Content crunch – the fight for rights

As the pace of consolidation quickens, competition for rights is fiercer than ever. Stewart Clarke talks to distributors about the changing face of the business and how, in the hyper competitive world of TV, they are gaining access to content.

First-look deals, overall deals, development deals, output deals, umbrella deals and pod deals: all are increasingly part of the lexicon of international content companies. Every agreement is different, but the unifying aspect is the rationale for seeking out these deals – access to content.

Zig Zag’s Close Up Kings

Another wave of consolidation has left IP increasingly concentrated among a select group of super producer-distributor – and often – broadcast giants. The likes of ITV Studios, Modern Times Group, FremantleMedia and Red Arrow have led the buying spree. Meanwhile, Warner Bros. and Sony are aggressively expanding, and NBCUniversal has been consolidating shares in producers.

Shine, Endemol, All3Media and Zodiak own numerous production labels, and BBC Worldwide’s latest model is to commission, produce and sell content. All the while John de Mol’s Talpa is setting up joint ventures.

Everyone else is forced to fight twice as hard for rights, a situation made tougher still by the tussle for third-party fare.

With producers increasing keeping rights, there is a realisation that the real money is in international exploitation: a single sale can eclipse a work-for-hire fee. “If a factual show costs £280,000 (US$462,000) per hour to make, the production margin might be £40,000, and we can sell it for £75,000 an hour,” says a senior executive at a London-based distributor.

Nordic World’s The Seaside Hotel

The flip side is that unaffiliated production comapnies with rights are becoming the subject of bidding wars. Their choice of vendor should depend on their priorities – do they want titles packaged, development money, presales, or are they focussed on a US sale?

A mistake is to fixate on the size of the advance. “Savvy indies have had good and bad experiences; if the advance is big, the distributor can end up working so hard to get their money back that they end up not getting as much because there is so much pressure,” says one executive who has worked with indies around the world.

For a distributor, simply writing the biggest cheque is bad business, says Peter Emerson, president of TV at Entertainment One. “We’re not shy to cover a deficit, but we don’t want the only reason you came to us to be we’re going to pay the most,” he says.

Picking up one-off shows should be seen as the basis for building a deeper relationship, he adds. eOne has set up a raft of first look deals because “we realised it was so competitive that we need to ring fence rights,” Emerson says. It is currently working with Zig Zag Productions, a now rare example of an unaffiliated independent UK producer and one that has worked with distributors and done its own international sales.

BBC Worldwide’s Mud, Sweat and Gears

Zig Zag CEO Danny Fenton says there is a “feeding frenzy” going on for programming. “Because there is so little content out there, big distributors will pay quite a lot upfront for the right to work with you,” he says. eOne launched the firm’s magic-come-travel series Close Up Kings at MIPTV.

Indies are, then, well aware there are pots of money for rights as well as for development. Distributors are picking up the tab for TV content R+D with increasing regularity. All3Media International managing director Louise Pedersen says the company receives about five approaches a month from producers seeking cash to work-up ideas.

One deal All3 did go for was Swan Films, with which it inked a first-look. The executives behind the award-winning Grayson Perry: All in the Best Possible Taste, which went out on Channel 4, set up the UK indie. All3Media will sell its shows internationally including one-off doc Doggy Styling.

Content’s 19-2

Banijay has been actively acquiring production companies and rights, although its international division is younger than many of its peers’. “The fight for content is fiercer than ever,” says managing director Karoline Spodsberg. “The number of places to go for new formats has diminished, there are new players, and they are increasingly willing to put money on the table.”

Spodsberg adds: “There is a greater openness to looking at ideas, even at a very early stage. We’re getting back to the era where if you have a strong idea, it becomes very attractive to a distributor and broadcaster no matter if it is only off paper. It changes the distributor funding model, and we need to be able to step in with financial and creative support.”

Lionsgate’s Orange is the New Black

The amount of content available differs by genre and territory. Beyond Distribution’s head of acquisitions Yvonne Body says rights competition has been heating up. “It’s probably been happening for the last five years because there is less available content – in particular in the UK, where a lot is made and owned by bigger companies that have a distribution company in the group. That means it is more expensive to acquire rights and requires extremely high advances.

“We’ve always tracked things from an early stage, and that hasn’t changed. What has changed is the stage at which people are looking for a financial commitment; sometimes it’s before they even have a commission.” Beyond, which launched Great Pacific’s reality series Airshow at MIPTV, specialises in unscripted.

