IP Owners Talk Funding Models

APC Kids’ Lionel Marty, Guru Studio’s Frank Falcone, Thunderbird Entertainment’s Richard Goldsmith and Sixteen South’s Alexandros van Blanken shared their perspectives on evolving funding models at the TV Kids Festival.

The Money Matters session, moderated by TV Kids’ Anna Carugati, can be viewed in its entirety here. It featured Marty, managing director and founder at APC Kids; Falcone, president and executive creative director at Guru Studio; Goldsmith, president of global distribution and consumer products at Atomic Cartoons and Thunderbird Entertainment; and van Blanken, general manager of Sixteen South Rights, discussing how funding models are adapting and shifting.

“It’s a very cautious landscape,” Falcone said. “People are continually looking for known brands, something that brings an audience. The industry is in a state of decline at the moment. Some of the linear channels are losing audience share. Anything that brings them an audience and brings them a brand that has awareness in the market is attractive. There are some risks happening, but there’s a general climate of conservative investing in known brands.”

Marty said that streamers, too, are focusing on known IP, but there are opportunities to introduce new brands via linear broadcasters. “There is still a chance to finance original IPs, although in a fragmented media space, it’s easier for them to broadcast and introduce known properties. But more chances are there with linear broadcasters compared to streamers.”

Goldsmith is also finding that the openness to new ideas depends on the market. “France, the U.K., Germany, Australia, they’re much more open. The U.S. and the global companies are focused on these big brands and have much more of a narrow focus. But across the board, we feel that people are looking for the same things. It’s co-viewing. It’s well-known brands. It’s preschool and bridge, which could be up to age 9. Not much interest in content over 9. And everybody seems to be looking for a great 6-to-12 comedy.”

“We often forget that we’re in the attention economy, not in the kids’ TV business,” Falcone observed. “We’re chasing their attention. TV only can go so far with getting their attention—it has to be really beloved properties. Breaking new shows is increasingly challenging when you don’t have that immediate love and you have to build it up. It takes years to get to a point where people love their characters. Bluey came out of the pandemic with a great opportunity to have co-viewing with families and the right show at the right time. It almost created the co-viewing situation that we need now.”

Van Blanken also stressed the demand for co-viewing shows, character-driven stories and known IP. “But especially here in Europe, I find that public-service broadcasting is still very much willing to take a bit more of a risk, albeit those license fees have come down significantly. We’re still able to tell those stories and come up with new ideas.”

The global streamers reevaluating their kids’ content expenditure has also contributed to the unease in the market. “A lot of them are just on hold,” Goldsmith said. “We don’t really know what their commitment is going to be to kids’ content. So that is a huge, huge black hole.”

Falcone also stressed the importance of taking into account all touchpoints for kids—not just the ones powered by technology. “I don’t know if storytelling happens in Roblox. Brand development happens in places like Roblox, but storytelling still comes from the page. It comes from characters in sequence, across several pages. We have to think about linear storytelling as our focus if we’re doing storytelling for kids. We don’t want to get too caught up in the digital side of things. It’s a way to reach kids but not necessarily a way to develop content.”

The conversation then moved to the role of exclusivity today. “The streamers know that they want to have awareness, and that means sometimes sharing exclusivity or having non-exclusive rights with other broadcasters or other platforms, AVOD, YouTube, because they know that it can bring some awareness for the shows they will market,” Marty said.

“It has been a major shift in the dialogue that we’ve been having,” Goldsmith added. “Streamers particularly, or worldwide linear companies that traditionally wanted all rights, are now coming back and saying, Well, if you are getting some funding from a territory or two, we can share rights in those markets. We haven’t had that conversation in years. There are lots of discussions now about co-funding series. We’re doing deals now where we’re both putting up money and we’re sharing rights. The time of the windows are also being loosened up. That is one of the silver linings of the situation now.”

That approach does share some “complexity in deal-making,” Falcone observed. “When you’re constructing deals with many potential windows and financiers, the recipe becomes complex. And sometimes deals lose momentum in this process. So, we really are reliant on our legal and business affairs teams to pull together tight, interesting deals quickly because, as you know, time kills all deals. We want to be quick about how we pull together our shows. Windows of opportunity can be missed if we’re not moving quickly.”

Van Blanken added: “Dropping the need for exclusivity also has meant some of the deals are for less payment or no payment at all, which is kind of a rev-share model, which becomes increasingly difficult and a challenge when you’re having a conversation and you’re trying to fund a show or trying to at least back some of your investment. Especially when it comes to significant territories. I agree with Richard, it is a bit of a silver lining, but it’s also effectively decreasing the financial burden on that licensee. So, it’s a balancing act.”

L&M partners are partial to shows that are exposed in multiple places, Goldsmith said. “For the first time in my career, the people that we make substantial revenues from are indicating to us that they no longer really believe that being on a big streamer or big linear network is the best route. So, with Mittens & Pants, we’ve launched it everywhere. It’ll go on at least ten AVOD platforms in the U.S., YouTube, social media. That is a seismic shift. It’s great for building brands, great for monetizing brands, not so great for revenues up front that we’re now not getting from that big streamer or that big linear network.”

