The aftermath of rampant consolidation was in the spotlight at this week’s NATPE market, where the uptick in AVOD models, rights ownership and branding à la Netflix-Lifetime hit You dominated the discussion.
Steven Cahall, senior analyst with RBC Capital Markets, said it best early on in the week: “If you don’t work for the four global direct-to-consumer companies – Netflix, Amazon, Disney and Apple – you need to figure out how you fit into a world where they are becoming more dominant.”
Indeed, the conversation at the three-day Miami market was less about parsing Netflix and Amazon Prime Video’s next moves, and more about how studios, broadcasters, producers and distributors are battening down the hatches and fighting back with services of their own and aggressive rights positioning.
Weeks after Amazon launched Freedive, an ad-supported, Internet Movie Database (IMDb)-affiliated streaming channel for film and TV, news broke during NATPE of Viacom’s $340m acquisition of the Sky and ProSieben-backed AVOD Pluto TV, which has around 12m monthly active users and is to roll out internationally.
Scott Kirkpatrick, SVP of sales and business development at The Cry (below) distributor DRG, points out that AVOD will only continue to grow as all the major players “have realised that the revenue growth is going to dramatically increase over the next few years”.
“People are noticing subscription overload, and eventually, all the subscription platforms will be bundled together and that will slow growth,” he notes, adding that AVOD’s greatest opportunity lies in the international market.
“There are areas of the world that were closed off and that don’t necessarily have the disposable income to subscribe to platforms or buy the OTT hardware, but they do have their cell phones and 4G or 5G connectivity. These markets are now wide open, ready to see localised content, and the best way to get it there is through AVOD.
“All the major players – Walmart, Amazon, YouTube, Facebook – they already have a global infrastructure, and already know their metrics and audiences, and when [brands such as] Procter & Gamble and Johnson & Johnson can work with that, you have a direct way to sell diapers to a very clear audience member.”
Meanwhile, when Adam Lewinson, chief content officer of Tubi TV – an AVOD with more than 200 content partners and a library at least double the size of Netflix – was challenged by skeptical BritBox boss Soumya Sriraman around whether ad-supported platforms can be a sustainable business, the exec clapped back, noting that AVOD “is already a business and it’s cable network-sized”.
“That scale already exists today,” he said. “If you look at Viacom and NBCUniversal getting into AVOD, there’s a reason all of this is shifting.”
You provides valuable lesson in attribution
Meanwhile, the branding debate surrounding Netflix Originals seemed to reach fever pitch around Netflix-Lifetime co-production You, an eight-part thriller about a crazed bookstore manager who becomes obsessed with one of his customers.
The show – one of the most sophisticated dramas out of Lifetime to date – premiered on the A+E Networks-owned channel in September and was released globally on Netflix as an Original in December, where it has reached more than 40m households in its first month, according to the SVOD’s Q4 results.
TBI understands that the show was not intended to fill the holiday slot on Netflix, but the SVOD was keen to have another original to sit alongside Black Mirror: Bandersnatch and plugged the gap with You, which was released on 26 December.
Ultimately, Lifetime backed out of its second series commission because of poor ratings, and sold all rights to Netflix, which swooped in to carry series two exclusively.
Linda Ong, chief culture officer of marketing firm Civic Entertainment Group says these models can be “a challenge” for linear brands “because their shows can blow up” on Netflix with no marked connection to the originating network.
“People understand the Netflix brand so clearly, and their seal of approval is buzzworthiness. The brand challenge is how to return that attribution back to your channel,” she says.
“If people see an ad for a certain brand and they don’t expect that kind of show from that brand, they are less likely to [buy it]. That puts more emphasis on the brand to say, ‘This is something that will elevate and surprise you.’”
Buoyed by consolidation
For its part, Netflix was at the market in force, hosting an exclusive Soho House rooftop cocktail on Wednesday (23 January) attended by top LatAm producers and distributors.
Throughout the week, execs also engaged with the conference, with acquisitions boss Amy Reinhard commenting on the future of The Office (above) and Francisco Ramos, VP of Spanish-language originals, noting that the “shows being pitched to us year by year get better with more ambition, better writers and directors”.
Meanwhile, Amazon execs on the ground included Brad Beale, VP of worldwide TV content acquisition, Amazon Prime Video and Amazon Studios, and Danae Kokenos, head of content for Latin America at Amazon Studios, among others. TBI understands that Apple was also at the conference, courting producers and distributors with an eye on LatAm content.
Next year, the new kids on the block will be from the likes of burgeoning SVODs such as Disney+ and WarnerMedia’s three-tiered service – all of which are currently staffing up.
However, according to Michael Nathanson, senior research analyst for MoffettNathanson, the market is ultimately in “the last inning of material consolidation and big changes”.
“The CBS and Viacom merger seems inevitable this year, but after that, there is not much that is a natural fit,” he says. “I don’t see natural chess pieces afterwards. We will likely muddle through in the next few years to see how it will all resolve.”
One potential outcome could be a booming supplier’s market, with producers having their pick of platform partners. However, when it comes to rights retention and back-end profits, there are challenges ahead as new SVOD rivals look for worldwide exclusivity alongside Netflix.
Danny Fenton, CEO of Dating Detectives producer Zig Zag, agrees it is a supplier’s market in terms of “more opportunities and platforms popping up,” highlighting Jeffrey Katzenberg’s mobile TV platform Quibi as a bright light for short-form content.
However, the exec worries that the lost spend among US cable networks isn’t necessarily being propped up by streaming services.
“I actually don’t think that shift has gone as far as people assume. Obviously the streamers are buying and they have money – especially Netflix – but the balance isn’t as big as people think. Streaming money isn’t compensating for the lowering of cable money.”
Fenton foresees the market trending heavily towards a work-for-hire model. “Already the new platforms are wanting worldwide rights and they’re paying a premium for that, but at the same time, a lot of the US broadcasters and cable networks are aggressive in wanting more rights, and if you’re part of A+E, Nat Geo, Discovery, they’re more aggressively in wanting to hold on to rights as well.
“At one point, the US cable and broadcast networks will say they can offer a better deal. But in truth, not many places will give you back-end positions,” says Fenton.
Raw TV head of factual Liesel Evans adds that better SVOD budgets are the compensating factor “but once that diminishes and they start to match their budgets, then we’re in trouble.”
Dimitri Doganis, founder of the US-UK prodco, adds that it is incumbent on producers to “find the cracks and exploit those”.
“People will give on rights positions when it’s clearly in their interest to do so. What we have to do is bring something of value that leverages out a position for ourselves.”
The exec adds that the business is also in talks with Quibi and “developing with them in mind”.
“That’s a whole different discipline and set of challenges. That’s one piece and there will be others,” he says.
The week’s top TBI stories…
- What Netflix’s Q4 results tell us about its 2019 strategy
- What Netflix’s Friends deal tells us about rights ownership in 2019
- Exclusive: Netflix expands UK docs team as unscripted priorities emerge
- Disney offers earnings forecast, reveals $580m Hulu losses
- Netflix price hikes will come to the UK, says pricing strategy firm