They say sharing is caring, but in some parts of the kids’ business, no one wants to share, creating complications for IP owners looking to fully maximize the value of their properties.
“You just don’t have those traditional windows like you used to, because people want exclusivity,” says Alix Wiseman, the senior VP of distribution and acquisitions at 9 Story Media Group. “The hardest part is extracting the value that is commensurate with what you’re making from the platforms that want to license it, given that you just don’t have as much scope in terms of windowing.”
Ed Galton, managing director and chief commercial officer at CAKE, agrees, stating, “While we will always push for non-exclusivity and a collapsing of as many windows as possible, the truth is that the traditional platforms have become more reticent about sharing than in the past. They don’t want to give any window of opportunity to work with the SVOD players and preserving AVOD rights has become a priority given that linear channels will ultimately migrate into that space.”
Morgann Favennec, the executive VP of distribution at Xilam Animation, notes that broadcasters’ needs have evolved alongside changes in viewing habits. “While it was not always easy, it used to be possible to satisfy all parties and have major partners coming on board one after another. Over recent months, it has become increasingly difficult to reach outcomes that are fully satisfactory for all involved, as everybody is now looking for exclusivity, particularly on premium content.”
But, as Emmanuèle Pétry Sirvin, co-founder and partner at Dandelooo, points out, “if you have the right project that everybody wants, all the rules fall apart. If the show is so-so, they are going to say, I can’t take it because I don’t have this window or I can’t have exclusivity, etc. And it’s almost an excuse. We’re co-producing Mum Is Pouring Rain for Canal+—they have the first window. It’s a wonderful director and a very talented artist, so France Télévisions said, We’ll take a second window. If it’s a great show, they will bend the rules. Netflix first started to say they needed to have all first windows and all exclusivity. Now they’re saying, We’ll give it a think.”
Plus, “there’s less loyalty from the audience now for specific channels, and instead, kids or their parents will search for their favorite TV shows; they don’t mind where they are found,” observes Alison Taylor, the director of distribution and business development at Aardman. “The platforms and channels are becoming accepting of that, so it’s become increasingly important for windows, on the top brands in particular, so everyone has the ability to broadcast the most popular shows and have an exclusivity window to do so. Buyers need new IP as well as popular existing brands just as much as producers of the IP need the financing, the marketing, the brand support. Windowing can sometimes be a neat solution for everyone, obviously while understanding the importance of the premiere, especially for the main commissioners as the financiers. This is when windowing can be effective.”
Jérôme Alby, managing director of Mediatoon Distribution, echoes this point, observing, “When you are a distributor, you have to maximize the number of windows on which you put your content. The main evolution has been to open those windows, to open the holdbacks, to make sure at the end of the day the kids see the show—a lot—and that you make more or less the same amount of money. You have to have the windowing to make sure there is a viewership you are looking for and you can make money and get the exposure you need.”
As for crafting a windowing strategy, there are a range of factors to consider, from local regulations—such as those in France, Alby points out—to the broader needs of the property.
FREE FOR ALL
“We always take into consideration all of our business departments,” reports Dorian Bühr, the head of global distribution at Studio 100 Media. “When we are talking to potential merchandising licensees, most of them want to know whether there will be free-TV coverage, and ideally, when and how often. This is still a very important parameter for the licensing business, especially for the introduction and brand development of a new IP. However, constant availability on streaming platforms ensures keeping kids connected, as for them, the most important thing is to get to see their favorite show, no matter where and when and how. Therefore, a coexisting solution using a distinct windowing [strategy] is desirable—ideally on all available platforms.”
At Mediatoon, Alby says the factors that need to be considered—beyond the size of an offer—are visibility, your own cash flow and how a broadcaster or platform will curate your content. “Typically, if you have the luxury of being able to choose between broadcaster A and broadcaster B who propose the same amount of [money], and your cash flow is good, what you will be looking for is who will best maximize the exposure of the show and help better roll out a possible L&M strategy. How do you make sure the show will be everlasting?”