The conversation then moved to financing models. Partnerships are more important than ever. “Our previous model used to be, you get a commission, maybe a second broadcaster and make it all in-house as a studio,” van Blanken said. “That financing model has sort of gone out the window for us. We’re looking for that creative partnership to access tax credits and funding from other countries. Five or six years ago, finance plans were never this complicated. What’s beautiful about it is that it relies on creative partnership as well. The financing models are evolving, and having to share rights, share IP and accessing tax credits and finances in other countries is becoming imperative for us as a studio.”

Goldsmith referenced Canada’s strong funding system, which allows Thunderbird to partner with other production and distribution companies around the world. “Canada has more co-production treaties than anyone. Partnering with another country that has subsidies and tax credits like we do makes a lot of sense.”

Carugati asked the panelists about the role that private equity is playing in kids’ content financing. “With the stall in the industry and the delayed response to commissioning new shows, their cycle for return on investment is shorter than the wait time that our industry might be facing on a return to spending,” Falcone said. “Since we’re in an environment where the broadcasters and the platforms don’t seem to have control of an audience, some of that soft money is looking to just make the show and put it out there, rather than putting it in the hands of a trusted channel partner that commands an audience. You can’t command kids anymore; they do what they want to do. They go where they want to go. You hope to find them where they are, and you put the show in as many places as they could possibly find it. There are really good opportunities in working with that. But it comes with issues—a lack of understanding of our business and the kind of returns that are expected from some of that money. We’re not a high-margin business unless you hit it big with a kids’ brand. And that’s an exception, not an expectation.”

“Private-equity acquisitions have slowed down in the media business,” Goldsmith added. “That said, private-equity firms are still interested in kids’ entertainment companies. But they have to be profitable and they have to be mature businesses. They’re no longer interested in taking risks. It’s all about the numbers and proven management teams and proven brands.”

The conversation then moved to FAST and AVOD. “We’ve seen great results on brands that we succeeded in establishing on a global level,” Marty said said of the AVOD space. “We see significant amounts of revenues coming from AVOD, although it has dropped a little bit from what it used to be. It’s still a very solid and recurrent stream of revenues. It is on established brands. On FAST, the kids’ sector is interesting, but it’s not their priority right now.”

Guru launched a FAST service for True and the Rainbow Kingdom with Future Today. “There are selective brands that are able to get into that universe and find an audience,” Falcone said. “The challenge that I see is it’s another issue of discoverability. When everybody launches a FAST channel for their brands, everyone’s dropping a bit of water into the ocean. It’s the App Store all over again. How do you find that FAST channel? How does it bubble to the top? That’s the real challenge: discoverability and placement and support from those platforms. It’s not going to happen overnight. And I don’t know how big a piece of our business it will be. I don’t see any drivers in the kids’ business in the FAST channel universe right now. But there’s money to be made and there’s an opportunity. And certainly, people should be looking at how to monetize their content on FAST channels.”

Goldsmith agreed with Falcone’s assessment of the FAST space. On AVOD, he said, “It’s no secret that all linear channels are eroding and that the kids’ channels have eroded much quicker than the adult channels and that the money is slowly going from the big linear channels to all of these AVOD channels. I think that that is where the future is. That said, it’s going to take time to monetize. Right now, it’s a rev-share model. When you ask a platform, How much am I going to make on my show?, the answer is, Well, people on our platform make quarterly from $0 to $1 million. If you don’t have a big hit on AVOD that kids already know, you’re not going to make a lot of money on it. Eventually, AVOD will go to a licensed model. Right now, we’re investing heavily in content for AVOD because we do believe that it’s the future.”

The panelists then weighed in on opportunities in the metaverse. “It’s a place for brands to showcase what they’re doing, to engage in a brand,” Falcone said. “It’s like a virtual park experience. It’s certainly something that we in the kids’ business should consider once we have a brand and engagement and an audience. Before that, I don’t see a lot of it coming back the other way. I don’t see a lot of unique properties launching in that ecosystem that can migrate over to television.”

On how they view the market going forward, the panelists all remain optimistic that good content will always find a way to cut through and make an impact. “There’s still a huge demand for content and for great storytelling,” Goldsmith said. “With the streaming model being blown up and that huge amount of money that is now gone, there’s no doubt that it’s going to affect the industry. But those of us that make great content will continue to make great content.”

He added, “As a company, to play in this business in today’s day and age, you need to have money to deficit finance your productions. You need to have money to operate YouTube channels and social media so that you can promote them. And you need to have a robust consumer products operation to monetize them. And that’s our business model for kids’ content. Yes, occasionally you’ll sell a show that won’t have consumer products attached to it. But the vast majority of what is successful is driven by those revenues. That’s important to keep in mind for the future.”

“I feel really positive about what we do,” van Blanken said. “It’s become a lot more challenging. There are a lot of question marks in our industry. But we just have to keep on doing what we’re doing because our show might be some 5-year-old’s or 4-year-old’s or 9-year-old’s favorite thing in the world that they love doing and watching and playing.”