What’s Next?

Mansha Daswani checks in with several distributors about the trends they expect will shape the kids’ media business throughout 2023.

The kids’ business took some tough hits in 2022, beginning at the start of the year when the U.K.’s Department for Digital, Culture, Media & Sport said it would be discontinuing the Young Audiences Content Fund. The confusion around HBO Max’s kids’ and family strategy that would begin later in the year, starting with Tom Ascheim’s exit from Warner Bros. Discovery and continuing with a slew of projects being canceled or put on hold, did not make life easier for producers and distributors. Inflation, slowing SVOD gains and a weakening ad market put pressure on budgets, making financing ever more complex. And with a fast-moving AVOD/FAST channel landscape, windowing became much more challenging.

“Last year, the consolidation of studios and buyers of kids’ content greatly impacted the global kids’ business,” reports Karen K. Miller, president and CEO of Cyber Group Studios USA. “Series in all stages of development and production were canceled or put on hold and have started flooding the marketplace in search of new partners.”

“The latter half of 2022 saw some turmoil in the industry, and as a result, programming needs have shifted considerably for some of the large streamers and linear channels,” adds Alix Wiseman, senior VP of distribution and acquisitions at 9 Story Media Group.

“Overall, 2022 was not an easy year for our industry, and we saw a number of major shifts and changes,” agrees Katharina Pietzsch, director in ZDF Studios’ junior department, referring to content being shifted increasingly to digital-only environments, editorial policy changes, budget cuts, a squeeze on available talent and rising costs.

“The streaming market is still evolving, with some subscriber numbers not hitting the huge growth levels of previous years,” observes Delphine Dumont, chief commercial officer at Banijay Kids & Family.

DIGITAL-FIRST
Indeed, keeping an eye on the fast-moving developments in the streaming space was paramount throughout 2022.

“Toward the tail end of 2022, there was a renewed energy and focus on emerging digital platforms—particularly in the U.S.—which has created many new opportunities in distribution and in financing new IP and content strategy on existing brands,” says Alison Taylor, director of distribution at Aardman.

“The rise of YouTube-first brands on global OTT services has led to an incredible shift in how we see the value of windows and formats of content,” notes Corey Caplan, senior director of international sales at Guru Studio. “The continued move toward direct-to-consumer streaming services in the SVOD and AVOD/FAST space is changing how broadcasters, distributors, producers and all rights holders think about windowing, brand-building and co-production partnerships.”

Taylor is of a similar perspective: “As ever, we have to be as nimble as possible when it comes to getting a show financed and keep the conversations moving in an ever-changing media landscape. On the one hand, more investors are out there now, with new platforms paying enhanced fees for exclusive rights in certain territories. However, with a number of key platforms undergoing mergers/re-strategizing, financing a new show can be more complex—especially on a new IP. On kids’ TV series, we have to seriously consider co-productions with other territories to develop and finance content, with the U.K. government deciding to stop the Young Audiences Content Fund and the U.K. tax credit becoming increasingly uncompetitive versus other territories.”

The increasingly challenging environment for getting a show off the ground financially was a recurring theme among the distributors surveyed here.

“More fragmentation means lower budgets, and it ultimately makes it harder to finance a show,” says Wiseman at 9 Story. “You have to continue to deliver high-quality content and not compromise while being realistic about the financing. As ever, it’s all about carving out and protecting as many rights as possible while taking on board the levels of exclusivity that big investors require and expect. It means increasingly that for shows over a certain budget, the only way to finance them and retain ownership of the IP is through presales.”

Caplan believes that this year will require producers to be “as creative as possible” in cobbling together budgets. “Bringing in investment from as many partners as possible will be crucial to help fill the gap from a more fragmented funding environment.”

Dumont agrees, noting: “The market is constantly changing, and each region works differently, so we must be agile and adaptable in order to deliver funding models that work for us and our partners.”

“As the market becomes more fragmented and buyers tighten up on their spending, we have all had to be resourceful with production costs,” says Miller at Cyber Group Studios. “We do this alongside the sales teams, which continue to open up more international markets and explore new platform opportunities.”

Miller adds, “Kids’ distribution, and to a certain extent financing, has been slowed for many independent producers and distributors. On the other hand, orders for original programming are rising. For example, last year, we announced our first original project with Disney (in partnership with La Chouette Cie). In Europe, more specifically, the SMA law is making it compulsory for streamers to invest in European content. This should have a positive effect in 2023 on the content financed and/or acquired by these streamers.”