CAKE’s Galton says the nature of a project will also help determine its preferred distribution model. “With a serialized show and a story arc that you have to follow, you are limited in who you can approach. The linear broadcasters are looking for snackable series that can be aired one episode at a time in any order, while VOD platforms look at viewing patterns differently. Secondly, there’s the level of ambition and size of the show, which is where the economics come into play. The traditional method of how we finance shows has evolved. Some of the series we’re working on are more ambitious with higher budgets. Certain platforms can afford to commit to that additional amount of money and have those shows made.”
Galton also points to the importance of ancillary revenues, where a free-to-air broadcaster or platform may be a better route than an SVOD streamer. “Does it make more sense to be on the free-TV channels of the world, or is it more beneficial to have as many non-exclusive deals as you can so you can be visible on every platform?” says Galton. “In addition, one needs to consider that if you are being held to exclusivity by a platform that you cannot extract data from, it becomes very challenging when selling in your licensing program.”
Galton references CAKE’s approach on its Angry Birds shorts series, where the strategy was always to do non-exclusive deals. “We found that the bigger the brand, the less exclusivity was an issue. In contrast, with a new show airing for the very first time, partners demand exclusivity as they want the show to be associated with their platform. There is a bit of an irony there; as long as it gets eyeballs and ratings, that’s what matters.”
Meanwhile, 9 Story’s Wiseman sees SVODs becoming “more proactive” in helping to support brands. “You generally need to have plenty of scope to be able to support a brand off the primary platform as much as possible. That does mean the YouTube world and so on. I think that’s where the conversation needs to be going. And the biggest challenge when it comes to consumer products with children’s content on the SVODs is simply how children, and we as adults, consume content now. We burn through it and we’re done with it in a period of time. It’s not being served up on a weekly basis, which would allow licensees to slowly launch programs. That’s an issue we’re all struggling with. I do think the SVODs are keen to see how they can play a part in maximizing that, which is to everyone’s benefit.”
Aardman has long managed its AVOD rights in-house, given its strong presence on YouTube, Taylor reports. “In some instances, we roll out content on AVOD platforms first. We did that with Learning Time with Timmy, originally produced for YouTube [and developed with the British Council]. We’ve since been able to license the second window of this series to Netflix and public broadcasters globally, despite it already being on YouTube.”
Catch-up rights have emerged as the most contentious battleground. Commercial broadcasters that may have once not worried too much about digital rights want to hold onto them for as long as possible as they build up their own VOD services.
“You have to think about the massive role catch-up plays and then what can be done with AVOD,” says Wiseman at 9 Story. “What you want to do is not cut all your options out, but it is difficult. I think one of the challenges is that with a lot of the linear platforms, they are now consolidating like crazy, as we know, and they have their own SVOD platforms, so they are reserving those rights for themselves. We need to see that they are going to cover the value of those rights. That’s the challenge for us distributors. For us to be able to deliver top-notch programming with very high production values, if we’re not going to be able to extract that value out of a number of windows because one platform is going to exploit all those rights, it is really important for those platforms to understand the value of those different rights.”
Dandelooo’s Pétry Sirvin says that pubcasters in Europe are becoming particularly insistent on VOD rights, which blocks the company from doing global SVOD deals on some shows. “So now we’re much more careful. We reduce the window down to six months with them in order to possibly start the discussions with Netflix or others to make sure we have access to the dub and the rights cleared. We’ve been punished for not being careful enough with that before.”
Studio 100’s Bühr agrees that broadcasters are seeking out a far more extensive slate of catch-up rights today, which decreases the value of a show for digital exploitation. “On the other hand, the streamers have become important and lasting players in the market—so there is a slight movement towards a kind of coexistence with different window constellations, trying to find a way to cross-fertilize each other and avoiding the complete exclusion of one platform.”
Taylor at Aardman reports that “some channels are more cautious than others when it comes to AVOD rights. It can be a sticking point in negotiations, whether it’s the number of episodes or even the number of clips agreed. Often a neat solution is to offer the broadcaster the same content for their AVOD channels that you produce for your own, which satisfies all partners on the show. In addition, if the channel or platform has a vested interest in the success of the show—for example, a share in the ancillary rights or a long-term partnership on the brand—then they will often be more flexible, so long as the premiere is on their channel.”
The COVID-19 pandemic may have facilitated some increased flexibility in the kids’ business as of late, as broadcasters and platforms alike clamored to serve the needs of kids stuck at home for hours at a time—amid a bruising impact on the ad market.
