What’s Next?

This article originally appeared in the MIPTV 2015 issue of World Screen.

Elizabeth Guider explores what’s in store for distribution companies in a world of new windows and new screens.

Imagine a room with a super-sized curved screen on one wall, a couch against the far wall and a table laden with a console and wearable gear. With the stroke of a key, a viewer-cum-player, along with real-life or virtual friends, pays for the experience of the next few hours. Then he or she dons goggles and grasps a joystick for a multi-dimensional ride in which at least some of the twists and turns of the story’s plot are controlled by the viewer.

Such a vision of how consumers will be interacting with entertainment content is hardly far-fetched or far off. Think Avatar on steroids.

“In just a few years, we’re going to see a few productions that stand at the intersection of movies and gaming,” says Amy Reinhard, the president of worldwide television and home media acquisitions at Paramount Pictures. “They’ll represent an immersive experience unlike anything before.”

Movies may be the first medium to be so enhanced, but TV series will likely soon follow suit, mimicking, even enhancing, the intensity of such creative breakthroughs. Reinhard believes that technological advances and the flowering of creativity, both for the large and small screen, will result in ever more hands-on media consumption.

And storytelling will only get richer—more “360” in its ability to surround, as she puts it—as a result. Companies, too, will presumably get richer if they find, (smartly!) fund and nurture the talent that it takes to put together such ambitious fare.

When they succeed, such content will open up yet another potentially lucrative window for their owners to exploit. As never before, companies need to be at the ready, open to new arrangements—in program creation, production and distribution—if they want to profit in this exploding media milieu.

Reinhard is not alone in her assessment of the challenges or  opportunities around the bend. If there is, as she says, “caution” on the part of program buyers and sellers to commit to too much for too long, that’s because both sides want to stay flexible in terms of how, when and where they (or their competitors) exploit content.

Sellers in particular, she and others suggest, no longer want to commit to the lock-downs of yore, as when the top U.S. suppliers would ink all-in five- to ten-year exclusive deals for programming with the likes of Germany’s Kirch Group. It was a simpler time, with less demand, less supply, fewer players and fewer options.

But now, says Eric Schrier, a president of original programming at FX Networks and FX Productions (alongside Nick Grad), “everyone has raised their game,” and the game itself is much more complicated and unpredictable. In less than ten years, for example, his company has gone from producing one successful cable series (The Shield) to fielding 20 (including The Americans and Tyrant) by, in his words, “thinking and playing outside the sandbox.”

CRYSTAL-BALL GAZING
Top executives at both large and small companies, while hardly donning rose-colored glasses, generally envision a not-too-distant future of ever more diverse storytelling options, novel ways to develop and fund series and movies and, piracy notwithstanding, a wider range of ways to get viewers to pay for the consumption of entertainment product.

“What’s next? Storytelling modes mushroom. Serialized drama and in-depth characters may remain foremost, but ever more eclectic stuff will find a home,” says Entertainment One Television’s CEO, John Morayniss. His company distributes the Revolutionary War spy drama Turn: Washington’s Spies as well as the period miniseries The Book of Negroes, among other fare.

The challenge, Morayniss says, is not being misled by what’s all the rage during any given season. “As soon as you’ve spotted a program trend, it reverses or takes a left turn.”

He notes that the variety of subject matter being explored is mirrored by the variety of ways in which shows are being developed. Outside of the pilot-dependent broadcast-network arena, more material will be greenlit direct to series.

Tandem Productions’ CEO and partner, Rola Bauer, agrees. “Straight-to-series is an evolving trend in the U.S. that we have always been doing, as Tandem never produced pilots,” she says. “Spotless, our latest production, follows this model. Though networks in America are now ordering more shows direct to series, producers across the pond have to think much earlier on about how they can ensure they have enough financing in place. Whether via co-production partners, presales, tax breaks or clever windowing strategies, producers need to be increasingly creative in funding big, ambitious projects.”

There’ll also be more upfront packaging, not unlike the practice of the indie film biz, where product is auctioned on the open market. Shorter-run series à la Under the Dome and Wayward Pines will, adds Morayniss, more routinely claim a few prime slots, allowing nets to either cut their losses if they don’t pan out or stretch shows out if they do.

Working with partners to piece together financing is another growing trend. “In the current market, the co-pro model makes the most sense, especially for many U.S. broadcasters that need fresh programming year-round and are no longer able to carry the full financial load,” explains Bauer. “There is no longer a summer rerun season.”

For smaller, indie TV players, nimbleness is everything, eOne’s Morayniss believes.

PLAN OF ATTACK
This is not to say that the media business will, in the future, be without pitfalls or pratfalls, executives admit. For the big studios, inordinate amounts of time and energy go into reducing overhead and managing disparate, sometimes out-of-sync units; small studios have to constantly scramble just to stay viable.