The same trend – needing an early commitment – also holds true in the scripted world, but the numbers involved and the gap left after a broadcaster commission are bigger. With a commission in hand for a scripted series, for example, a distributor will now contribute between 10% and 35%.

The type of deal a distributor will strike depends on how established the company is. Development deals suit young companies that cannot sustain costs. Pod or umbrella deals are for established talent striking out on its own, while acquisitions require three or more years of P&L accounts. Generally, development deals offer distributors a chance to recoup a chunk of the advance as production begins, while first-looks give them the benefit when they start selling a property internationally.

“There’s more competition for great content because people increasingly understand the importance of distribution as part of the finance model,” says Ruth Clarke, director of acquisitions and coproductions at ITV Studios.

TCB Rights’ Jumbo – The Plane That Changed the World

The ITV sales arm gets involved in optioning books, developing scripts and at every stage thereafter. For example, it has come on-board early on new period drama The Great Fire. “Ultimately it’s about balancing risk,” says Clarke.

Recent British drama successes such as Downton Abbey, Sherlock and Mr Selfridge mean a greater number of returning series, fewer slots for new shows and fewer new shows overall. In these circumstances, UK-based distributirs are forced to look further afield for new content. The next wave of projects ITV Studios has identified includes Hiding, an Australian drama about a Gold Coast criminal entering witness protection, from Playmaker Media for pubcaster the ABC.

All3Media International’s Pedersen has been instrumental in putting together some complex high-end dramas including Missing. The series, about a dad searching for his abducted son, is a copro between US premium cabler Starz, UK pubcaster the BBC and All3Media-owned prodcos Company Pictures and New Pictures. Two Brothers Pictures and Playground are also attached, along with Fortis Film Fund and Czar TV Productions, and the copro has been structured using Belgian tax credits – Belgian broadcaster VRT will also take the show.

Starz’ The White Queen

The BBC was lead funder before All3Media added a healthy deficit and brought in Starz (the pair worked together on The White Queen). All3 will distribute internationally and has secondary rights in the US.

Putting together deals requires a high level of networking and know-how – good news for market organisers. Video conferencing might be enough to talk details but will not provide the deep market intelligence a trip to MIPTV or NATPE Miami provide.

That is why BBC Worldwide gets buyers to its Showcase event each February – though few (if any) can match Worldwide’s 50,000-hour catalogue or its willingness to invest in an event on that scale.

“It’s a calculated investment, and I’m very confident it gives a short-term benefit to our shows and, in terms of our reputation, the sales teams around the world feel the benefit throughout the year,” says Paul Dempsey, president, global markets at BBC Worldwide.

MarVista CEO Fernando Szew spoke to TBI before heading to US media confab SXSW. He agrees that the current landscape requires more risk-taking, but notes that the increased number of channels and platforms provide a counter balance. “Now, if three or four outlets pass on a project, there are probably still ten opportunities left,” he says.

Meanwhile, Netflix and other streaming services have started paying significant license fees and are commissioning originals. However, the Netflix model of launching an entire series at once also changes the distribution model.

Lionsgate produces and sells Netflix’s comedy-drama series Orange is the New Black. “Before Netflix showed it we didn’t know how the [buyers] would react,” says Peter Iacono, Lionsgate’s managing director, international television. “Would they look at it differently because it was on Netflix and the episodes had run-times of 50-to-55 and sometimes 60 minutes? Now we have seen the reaction and looked at it with 20/20 vision we’ve realised it just comes down to whether it’s a great show.”

Banijay’s Opposite Worlds

Content Media recently acquired Chinese production and distribution companies from Seven Stars Entertainment and Media, which in turn is taking a stake in the transatlantic firm. The deal will allow Content to pipe its libraries into China through Seven Stars’ Alive Group and get formats from its prodcos into the Asian territory.

Before that, Content Television launched Canadian cop series 19-2 at MIPTV. Its president Greg Phillips agrees that competition is growing but remains bullish. “When you are up against the bigger or multinational companies and you get something, it is that much more gratifying,” he says. “The obligation is then on you to perform as well as your larger competitors.”

Marketing has become more important, Phillips adds. “We will market something and get behind it as we would a feature film that was going into theatres,” he says.