“Until the beginning of 2020, sharing AVOD rights was not our standard approach to windowing, but with the recent decline of YouTube revenues, we have since adjusted our strategy,” says Favennec at Xilam. “The pandemic provided us with a lot of new AVOD collaborations with partners who were looking for new content on a non-exclusive basis. Our strong [titles], including non-dialogue global hits such as Oggy and the Cockroaches and Zig & Sharko, were perfect for their needs. We quickly realized that these partnerships did not have an impact on our own digital views—we have 40 YouTube channels that are now generating billions of views annually—and are an effective way of reaching new audiences and generating extra revenue.”
9 Story’s Wiseman sees that budget concerns already have some broadcasters considering “more flexibility in terms of sharing. And we’re very open to that. When you look at the level of exclusivity that a lot of SVODs and linear require, there are cases where there are entire series available on YouTube that are also sitting on those platforms. They may not be as threatening or as problematic as some might have originally thought them to be. I think there is a lot more scope for sharing, where both platforms can live easily side by side. That’s a helpful way to move forward, especially for linear channels that are losing so much in terms of ad spend. If they can be a bit more flexible, pay a little bit less, then they will still get great value out of what they’re acquiring, even if it’s on another platform.”
NEW WORLD ORDER?
Indeed, Mediatoon’s Alby sees this as a potentially ongoing trend—with or without the global health crisis. “Five years ago, it was very difficult, especially for pay television, to share some rights or open exclusivity toward AVOD. This is for obvious reasons. AVOD is free, pay TV is pay, so it wasn’t good for them to do it. Everyone tries to navigate this. We all have to find a way for the shows to be seen. The logic that many have adopted is to use AVOD as a tool to promote the broadcast. Let’s say you have a series made of 52 episodes. You can agree to have 75 percent of the content only for pay TV, and 25 percent on AVOD as a sort of freemium content that will drive viewers towards the pay-TV offer of the series. You can put the first 13 episodes on YouTube and say, Want to see the rest? Log onto pay-TV channel A or SVOD platform B. More and more networks are open to this, as it can be a win-win for both partners. There are so many offerings today, if you’re a channel and you want to stand out, you better optimize the cross-promotion between the different media and make sure you’re present on all at the same time.”
And with SVODs spending aggressively in the kids’ space, Favennec at Xilam says there are now opportunities for shows that premiered in a digital walled garden to have a second window on terrestrial channels. “Some traditional broadcasters are open to this scenario and have found it to be a fruitful win-win collaboration, but others have closed that door. It’s uncertain what the distribution landscape will look like in the longer term and what models there will be when we deliver shows a couple of years from now. Will broadcasters want to air a show after Netflix then? It’s hard to say given how things are changing so dramatically and so quickly.”
FACING THE FUTURE
As for the lingering impact of this year’s shutdowns and plunge in ad revenues, CAKE’s Galton says it’s too soon to tell. “There is no doubt that we have entered a global recession, but the immediate effect has not been too severe for us. Money was allocated, people had budgets and there was still a need to spend. At the very beginning of lockdown, we saw an urgent demand for content that was already versioned and immediately available and broadcasters were asking for educational content, given that kids were going to be off school for the next six months. We are more concerned about what next year will bring, as I don’t believe we’ll see a negative impact on the distribution industry for at least another six months. At this point, we’re still doing deals and while we’ve had some clients say they’re waiting or they’re on hold, we’re in a consumption-based business and the need for content on platforms is not going to stop because of COVID-19. The advertising market is going to be negatively impacted and this will have an adverse effect on future programming budgets, but viewing patterns across all platforms have gone up. That’s only good for us and whether that will end is still to be determined.”
One thing is clear: the complexity of windowing today means that you need to have a fleshed-out plan at the outset, taking into account how much money you’ll make from your commissioning platform—and what else you’ll be able to generate one, two, five years down the line. Animation is both expensive and time-consuming, so flying by the seat of your pants on a financing model is just not an option.
“You have to understand, if I do this deal with this channel, how that is going to impact the rest of the sales moving forward,” says Galton. “You have to make a choice and you have to be aware of the path you’ve laid—or the roadblocks you’ve put in front of you by choosing those partners.”