The Consolidation Game: Will the Small Survive?

January 3, 2011 World Screen

This article originally appeared in the MIPCOM 2010 issue of TV Formats.

 

Last September, when Media Entertainment Group’s (MEG) CEO, Peter Greén, decided to get back into the format business, the idea of launching a new format company seemed questionable. Greén had played a pioneering role in the format business during the late 1980s and 1990s, but he would be returning to the business at a time when the television industry was racked by the worst recession in its history and the format business had become much more competitive. How could a small, new company survive in a landscape increasingly dominated by a handful of global giants that owned production companies all around the world?
 
Very well, it seems. Since its soft launch at NATPE 2010 and formal debut at MIPTV, MEG Formats is already enjoying some early successes by laboriously ferreting out new ideas and formats from emerging markets and companies that some of the bigger players might ignore.
 
“We’ve just taken three formats from Romania, which wasn’t on the map for formats a year ago [and seen considerable interest in one of them, Extreme Musical Chairs],” explains Sarah Coursey, the VP of MEG Formats. “After just a few meetings in London, we have a big European channel and one of the biggest players in the [format industry] interested in deals.”
 
Similar stories can be heard from other executives at smaller and mid-sized format companies. While smaller players face some serious challenges in their efforts to compete with the huge multinational format players like Endemol and FremantleMedia, these executives report that small and mid-sized players are not only surviving—in many cases they’re thriving.
 
“We see there is room in the format business for both these big corporations as well as small boutique companies that move quickly and can bring different types of ideas and solutions to the market,” notes Avi Armoza, the founder and CEO of Armoza Formats.
 
Armoza adds that in a very short period of time his company has “been able to conclude more than 16 deals in major territories for one of our newer formats, The Frame, which some of our clients have described as the next big prime-time reality show, and hopefully by winter it will start airing in a few of them.”
 
One key advantage for Armoza, and other smaller players, has been their ability to find ideas that stand out from the crowd. Global Agency, for example, attended its first MIPCOM four years ago with just one format from Turkey—a market that was not known at the time for exporting formats—and has since found success in specializing in controversial formats. Its catalogue includes Perfect Bride, where the mother chooses the best bride for her son; Rent-a-Mama, which has couples competing to have a surrogate mother provide them with a baby; and Choosing My Religion, which features religious leaders trying to convince ten atheists to adopt either Christianity, Islam, Judaism or Buddhism. “If you want to stand out from hundreds of other companies you have to be different,” says Izzet Pinto, Global Agency’s CEO.
 
In the hunt for new ideas, Global Agency and successful smaller shops are often willing to cull through mountains of ideas and explore emerging markets. “Out of 150 or 200 ideas we might find only one or two interesting ones so you have to do your research and be passionate about your job,” says Pinto.
 
Many of these mid-sized and smaller companies also bring years of experience to the table. Strix, for example, was an early player in the format business. It was the first company to produce Survivor and now has a network of production companies in Sweden, Norway, Denmark and Holland that continue to supply its distribution arm with a stream of fresh ideas.
 
“We are known as a very dependable supplier of reality formats throughout the world such as The Farm and The Bar,” notes Mia Engström, the head of international sales at Strix Television. “We’ve been fortunate to have a great back catalogue of proven formats that have been very valuable during the recession, and we are a small organization that can move very quickly.”
 
That isn’t to say these companies aren’t facing some serious challenges. Sparks Network, which has 17 leading independent producers as members and handles distribution of formats created by a number of other players, provides another example of a successful mid-sized format company but its president, Nicola Söderlund readily admits, “the mid-sized companies are [being] squeezed [by the big players.] The big companies with the big investment capabilities can dominate the [market for the] big commissions. Very often a [big global format] needs a big investment to fly.”
 
One problem is that consolidation has cut off some sources for new formats. “We’ve lost a couple of suppliers [of formats] when they were suddenly swallowed up by one of the larger players,” notes Hans Spielthenner, the CEO and co-founder of ohm:tv.
 
 

A WELL OF IDEAS

But Spielthenner and others stress that in many other ways, consolidation has proved to be a blessing because some well-known producers may leave after the company is sold and then turn to a company like ohm:tv to sell their ideas. “Something that we initially thought could make it more difficult to find new ideas has not really harmed us,” Spielthenner says.
 