The costs of making and marketing both movies and TV shows keep spiraling upward, fragmentation is making for narrower audiences  and the competition for viewers has never been fiercer. Failure, lest anyone forget, is endemic, with fewer than 20 percent of U.S. TV fiction performing well enough or for long enough to make money. (Movies face even tougher odds, because fewer but more expensive ones are being made by the major studios. Return-on-investment with these thinner slates can be difficult to achieve.)

All that is unlikely to change, nor are the occasional local problems abroad like currency fluctuations, advertising downturns or cuts to acquisition budgets by broadcasters.

However, American-made hits are increasingly huge profit-makers, with Disney (think executive producer Shonda Rhimes’s Thursday-night lineup on ABC) and CBS (think NCIS and CSI, and their offspring) wowing not only audiences but Wall Street bankers.

Formerly at Sony Pictures Television and now in the indie trenches at Thomas Tull’s Legendary, Michael Grindon has a multi-dimensional perspective on what it takes to thrive in this new entertainment age. Grindon, the president of worldwide distribution at Legendary Television, points out that his indie bona fides allow for more of an “entrepreneurial” spirit and “a chance to build something.” It’s true that Sony, like the other Hollywood majors, boasts long-established outposts around the globe, but, Grindon maintains, “communications advances are making it easier to conduct business on a worldwide basis, even for smaller players.”

LEGENDS IN THE MAKING
Recognizing arguably the greater buzz and more consistent pros­pects for profits that the small screen promises, Legendary set up a TV division, which Grindon says will focus on high-end hour-long dramas and half-hour comedies for whatever outlet is interested: broadcast, cable or digital upstart.

“Yes, windowing is more complex, but what’s increasingly true is that top series command greater license fees because you can now fashion deals across multiple platforms more effectively to get the most bang for your buck,” he says.

Given all the new opportunities for varied content, Grindon senses a renaissance of indie TV players in Tinseltown, citing Alcon Entertainment, SkyDance Productions and Media Rights Capital as among those, like his own company, that are responding to the call for more creative voices.

As for finding and banking on such original voices, cabler FX, which scored big time with Fargo last year, is arguably honing one of the more appealing approaches Stateside. “We act more like coaches than auteurs or impresarios,” explains Schrier. He mentions a half-dozen pod deals struck with talents ranging from Danny Boyle to Nina Jacobson, as well as a recent partnership with British producer DNA Films and a pick-up of a Ridley Scott-produced eight-parter for the BBC called Taboo.

To attract top writers and producers, Schrier thinks his company is setting the pace for giving such talent “creative rein” and “back-end profit participation.” Comedian Louis C.K., for one, is a prime example of a beneficiary of that approach.

“Keeping up with what the audience wants to see is the biggest challenge going forward,” Schrier stresses, adding that the intensity of what it takes to get the best results on screen never lets up.

He is not alone in not having enough hours in his day.

“I do sleep less,” admits MarVista Entertainment CEO Fernando Szew, “not because I’m worried, but because there’s so much now to keep up with, on both the creative and financial fronts.”

Szew, whose outfit focuses on TV movies, foresees an ever greater influx of new talent, as stars from both the film world and YouTube converge on the mainstream TV biz. He points to “a lot of dollars that for the last five years have been sitting on the sidelines,” but which are now primed to flow into programming ventures.

To take advantage of the evolving taste of younger consumers for small-bite content, MarVista recently set up a direct-to-digital unit, which is experimenting with shorter-form storytelling.

Short-form content on the internet is the new Wild West in storytelling. If you think that the Swedish videogamer PewDiePie, who has the most-watched channel on YouTube (and earns a reported $4 million a year), or the adolescent Nash and Cam, who make six-second videos on Vine, aren’t making a dent in the content business, think again. Major media companies have taken note of MCNs—multichannel networks—like Maker Studios and Fullscreen, which aggregate YouTube channels and represent short-form creators. The Walt Disney Company acquired Maker, and Otter Media, a joint venture of AT&T and The Chernin Group, bought a majority stake in Fullscreen. Stay attuned to the short-form space. It is an incubator of talent and a favorite format of Millennials, whose tastes and viewing habits will soon be shaping the entertainment business.

In the meantime, the biggest and more traditional players continue to mine opportunities in this evolving media landscape—even if, given their size and complexity, they can’t always turn on a dime. What they can vaunt are their economies of scale and their global connections, through which they can take advantage of exploding viewer demand overseas and the plethora of platforms popping up to satisfy it.

Look at Warner Bros., which boasts one of the largest rosters of TV series worldwide. Production-wise, the company continues a long-running streak as the biggest supplier to the U.S. broadcast networks. But, it is now goosing year-round development to funnel more disparate product to cable and digital platforms—not only to Time Warner siblings TNT, TBS and HBO, but also to Showtime, A&E and Hulu. Internationally, the company has snapped up production outfits in the U.K. and Holland, including, most recently, Eyeworks, which operates unscripted factories in a dozen European and South American territories.