The key, ZDF Studios’ Pietzsch says, is finding the right partners on a project. “As well as the financials, the rights taken by each partner need to be aligned as well as the editorial line—it is essential that all partners share the same creative vision for the project. We have seen some well-established and successful partnerships change or end, but we have also seen some great new models come into being. With increased production budgets on the one hand and budget cuts and restrictions on the other, there continues to be a great demand for working together and sharing costs.”

Pietzsch continues: “Some global partners can carve out or hold back in certain territories and on rights if the overall model makes sense to them. At the same time, partners from ‘smaller’ territories and with limited acquisition budgets are increasingly interested in coming on board a project early to secure content that would otherwise end up in a multi-territory deal and just not be available to them at a later stage. We see public-service broadcasters in Europe working together to co-fund projects. Having said this, there will still be full commissions on certain major brands and programs as exclusivity is a major USP—but these might be even harder to get the green light for and, as we already saw in 2022, more volatile.”

Another trend that continues to impact the kids’ production and distribution sector is a need for known IP that will be able to cut through the clutter.

BRAND RECOGNITION
“Existing brands have always been desirable, of course, but there appeared to be a renewed focus in this area, with many platforms and channels seemingly more risk-averse to new IP,” says Aardman’s Taylor on one of the critical shifts she witnessed in 2022. “That being said, we successfully launched several new series in 2022, including Interstellar Ella, Pop Paper City and Happy the Hoglet. So as long as the content is of a high standard, with inclusive and relatable characters alongside compelling stories, all opportunities certainly remain high.”

Cyber Group’s Miller agrees, adding, “Known IP continues to be in high demand, as does anime and gaming content. As always, great storytelling is at the forefront of all Cyber Group Studios does, which helps ensure that the content we produce is picked up worldwide.”

Banijay’s Dumont also cites the wealth of opportunities in the market, regardless of the interest in brands with existing awareness. “From a surge in demand for content to attract four-quad and young adult audiences to a rise in animation IP, the landscape is broad. In the last year, we added two new labels to the company, Kindle Entertainment and Movimenti Production, further strengthening our market position.”

For the remainder of this year, Dumont says she and her team will be focused on “protecting our IP and supercharging our brands.”

Similarly, Aardman’s Taylor is prioritizing “financing and distributing subsequent seasons and spin-offs of existing series, helping to support the brands’ global exposure and audience engagement across multiple channels and platforms. Regarding the further rise in digital platforms, especially AVOD and FAST channels, we’re being more strategic in terms of the rights we’re licensing, increasing our focus on the windowing of content to enable us to reach even more audiences globally. Licensing content to traditional channels and platforms remains key to any distribution strategy. Still, it’s [crucial] that we are also licensing content to all platforms where kids are viewing content in order to build a brand. If the brand grows due to this, then every channel, network and platform that is part of the brand’s exposure will be in a winning position.”

9 Story’s Wiseman also points to the importance of effective windowing strategies, noting: “We continue to take stock of how to monetize our catalog across both the AVOD and FAST channel realms and build on that moving forward. 9 Story has a vast library of over 4,400 half-hours, and these avenues have provided new opportunities for some of our evergreen content. We are also taking a closer look at some of the established IPs we have on our roster to meet the evolving needs of the market. This means listening to the needs of our clients and looking at our slate through that lens. For example, we’re hearing that some commissioners are moving away from curriculum-based content in favor of comedies and lighter entertainment for preschoolers in the wake of the pandemic.”

One shift in the market that Guru’s Caplan is eyeing is innovation in short-form content. “There’s an opportunity now for producers to test the waters by producing shorter formats as the starting point for new IP before attempting to fully finance it as a long-form series,” he says. “There’s also more opportunity now for distributors to leverage their catalogs not only with linear partners but with new AVOD platforms and FAST channels to maximize the potential for reach and revenue.”

On the heels of much M&A at Banijay in 2022, Dumont says there is the opportunity for more as the company looks to align with premium content creators across the globe. “We are always looking for new talent and IP that will complement our existing portfolio, and M&A is a strong way to scale up our offering,” she explains. “Investment in brands and commercial growth is also a key area of focus, and we are keen to maximize expansion opportunities for our IP.”

ZDF Studios’ Pietzsch stresses the need for flexibility. “Some partnerships might not work like in the past, and some negotiations may become more difficult than they were before. Established business models will be challenged and might change, but there are also great new opportunities. So thinking outside the box will be our key premise for 2023.”

