Media giants building SVODs to rival Netflix are talking the talk, but who will walk the walk? Manori Ravindran investigates the knock-on effects of consolidation and the bigger picture around windowing and rights ownership.
If 2018’s media disruption taught us anything, it was to expect the unexpected in the laser-focused drive for scale. As potential outcomes of mega-mergers such as Disney/21st Century Fox, AT&T/Time Warner and Comcast/Sky become clearer, many of 2019’s most salient conversations will center on rights ownership and windowing.
An illuminating flashpoint in the ownership dialogue was Netflix and WarnerMedia’s $100m deal for the latter’s 24-year-old sitcom Friends, which has been streaming on the SVOD since January 2015 and prompted international outcry from fans when it was revealed that the streamer’s license was due to expire in January 2019.
Although WarnerMedia boss John Stankey had bullishly warned of a “substantial structural shift” that will see competitors’ libraries looking thinner when the business launches its three-tier streamer later this year and plucks its content from rivals, it made the shock move of renewing its Netflix deal, leading many to puzzle at the new frontier of content distribution.
“If you’re WarnerMedia and you have a platform, how do you map through where you put content, while making sales elsewhere?” asks Tim Mutimer, CEO of Temptation Island distributor Banijay Rights.
“The obvious thing would be to make Friends exclusive to their platform, but then checks are waved and you need to take that seriously. There is this assumption that people will want to integrate and keep everything on their own services, but big distributors have always looked at where the money is coming from and made choices based on that.”
Indeed, one senior distribution exec with knowledge of Disney’s sales strategy in recent months tells TBI that the Mouse “hasn’t yet collapsed the VOD window to move content to [Disney+] more quickly – they still want that money.
“At MIPCOM, Disney was looking to do short-term international deals for good content, because the international Disney+ streaming service isn’t going to launch as quickly as they thought, so [those sales execs] are thinking, ‘Oh, we might not launch for a year? Let’s see if Netflix wants to buy some stuff,’” says the exec.
“They haven’t signed anything at the level of Friends with Netflix, but they were having some discussions.”
Jane Millichip, managing director of pay-TV operator Sky’s distribution arm Sky Vision, points out that despite “very bold statements” made by some big players, their narratives have “softened a bit” as they begin to grapple with the reality of losing short-term revenue.
“Anyone with an ambition for their own SVOD, which is most of the big players, is assessing the value of harvesting their own rights for their services. But there is always a short to medium-term impact that could be negative on revenue.”
Millichip highlights that the question of whether or not to sell or hold on to content becomes particularly significant – and potentially dire – when you consider the impact on new projects, particularly within scripted.
The loss of licensing and ancillary revenues as businesses move from programme sales-based revenue to subscription-based models could have a serious impact on funding.
“There is a massive cost impact in de-harvesting rights, because we’ve built our business model for programme funding on the fact that we will monetise up to 40% of the budget through ancillary sales, and now we’re looking to potentially not do that in favour of having those shows on our own services.
“But unless you already have an established SVOD with a considerable subscriber base, you have something of a hole in your funding plan, because initially you aren’t going to derive the same revenue from a subscription that you did from license fees and sales.”
The shift in model, she says, will have a substantial impact on the “entire licensing world” and how much content is held back or sold openly and freely, and how this affects rights and windows.
A supplier’s market?
For some content suppliers, however, top-level changes in the market have put them in the catbird seat.
Dan Cohen, president of worldwide television licensing for The Haunting Of Hill House (above) and Catch-22 producer Paramount Television, reasons that as Disney’s acquisition of Fox sees the Mouse place a large amount of Fox content on Disney+, and as WarnerMedia preps its own streamer, these changes will greatly reduce the amount of content available to traditional broadcast clients as well as Netflix and Amazon.
“That then presents budgets that these players have to spend elsewhere,” says Cohen. “Similarly, if Fox does not extend its HBO output deal, there will then be more capacity at HBO. And that type of scenario is happening globally.”
Ultimately, these market shifts present an especially ample opportunity for Paramount, which has “no intentions of growing a streaming service to compete”.
“We want to do business with everybody, so we have moved up the food chain in terms of being a viable option for our clients.
“Even if we don’t have anything that an SVOD or traditional client wants, they aren’t worried about our ulterior motives or agenda.”
Similarly, Jonathan Ford, EVP of sales for Kew Media Distribution, notes that WarnerMedia’s service will serve as a “new customer” for the distributor.
“While Disney+ will be built using Disney’s own content, I can see Warner looking to buy exclusive rights for their service, and for me, that presents an opportunity,” he says.
“The merging of buyers does create an issue with potentially fewer buyers, but it also means that the people at these merged entities are stronger, more sustainable and more willing to do business.”
Sky Vision’s Millichip, however, warns against the assumption that it is entirely a seller’s market, particularly at the producer level.
“Producers are going to be challenged by a knock-on effect from consolidation,” she says.
“Yes, there are potentially more buyers than ever and more platforms to sell to, but each of those buyers requires more rights. Terrestrial broadcasters are no longer defined by the technical means of delivery – they also need catch-up and SVOD. Therefore, you don’t necessarily have a great deal of opportunity to do a lot of windowing.”