A MATTER OF SCALE
Jeffrey Schlesinger, the president of worldwide TV distribution at Warner Bros., believes that “bigness” will have outsize advantages going forward, and that investments like these also give the studio both a leg up in localism and another supply base for cross-border product and formats. He points to a Belgian scripted format called Cordon that his company is reversioning for The CW in the U.S.

“There’ll be more such cross-border deals as we proceed,” he says.

On the distribution side of the equation, those so-called “digital pennies” that many were dismissing a few years ago are quickly morphing into larger denominations. “[There are] more platforms, in more homes, with greater demand for content,” says Schlesinger. “They are ravenous.”

RBC Capital Markets, an investment firm, projects that Netflix, Amazon and Hulu will shell out a whopping $6.8 billion for content this year. In some cases, these disruptive digerati are buying out the first window for shows, as Netflix did for Warner Bros.’ Gotham or Amazon did for CBS’s Extant.

“The value of our library as well as of our current series continues to expand,” Schlesinger says.

SLIDING WINDOWS
As for windowing outside of the U.S., Schlesinger thinks it’s shifting more for TV product than for movies, with a number of European players, as well as their U.S. counterparts stepping up aggressively in the food chain. For instance, his division licensed the first window of its freshman series Constantine to Amazon in the U.K. rather than to a terrestrial broadcaster. Increasingly, too, he notes, European cable or SVOD players will “step up” for shows that fit their brand.

Similarly, over at Twentieth Century Fox, the windowing of series abroad is becoming a much more all-involving and strategic part of the business operation.

“There’s an enormous amount of negotiation, strategizing and collaboration going on within our company to determine what’s best for our content—and for a particular market,” says Gina Brogi, executive VP of worldwide pay TV and SVOD at the studio.

In the U.K. in particular, Brogi points out, new types of deals are coming at a rapid pace. Sit-downs to figure out the potential for each content asset with her colleagues are routine, Brogi explains.

“In each case, for each show or movie, we have to figure how our decisions will impact the future of the market. With so many more outlets and so much going on, you can’t run a distribution outlet without constant collaboration.”

In this constantly shifting landscape, a few firm signposts are becoming clear. Windows will continue to move and even collapse. OTTs will keep producing original television series. Like Netflix, Amazon Studios is attracting A-list talent to its original productions, like Ridley Scott and Woody Allen. Netflix revealed it wants to premiere 20 originals a year—one every two-and-half weeks—leaving others to wonder how quality and effective marketing can be maintained with that kind of volume.

Digitally originated content will continue to flourish through MCNs like Maker Studios and Fullscreen; YouTube makes it easier for ambitious creators to reach an audience than it would be if they pitched their ideas to traditional linear channels, where network executives decide if content is good or not. These young producers post their videos online and viewers decide their fates, making for a much more democratized process.

STAR MAKERS
“Most creators start out as fans of somebody else,” says George Strompolos, CEO and founder of Fullscreen. “Then, some magic happens when a little light goes off in someone’s head that says, ‘I can do this too.’ That’s a beautiful thing, but it takes serious commitment to become a successful creator. It takes a while to find an audience and a ton of work to keep them engaged. At Fullscreen, we help creators of all sizes and on all platforms develop their voices, build an audience, produce better content and connect with advertisers. Empowering creators is in our DNA.”

The major stars on YouTube are already migrating to linear channels, and there will be more coming. Lionsgate has picked up the distribution rights to AwesomenessTV’s The SMOSH Movie. HBO has ordered a pilot from YouTube star Issa Rae. Maker is packaging the best of its short-form content and selling it to pay-TV and free-TV outlets.

Netflix, Amazon Studios and Fullscreen have all announced that they will be producing feature films and premiering them online, in some instances before the traditional theatrical release.

These digital platforms also have plans to start charging for content. “We view the production of original premium content as a continuation of our mission to empower creators,” says Strompolos. “We recently announced the Fullscreen Films banner, which includes features like Rooster Teeth’s Lazer Team; The Outfield, starring Nash Grier and Cameron Dallas; and #O2LForever, featuring the Our Second Life crew, which was a beloved vlogging super-group.”

But will the Millennials, to whom this content is directed, pay for anything online? That’s a big unknown. What is known for sure is that the tastes and viewing habits of Millennials will significantly impact the media industry. A number of surveys have already established that they prefer YouTube to television by a long shot and that their favorite entertainers are all YouTubers, not Hollywood stars. Millennials adore role-playing video games, in which they can interact with stories. That super-sized curved screen, the wearable gear, the viewer-cum-player—they’re not as far off as one might think.