In addition, broadcasters seem keen on preserving alternative sources of supply and creativity. “The broadcasters in general are wary of only working with the big conglomerates,” notes Söderlund at Sparks Network.
 
Several distributors also argue that consolidation has actually made it easier for them to pitch ideas. “Buyers who used to have appointments with five independent production companies at Cannes now have one appointment with one big company so it has become easier for us to see them,” says ohm:tv’s Spielthenner.
 
In fact, smaller distributors are pitching their size as an advantage when talking to producers about acquiring distribution rights to new formats. “We’ve had producers approach us because they felt their formats were getting lost in the large catalogue of a larger distributor,” reports MEG Formats’ Coursey. “They like the fact that we can provide the focus and attention their idea really deserves.”
 
And, for all the talk about the difficulties faced by smaller independent companies that must battle big multinational corporations, perhaps an even more important dynamic has been the development of widespread alliances between large and smaller players, in part because these boutique and mid-sized operations have proved so successful in digging up new ideas.
 
“Strange as it may seem, most of these production companies that are part of these massive groups are still looking for ideas outside of their own catalogues,” says ohm:tv’s Spielthenner. “We have regular meetings with companies that are part of Endemol, FremantleMedia and all the big ones.”
 
Such alliances are also important for smaller players. “There are certain formats [such as the lavishly produced expensive studio shows] that need a big distributor,” admits MEG Formats’ Coursey. That’s why MEG is talking to big production companies about Extreme Musical Chairs. “They have done a lot of studio shows and have the ability to do a big show like that.”
 
 

INTHEFAMILY

A few mid-sized players like Strix can draw on their own production companies for production expertise and new ideas. In fact, Strix is one of the few format companies that only sells formats developed and produced by its production companies. “We see it as a competitive edge,” noted Strix’s Engström. “It really makes us very close to our products and gives us an enormous amount of knowledge and experience in producing them. We think that has been very important in our international success.”
 
Most smaller players can’t afford to acquire their own network of production companies. But, to gain some of the advantages of owning a production arm, some of the smaller players are looking to forge strategic alliances with production companies.
 
Global Agency, for example, has already set up a strategic alliance with the Indian production company Miditech, which has produced local versions of such hit formats as Deal or No Deal and Got Talent. As part of the alliance, Miditech will became the exclusive distributor and producer of the Global Agency catalogue in India and Global Agency will represent their format Sarkaar ki Duniya as The King’s Jungle in international markets, with the idea that the shows would be produced in India by Miditech. “We want networks to send their cast and team to India and produce the series in India,” says Pinto at Global Agency.
 
 

PLATFORM FOR SUCCESS

While the biggest format companies have the financial resources to invest heavily in newer technologies and develop the expensive online, mobile, IPTV and VOD applications for a hit series like Idols, several companies see their expertise in online, broadband, mobile and other digital technologies as a competitive edge.
 
For example, Armoza Formats’ The Frame has a number of multiplatform features and the company’s founder stresses the importance of these technologies in the way they approach the format business. “We are focusing on what we call a strong content brand,” Armoza says. “Once we have that brand we want to have the ability to generate income from all platforms and to help our clients reach viewers wherever they are. We think that coming out of Israel gives us a real advantage here because there are quite a number of start-up and technology companies that we can work with and we’ve been focusing on teaming up with those companies to develop our content.”
 
This tech expertise is particularly important for ohm:tv, which has been involved in newer technologies since it was founded eight years ago and has developed a number of mobile and broadband channels for telcos.
 
By offering turn-key solutions for the deployment of mobile and broadband content, ohm:tv can also get revenues from consulting and technical services, Spielthenner says, making it possible to profitably develop digital projects that would be difficult to fund simply from licensing fees or advertising. “The expertise we’ve gathered from online and digital distribution gives us an advantage that others can’t really offer,” he says.
 
Smaller companies are also better equipped to deal with the limited budgets being offered by emerging digital terrestrial, cable and satellite channels. Spielthenner explains, “We never did the massive prime-time Survivor-type shows so the whole change in the market and the development of these new channels is really benefiting us.”
 
More importantly, these entrepreneurs have a passion for their ideas and shows that some of the majors may lack. “The advantage of commissioning from an indie [is that] people often own the company and every commission is extremely important,” he says. “They will do their utmost to make the show into a success. The staffs at the bigger corporations work for hire and don’t have the same passion.”