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Where’s the Money?


As the streamers continue to upend the traditional models for financing shows, leading distributors weigh in on piecing together funding formulas today.

It’s been an excellent run for the kids’ business over the last few years, with the likes of Netflix, Disney+, Apple TV+, Paramount+ and HBO Max, among others, making big deals to fully finance compelling children’s IP. Is the honeymoon over? The jury is out on that question, but the streamers clearly have a bit of reckoning to face amid slowing growth projections and consolidation (indeed, as HBO Max gears up to combine with discovery+ in an as-yet-unnamed service, several animation projects have already been axed).

And it’s not just the streamers at a crossroads. Linear channels, both ad-funded and pubcasters, are facing their own challenges. Amid recessionary fears, there are questions about the sustainability of the ad market’s post-Covid bounce-back. And concerns about the future of consistent government financing of public broadcasting for kids remain; of note, CBBC, the BBC’s beloved channel for kids, is transitioning to an online service in the next few years.

“You used to be able to finance a $300,000 budget ten, 15 years ago with Canadian financing and maybe an acquisition from the U.S.; now you can’t do that,” says Caroline Tyre, VP of global sales and rights strategy at WildBrain. “As distributors, we would rather have something where we can finance it with two broadcasters, and we get the rest of the upside. It’s financed, and everything else is gravy, and that’s the dream. But I think budgets are so high now, and everything has become so much more premium that it becomes much harder.”

“For linear, traditional broadcasters, it has become a bit trickier to invest and sometimes a bit delayed,” reports Raphaëlle Mathieu, executive VP of Cyber Group Studios.

Meanwhile, usage of SVOD services surged amid the pandemic, “so they have been able to invest more money, but it has had some tricky consequences,” observes Hanna Mouchez, the founder and CEO of MIAM! animation. “As a French producer and distributor, we used to be able to combine two different broadcasters in one territory, for instance, a free-TV channel and then a pay-TV channel. The SVOD platforms…need exclusive content. We come to a paradox where we have more potential clients and opportunities to finance our shows, and nevertheless, each one wants exclusive rights. So they exclude the possibility of working together. Where we used to be able to finance our shows with two broadcasters and presales, today we’re facing the situation where an SVOD platform is interested, but in France, we’re not able to find another broadcaster to complete [the financing] because often those linear broadcasters will not agree to come as a second window. So, in appearance, we have more clients, but it’s more tricky to finance our shows.”

Genevieve Dexter, the founder and CEO of Serious Kids and Eye Present, adds, “With the SVODs, we used to get significant presales with Amazon and Netflix; they are no longer prebuying. And in fact, Netflix is no longer co-commissioning animation. That’s a big hole for us. But, luckily, there are new entrants. Our skill as the distributor-producer, as it were, is in making those rights compatible with numbers of rotation or available episodes and trying to find a compromise on those points.”

The trend of streamers taking all global rights on a property can be problematic, Mathieu notes. “It can be interesting financially speaking on a short-term basis, but it has consequences in creating your own IP and developing your own brand and catalog. For independent producers, it has become trickier because there is a lot of money; theoretically, that can be invested or allocated, but it might not necessarily be the best way for us to grow. Making all this investment and development and then having it all taken away can be an issue and is hardly a complete business model.”

On the considerations that go into deciding whether to take an all-rights global deal or opt for territory-by-territory, Dominic Gardiner, CEO of Jetpack Distribution, notes, “Whoever makes the best offer. That’s my flippant but serious point to make. You can sit down and look at so many scenarios in this game. Quite often, going to plan is a luxury we don’t have. We have to think on our feet and react. We try to take an approach where we have to pitch as many people as possible during the opportunities that arise. You plan it out, you pitch, and then hopefully, you might have a choice of whom to go with. But quite often, you don’t have a lot of choice. You go with the one that works.”

Serious Kids’ Dexter adds, “There’s always this period of new entrants in the market. They haven’t got any content, so they’re very flexible. And then, as time progresses, they become vertically integrated. The party’s over. If people have become very reliant on the Netflix model and everything they’re doing is exclusive or they won’t co-produce, then that’s quite a dangerous place to be.”

Andrew Fitzpatrick, the chairman and founder of Monster Entertainment, remarks, “I think these things are all somewhat cyclical. We’ve already seen the peak in the rights grab by the streamers. Up to fairly recently, Netflix wanted everything exclusively, and they wanted to own everything. Amazon was playing that game at one point. Neither of them is doing that anymore. It could be that the next streamers in line may start doing that too. But we’re seeing a little bit of a fragmentation of the streaming market, which is probably a very healthy thing. It leads to more competition and more opportunities for independents.”

Fitzpatrick also notes that it’s “essential” to be involved in an IP as early as possible in its life cycle. “We’re finding we’re having to get a lot more involved at an early stage in either advising the producers on financing or helping them raise the financing, whether it be from presales, sales, finding equity investors sometimes, maybe sources of debt, maybe gap financing and co-production funding. We’re often introducing producers to co-producers if they don’t have the contacts to help and get it over the line.”

As for what this all means for funding models, Cyber Group’s Mathieu reports: “No project looks like the previous one. It’s a question of momentum. It’s a question of topic. It’s a question of money or a theme in the market. We need to customize our approach each time. Of course, the earlier we’re in, the better it can be done and adjusted. Every single detail does matter; sometimes, €20,000 ($19,900) in x, y or z territory can generate much more interest in global financing. So you need to be inventive, and you need to adapt. And you need not be afraid to have a partner saying yes and then a partner saying no right after, which can still happen.”

Serious Kids’ Dexter reflects a similar sentiment when she says, “You start with a clear idea about how you’re going to put it together. And then what ends up happening is quite another thing. It’s incredibly technical, especially an official co-production. Sometimes you suddenly realize a minor legal point that has quite catastrophic implications for the production. It can be quite scary.”

Creative Europe remains a “significant source of financing for production and development,” Fitzpatrick says. “They’re pushing totally in the direction of co-production. In the past, you could get development funding as a single producer for a project. Now, you need to be going as a co-development. That means that people are going to have to, if they want to get development funding from Creative Europe, start talking to co-producers at an earlier point. People who might not even have thought of co-production in the past will be thinking of it in the future. That will be the beginning of a significant increase in co-production in Europe.”

Private-equity funding is also on the rise, Fitzpatrick says. “I think that’s a good thing. You could say that it’s because it’s hard to get the money elsewhere, but it’s also great to have that available as a source of finance. These funds realize that IP has a long-term value and potentially an increasing value. There’s a very long tail on income from animation projects. I think we are going to see more of that. I don’t think it will become the only source of finance. But I think it’s a healthy thing that it’s becoming more available.”

When you’re taking private equity, “you are then accountable to these people who’ve invested in your program in perpetuity,” Dexter explains. “So you have to continue to attend board meetings for that special purpose vehicle that you’ve created for the program. It becomes quite an onerous long-term obligation because you’re having quarterly board meetings, and you’re preparing presentations and reports over a 10- to 20-year period for that one property. It comes with quite a price for project investment as opposed to company investment.”

MIAM! has not yet used private equity, but if it did, “we would be looking for an investment aligned with our values and what we want to do,” Mouchez says. Taking financing from companies not aligned with your values “can be dangerous in terms of independence and creativity of your projects, your company and what you do and why you do it.”






About Mansha Daswani

Mansha Daswani is the editor and associate publisher of World Screen. She can be reached on mdaswani@worldscreen.com.

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