TBI DISTRIBUTOR SURVEY 2016: SVOD boom, stacking issues?

Netflix and its streaming counterparts have shaken up the traditional TV market in an unprecedented manner.

For the free TV players Netflix is a viewing threat and rival for the best programming, for pay TV it is both these and a cord-cutting threat. For distributors SVOD is clearly a boon. Last week CBS boss Les Moonves told analysts Netflix has helped create competition for rights, driving up prices, notably at the premium end.

Will SVOD overtake linear, and when?

We asked distributors whether they could envisage a time when sales to streaming services and SVOD players eclipsed those to the traditional buyers. An overwhelming 58% say they could see that happening, with 20% saying they can’t (and the remainder sit on the fence).

When this might happen was a moot point. It is 3-to-5 years away according to Rafael Bardem, head of sales for Spain’s RTVE, 5-to-8 years according to Tricon’s Andrea Gorfolova and Marvista’s Vanessa Shapiro, 5-to-10 away according to Dynamic’s Dan March and Espresso TV’s David Hooper, and 15-to-20 years according to ZDF Enterprises.

Autentic’s Anne Hufnagel says the tipping point is ten years away, while Media IM’s Maria Ufland claims: “It is already happening in kids content.”

“In some territories, this is already beginning to occur,” says Starz distribution chief Gene George, a point backed up by the regional players. “With the Brazilian economic crisis, SVOD revenues have already surpassed those of traditional players,” says Joao Worcman from Synapse in Brazil.

On one hand, Netflix will be relying less on acquired content as it moves to an originals-heavy line-up across docs, drama, films and kids. On the other, it will be seeking out more territory-specific content as it seeks to give its international services a local feel, something we have already seen in Poland and Turkey.

SVOD opportunity vs. SVOD challenge

Asked about the impact on business, ZDF Enterprises says: “More business opportunities, more clients, more complicated legal and business affairs, and new technical standards.”

As the SVOD players gain ground the tension between them and free and pay channels is increasing, notably with each side demanding greater holdbacks, and with strain around what catch-up rights are included in a deal and how much is paid for these.

“There are more options for distributors, yet it is challenging to juggle the relationship with traditional broadcasters, and in negotiating rights,” Canadian animation distributor Guru says in its survey submission.

Most agree there is more complexity in the new world. “There are more opportunities to sell content and to partners at a co-pro level,” says Keshet International’s Keren Sahar. “There’s a need for more planning and sales strategy.”

The consensus is overwhelmingly that more buyers means more business for distributors (and, incidentally, the death of the DVD business). “We are closing more deals worldwide, and content that has never been aired on free TV and pay TV has a new window,” says Mediaset Espana’s Silvia Cotino.

While SVOD had been a boon for owners of finished programming, there is a sense the formats players are also about to feel the benefit. “It’s opening new opportunities for the format business,” says Javier Martinez, from Spain-based Phileas.

Formats veteran and founder of the The Format People Michelle Rodrigue, adds: “The need for programming has increased, and production budgets have maintained or decreased,” when asked about the impact of SVOD.

With streaming services provide a new outlet for content owners, their growth has an impact on linear channels, and in turn distributors.

“SVOD has created tremendous value and demand through new platforms and outlets, but it has also migrated market share away from linear broadcasters, negatively impacting linear value, changing traditional windows, and accelerating changes in consumer behaviour,” says Dan March, founder of Trapped distributor Dynamic Television.

TCB Media Rights’ Paul Heaney is careful not to overstate the SVOD impact. He says: “It has boosted revenues by 25%. It has been a tremendous gift for distributors, but only the short sighted cannot see we are in a transition period… linear is still the ‘bread and butter.”

What’s the global deal?

Netflix has complained that distributors are just not ready to make global deals. Do the distributors agree? Largely not, and several say Netflix needs to pay more if it wants these rights, especially for the catalogue titles. “Netflix needs to pay the freight for less than blockbuster content,” one distributor says.

A problem stacking up?

With SVOD services pushing for more, and more exclusive rights, the catch-up rights afforded to traditional channels have become a key part of negotiations.

“Stacking rights are always an issue and have been for quite some time,” says Endemol Shine International boss Cathy Payne. “I would say the heaviest things that we discuss in our negotiations are what rights they’re taking and what additional rights they may want, what other opportunities are there for their viewers to watch what are they seeking, and what are they prepared to pay to acquire those rights.”

Most distributors say what catch-up rights are included in a deal varies case by case. They all agree stacking and SVOD have made windowing more complex.

“The negotiation of stacking and catch up rights has become incredibly complicated,” says The Jim Henson Company’s Richard Goldsmith. “It’s different for literally almost every platform and creates a number of problems with respect to windowing our content.”

The challenge differs by region and territory. “It’s very much deal by deal, especially in smaller territories where windowing is more difficult and where linear broadcasters push for extensive holdbacks as a result,” says Passion chief Emnanuelle Namiech (pictured).

As the industry (slowly) moves in the direction of agreeing what rights should be included, the buyers that don’t remain open-minded risk losing out. “There is a consensus emerging, which is great as it puts pressure on the less flexible channels,” says TCB’s Paul Heaney.

“‘Consensus’ and ‘collegiate’ are two words I’d use for most operators – you would be surprised at who now makes life less painful in this area.