This often includes getting commissioners up close to on-screen and writing talent. For example, they are more likely to champion a programme having met key production figures. This is why Kim Cattrall, Maggie Gyllenhaal, Curtis ’50 Cent’ Jackson and Amy Poehler were all in town for MIPTV to promote shows from distributors Tricon, BBC Worldwide, Starz and Viacom respectively.

EL Rey’s From Dus Till Dawn

First-look and development deals are also about the marketing and positioning a distributor’s own brand.

“We are quite conservative and don’t want to do a lot of them just so we can issue a press release and look big,” says Banijay International’s Spodsberg. “We can deliver strong partnerships because we don’t do ten of these a year.”

Banijay is now pushing into selling finished shows with former Target, ITV Studios and FremantleMedia exec Emmanuelle Namiech spearheading efforts. “We’re making a serious move into finished/taped programming,” says Spodsberg. “We’ve been focused on formats and it is a natural next step to do this with English-speaking content.”

Nordic World – founded by Scandinavian free-to-air channels – was launched as a local Nordic sales alternative to the super indies. However, with MTG buying Nice Entertainment, ITV taking over Mediacircus and Content Media’s investment in Finland’s Aito, among other deals in the region, it has been forced to change the model.

Keshet International’s Boom!

“One by one the friends of Nordic World were being bought by superindies,” COO Jan Salling says.

Ironically, Nordic World has been forced into consolidation for content by acquiring Netherlands-based Absolutely Independent. “When the world moves into the Nordics, the Nordics move into the world,” he says. It has also set up a US office and cut format deals with UK and Irish firms.

Evidently, scale is the name of the game. The Hollywood studios (aside from Sony) and likes of ITV Studios, Keshet International and ZDF Enterprises all have powerful broadcast channels in the family. The same could be said of BBC Worldwide, though its remit dictates treading a fine political line.

The BBC’s commercial arm is currently engaged in a content drive to build its catalogue, recently commissioning new channel brand Brit’s first original series Mud, Sweat and Gears.

Mindful of the advantages of a close broadcaster relationship, others are looking at getting into the channels game. Endemol has bought a 33% stake in Israel’s Reshet, while DHX Media paid C$170 million (US$151 million) for Family Channel and the Canadian Disney XD and Disney Junior channels.

“We’re not a broadcaster yet,” says Peter Emerson, whose firm, eOne, has looked at the model. “Having a channel would be part of the increasing vertical integration of the supply chain, and if we knew we had a home for a show it would make strategic sense.”

DCD Rights’ Australian drama The Code

However, while there is a business rationale, eOne is unlikely to get into channels operation soon, he adds. The firm has instead made output deals with Robert Rodriguez’s El Rey Network and AMC for its scripted programmes.

Passion sells content from Scripps’ international lifestyle channels, while Tricon Films & Television has a deal to rep AMC Networks’ US cable net IFC. “They didn’t have an international distribution arm and saw us as an alternative,” says Jon Rutherford, senior VP, distribution and business development at Tricon about the latter deal. Similarly, when ex-IFC and Sundance boss Evan Shapiro took over US cable net Pivot, it was Tricon he went to for international distribution.

Mindful of that symbiotic broadcaster-distributor relationship, UK pay TV operator Sky set up sales arm Sky Vision after buying factual producer and distributor Parthenon Entertainment in 2012.

The move came as Sky ramped up investment in original programming. Assuming producers sign over rights, Sky can now invest in production, transmit the resulting programme and sell it internationally.

Sky Vision’s Duck Quack Don’t Echo

Regardless of size, top distributors do their homework on the buyers, says TCB Media Rights’ Paul Heaney. “There might be 100 people fighting for each slot, but how many have really thought about that broadcaster’s schedule? You need to know the buyer’s remit and any relevant changes with them.”

Having been at Cineflix Rights, Heaney set up his own content business, TCB, in 2012 and says the modern distributor should work harder, be leaner and respond better to market needs. At MIPTV, the factual distributor launched 747: The Plane that Changed the World, a doc for BBC Two in the UK, Discovery Channel in Canada and Smithsonian in the US.

So, what of the distribution landscape of the future? FremantleMedia has been linked with an All3Media takeover, a recapitalised Endemol will be back in play, Zodiak is eyeing an IPO, and numerous other distribution companies large and small are fighting for position. It’s time, it seems, to start doing deals.