Woodcut Media boss Kate Beal agrees that she may have to give up more rights in the future, but reasons that “as long as [partners] pay for them, that is fine.”
“I want a fair price for a fair product. If you’re giving those rights for the universe, then a buyer must pay for the universe.”
One broadcaster that is newly navigating challenges around windowing is Canadian public broadcaster CBC, which launched its streaming service Gem in December in a bid to offer not only CBC programming, but the “jewels of Canadian content”.
Just as Brits know to find uniquely British programming on the BBC’s iPlayer, CBC boss Catherine Tait hopes that “anyone looking for Canadian content will go to Gem” and, akin to the joint SVOD being mulled over by UK broadcasters, she is in conversation to join forces with other Canadian on-demand platforms, such as Bell Media’s Crave.
“Our primary competition isn’t our domestic colleagues, it’s the global digital giants that are monetising content across worldwide audiences – something we have never been able to do,” says the former Telefilm Canada and Duopoly exec, who assumed her CBC role in July.
In recent years, CBC has elevated its programming through several high-profile co-productions with partners such as Netflix, but it is now running into a “very challenging” situation as it looks to keep some of that content, such as Alias Grace and Anne With An E (above), on its fledgling platform.
According to Tait, who describes “vigorous conversations” with the streaming giant around rights, the quandary represents the “nub of the challenge that all broadcasters have in co-financing with Netflix”.
“Yes, Alias Grace is on Netflix in Canada, but there are holdbacks, and when their license runs out, it returns to us. As it is for all broadcasters, the managing of rights with Netflix in our own territory remains a tough challenge.
“What’s key is figuring out how to continue working with them or Amazon because, as a public broadcaster, we need to leverage our limited entertainment dollars and they provide a very important piece of the financing. For Anne With An E, Netflix came in with a significant part of the budget, and that’s enormous visibility for our talent. Do we want to walk away from that? Absolutely not. But are there challenges in how we manage windowing around the platform when they’re in our market? Of course.”
Tait acknowledges that while Canadians may choose Netflix and Amazon as their primary service, “we want us, CBC and Gem, to be their second or third choice”.
Matthew Graham, SVP and GM for AMC-owned Acorn TV, is equally realistic about the landscape and his SVOD’s place within it.
“Netflix’s global expansion has laid the groundwork for people like us to follow in their path,” he says. “As we have shown in North America, Acorn is a great add-on service to a mass-appeal service such as Netflix.”
The US streaming service, which was launched in the US and Canada in 2011 and specialises in British television, was acquired by AMC last year – a move that has “opened up opportunities”, including a significant expansion into 30 countries, including India, Australia, Spain, Sweden, Norway, the Netherlands, New Zealand and South Africa.
The Handmaid’s Tale streamer now has the second window for the show Stateside after Acorn.
“It reflects our growing industry recognition,” explains Graham. “We have the marketing model to get shows on the service in front of the right audience at a scale that matters.”
Kew Media Distribution’s Ford adds that the new deal came down to Acorn’s specific focus as a niche SVOD as opposed to Hulu’s “mass market general entertainment service”.
“Acorn is more targeted, and in terms of giving the series the profile in the US and the marketing backing, it made sense to go with them for the first window.
“As the world switches from linear to on-demand, if you consider the cost of subscribing to one or two key SVOD services and a couple of niche platforms, that cost isn’t any more than subscribing to basic cable. There is an appetite there.”
Trendwatch: could blockchain shake up TV?
Originally created to support digital currency bitcoin as record-keeping technology, blockchain has broken free of its contentious association and is increasingly applied across various industries, including television.
Despite enduring confusion around its application, the concept is fairly straightforward: blockchain is effectively a digital ledger system that contains a record of each step in any transaction, financial or otherwise. This record is incorruptible and transparent to anyone who is able to access the system.
Anita O’Donnell, co-founder of media entertainment advisers Media Minds, tells TBI that blockchain’s widespread appeal is informed by a drive towards trust in deal-making.
“When you are using blockchain, there is no one partner that has to have the final stamp. Because of the way blockchain works, there is a certain amount of people that have to approve every transaction, therefore decentralising the trust.”
According to O’Donnell, 2019 will see blockchain finally emerge as a legitimate tech that exists outside the “wrapping” of bitcoin, and can be used, for example, to record deal-making in TV. Blockchain technology lends itself particularly well to back-catalogue deals.
“You can do those types of transactions on a blockchain-enabled platform,” explains O’Donnell, outlining how a distributor with thousands of hours of non-premium content could adopt a blockchain system for a deal with a buyer.
“You can do your transaction using the smart contracts ability, pay your money, have the money go from A to B, and upon receipt of the money, that can trigger back the video file. It provides an end-to-end solution in which you are buying rights and delivering video content without human contact.”
While the above may sound like existing distribution portal TRX, O’Donnell explains that a crucial difference is that any transaction can go offline with TRX.
“If I were to reinvent that portal, I would put it on the blockchain so that every element of it all has to live within the ‘gated garden,’” she says.
Elsewhere, broadcasters could implement blockchain for rights acquisitions, while production companies could adopt blockchain for music clearances or rights renewals.
“But the point is that for all these transactions, you still need finance people to establish the rules of engagement, so those jobs aren’t going anywhere,” says O’Donnell.