ZDF Studios’ Dr. Markus Schäfer

Last year, the commercial arm of the German public broadcaster ZDF rebranded from ZDF Enterprises to ZDF Studios. As Dr. Markus Schäfer, president and CEO, explains, the new name communicates to the market that the company’s teams can shepherd a project from inception to screen, making the most of the complete value chain. Schäfer’s priorities include continued integration of the company’s three main businesses—production, distribution and services—dealing with rising production costs and serving the programming needs of clients and its shareholder, ZDF.

WS: What have been the benefits of the rebrand?
SCHÄFER: Our value proposition to the market has become much clearer. ZDF Studios is a fully integrated media group from creation to production and exploitation. In this regard, we see ourselves in the same bracket as other studios—branded businesses like, for example, BBC Studios or ITV Studios. The new brand was very helpful in conveying to the market that we are not just a distribution business, which is our heritage, but we cover the full value chain. As such, we appeal to a much broader range of partners in the international market.

Also, within our group, the new name has an impact as it supports our ambition to become a more integrated company.

WS: What have been your priorities since you took over?
SCHÄFER: First of all, learning, learning, learning! The ZDF Studios Group comprises many companies spread across three business areas: production, distribution and services. We cover all major genres, from documentary to entertainment and scripted. We are a multi-site group with premises all across Germany, and we also have footprints in the Netherlands and the U.K. Last but not least, our shareholder, ZDF, is one of Europe’s largest broadcasters. It takes some time to get the overall picture. But soon after the learning phase, we took a look at our strategy as a group and intertwined this with our shareholder, ZDF, which itself had started a strategy process under its new director-general, Norbert Himmler. Although we only started this process a few months ago, there are already some significant outcomes. The key is to drive our internal integration in three dimensions: across our various production businesses, between production and distribution, and, of course, between ourselves and our shareholder, ZDF. We are convinced that such integration will service our key objectives and serve both the overall market and ZDF. We want to offer innovative, outstanding, high-quality programs. The integration will also help narrow our ability to produce and exploit such programs. If you’ve got outstanding programs, you can attract excellent talent. We think we are a great place for talent to work and want to show that to the markets, be it in Germany or elsewhere in the world. We value talent very highly and offer an inspiring creative environment with a huge amount of freedom for new and fresh ideas.

WS: Are there plans for more investments in production companies?
SCHÄFER: Our group comprises a number of production companies. It’s a mix of companies we have founded and majority-own and those in which we are joint shareholders with public and private partners in the market.
As part of the ZDF group, our main purpose is to help our shareholder achieve its strategic objectives. For us, this means providing ZDF with successful programs that fit its programming needs. At the same time, we also serve the international market, where you can only compete with outstanding IP and a unique, attractive catalog. The core of our business is the ability to generate top-level programs, and, on the one hand, we are very proud to have a number of fantastic production companies in our group. On the other hand, we are keen to enlarge our portfolio, first of all, with outstanding shows. Adding more talent to the group is one way of achieving that. Thus, partnering with talent, whether startup companies or investing in existing businesses, is a viable option to reach such goals.

WS: How is ZDF Studios working with producers or production partners?
SCHÄFER: In principle, we say we are model-agnostic, so collaborations vary from project to project. First and foremost, we make sure the interests and needs of the partners around the table are aligned and clearly defined, so everybody knows what they are contributing and what they cannot contribute. Any kind of collaboration or structure model should be designed following such a setup of needs and interests. Our general approach is to be a complementary partner who brings skills and assets to the table that our partners don’t have and vice versa.

WS: Inflation has hit many countries. Have you seen that impact the programming budgets of broadcasters and platforms?
SCHÄFER: Yes, broadcasters and streamers are suffering from inflation. Private broadcasters and AVOD services see a decline in advertising income, and SVOD services see stagnating and even declining subscription numbers. In Europe, public-service broadcasters experience pressure on license fees. This is partly driven by inflation, at least for subs and ad income. On the other hand, programming budgets are the most flexible items in any broadcaster’s P&L, so it’s natural for them to look at their slates and budgets per commission. However, that creates what I would call a toxic situation. Because on the other side, the producers are also affected by inflation. Production costs have gone up significantly over the last three years, especially. We have a situation in which producers need more money and broadcasters have less money, and what did the ancient Greeks call that? A dilemma!

It’s not rocket science to expect that, at least in the short term, there will be fewer commissions so that the remaining commissions are sufficiently budgeted. Otherwise, production companies would dry out and disappear from the market. We are also seeing that the big-budget shows are being scrutinized on the streamer side—shows are not getting recommissioned or not getting commissioned at all, sometimes even being stopped just a few days before shooting.

On the other side, there is a challenge to reconsider production models and production procedures. On the production side of the business, we and other companies need to be open to new approaches to how shows are made. And, of course, that applies to broadcasters and streamers as well. If everybody sticks to the past, we won’t prosper.

WS: What genres of programming are linear channels and SVOD platforms investing in? You have a broad range, so I imagine you can satisfy various needs.
SCHÄFER: Absolutely. We see a demand for shows with feel-good elements, more cozy, even escapist. There is less demand for programs you would describe as being kind of dark.

De-risking is important for buyers, so shows that are returnable, multi-season shows, book-based or otherwise IP-based are in demand so that one can build a show based on a certain awareness of the IP among viewers.

Scripted formats are also on the rise, as there is less risk when taking proven stories from other territories. The third element of de-risking is to reduce the number of episodes per season. We see broadcasters and streamers not commissioning eight but rather six episodes, at least for the first season. Maybe this is also due to a change in viewership behavior. The audience is less inclined to watch long seasons before getting to the end of the story.

And the economics of shows are becoming more and more important; budget, returnability and shelf life are key parameters. What we are experiencing in many places in the market are new windowing strategies on many sides. There is increasing complexity in the mix of the three parameters: rights, license periods and exclusivities. It’s slicing the cake into finer slices and sharing the pieces in different ways.

WS: ZDF and ZDF Studios have a long tradition of offering high-quality factual programs. Do those remain in demand?
SCHÄFER: We have seen a rise in demand for documentaries and factual programs. The high-end factual genre has only come up over the last five or six years. In the shadow of these super glossy high-end shows, there is also ample room for well-made, good, but not super high-end documentaries. We also see ourselves in that bracket in nature, science and history.

WS: And, of course, you also service young viewers with Junior.
SCHÄFER: We service young viewers as well. This is a segment where we think we are very successful; in particular, our slate of live-action shows is very well-regarded in the market. We have covered a niche where we are highly respected as a supplier of high-quality programs to the world. It’s a very international business. We are working from Australia to the U.S. and South America, and it applies to the producers and buyers.

WS: What is the outlook for ZDF Studios for the next 12 to 24 months? There are challenges in the market, but also opportunities.
SCHÄFER: The times ahead of us will not be easy for the industry. Inflation will remain high. We have seen the peak in demand; it’s coming down and might—depending on inflation and the economy—come further down. However, to put this into context: Overall, there is still a historic level of demand.

However, we’ve made very good progress in building new businesses alongside our B2B business with broadcasters and streamers. We now have strong and growing B2C or B2B2C businesses, which deliver a constantly growing contribution to our overall revenue mix. Thus, we are positive that we will continue to be successful, not only due to the rebranding but also by developing the company further. Looking ahead, we believe we will become an even more interesting partner in the international market for both sides of the business: buyers and creative and production partners.