More specifically, building on ZDF Studios’ live-action slate is a priority, Pietzsch explains. “Live-action series for the tween and teen audience have been a major contributor to our success to date, and we are looking to invest even more into content for these audiences.”

Live action is also a focus at 9 Story, Wiseman observes. “9 Story launched its live-action division in 2019, led by Gráinne McNamara. Our new series A Kind of Spark will premierein the U.S. and the U.K. in the spring and is based on the book by award-winning neurodivergent author Elle McNicoll.”

At Aardman, Taylor says there’s a new focus on investing in content specifically for digital services, “so we can license content to additional platforms, offering the audience a different viewing experience to the content they may find on more traditional platforms, for the same brand. This is taking the form of financing spin-offs, creating bespoke content through a dedicated digital and social production team at Aardman and acquiring content that would suit AVOD and FAST channels specifically. With the growth of the digital space, we’ve also recently hired a head of digital and strategic development, Laura Taylor-Williams. A further growth opportunity is focused on expanding our acquisitions business, headed by Robin Gladman.”

Digital-only opportunities are also key at 9 Story, Wiseman explains. “We are doubling down on our strategy with respect to how we manage our YouTube business, which features 96 channels, 100-plus managed brands and has reached over 12 billion views.”

She adds, “We’ve been pursuing ways to innovate from a technical perspective. We recently did our first test with a new games engine pipeline, with the idea that this would eventually live alongside our traditional pipelines.”

FAST TIMES
The continued growth in FAST channels will further “change the way the industry thinks about ‘linear’ television and discoverability for new and library kids’ brands,” says Caplan at Guru Studio. “We also expect to start seeing more YouTube-first properties and brands making their way off the platform and into the hands of traditional broadcasters looking for premium versions of the characters kids already love. Broadcasters might begin experimenting with commissioning shorter, non-traditional formats, certainly as kids spend more time on phones, laptops and tablets.” In addition, Caplan observes, “the rise of Roblox, Fortnite and the metaverse as new arenas to grow engagement for kids has become a world for brand building.”

With the continued demand for premium content, there is a shortage of on- and offscreen talent, Banijay’s Dumont notes. “As a group, Banijay Kids & Family is fortunate to have scale, which means we have immense in-house talent and, where needed, can collaborate on projects. We also have an incredibly strong animation output, which mitigates some of the shortages more apparent in live action due to its adaptability to enable us to work with global talent remotely.”

Miller at Cyber Group Studios also cites the benefits of scale, noting, “We are well positioned with our studio acquisitions—A Productions in Bristol, Scrawl Animation in Singapore and Graphilm Entertainment in Rome—as well as our real-time animation studio in Roubaix.  Our goal is to help those talented production companies create global series. The first results are very encouraging, as evidenced by the recent commission from the BBC for Digital Girl from A Productions in the U.K. and from Rai for Alex Player at Graphilm in Italy. On Alex Player, commissioned by France Télévisions, we are using our real-time animation pipeline to optimize production and, ultimately, the global quality of this breakthrough content with the support of our amazing Scrawl team.”

CONTENT SHIFTS
As for changes in what kids want and need in their entertainment, Taylor observes, “We are keeping an active eye on audio and music trends, by way of enhancing brand engagement, but also as specific content strands. What’s key is keeping on top of where the audience consumes content and the type of content they’re engaging with the most. Data analysis is key to this and is something that we’re constantly reviewing when it comes to development ideas and acquiring new content.”

Pietzsch at ZDF Studios says there is a pressing demand for shows that aid young ones in making sense of the world around them. “Although Covid is finally mostly under control in large parts of the world, there is a war in Ukraine, the highest inflation in decades, an energy crisis and natural disasters caused by climate change, to name a few. On top of the ‘normal’ problems children face as part of their growing up, there’s a lot to take in. It’s important to help kids understand and deal with these issues. Ideally, our programs will show children that they are not alone with their worries and fears, that other kids are facing the same problems and that there are ways to deal with them or maybe even make a change. With all the bad news, we want to send a positive message, educate kids and put things in context, but also empower children and give them a voice. In this respect, I believe that fantastical or magical themes will continue to be a trend, helping kids ‘escape’ from the harsh realities of their daily lives or the bad news of the day, giving them opportunities to dream, imagine, travel, go on adventures or explore—even if just virtually and only for a little while.”

Ultimately, Cyber Group Studios’ Miller notes, “While the global economy and kids’ content business are still in flux, we are optimistic that great storytelling will always prevail.”