers’ expectations are becoming more elevated.

All of this is excellent news for SVOD providers because only they have the scale and resources to play by these new competitive rules. In fact, the leveling off of scripted originals by broadcast, ad-supported and premium TV networks over the past 3 years already shows their limits to fully compete in this new paradigm.

As I explained a few weeks ago, Netflix’s and Amazon’s global scale gives them a far broader base of subscribers on which to make and amortize content investments. Combine that with their willingness to accept lower profit margins in their pursuit of market share and they’re a totally new breed of TV competitor (all this is ON TOP of allowing super-convenient ad-free binge-viewing across multiple devices). In Amazon’s case, yet another wrinkle is that video doesn’t even need to be a self-sufficient business; rather its main purpose is to drive the Prime e-commerce flywheel.

SVOD’s growth is happening at the same time the business models of ad-supported cable TV networks and premium TV networks, which are primarily tethered to the overall pay-TV and TV advertising businesses, are declining or flat at best. Pay-TV is a mature business and while cord-cutting is still relatively modest, if new skinny bundles succeed, there will be even more pressure on rates ad-supported TV networks can charge distributors. Meanwhile, digital ad platforms like Google and Facebook are going to be making ever stronger appeals for shifting traditional TV ad spending. Even sports, the traditional pay-TV and advertising firewall is under pressure, as this Fall’s NFL ratings decline amply illustrate.

Put it all together and there’s every reason to believe Netflix and Amazon will keep investing heavily in new originals in 2017 and beyond, putting more pressure on the existing TV networks. Peak TV is being driven by SVOD and as long as it contributes to SVOD’s growth, it’s going to continue. This will lead to even more audience fragmentation and higher expectations. In short, it’s a whole new world for traditional TV providers to adjust to.