The Power of the Global SVOD Market and its Impact on Film Financing
Streaming services and Pay TV have slowly been creeping up the totem pole in terms of marketshare and consumer influence. Netflix was at the forefront of the original programming streaming model, with its ground breaking series House of Cards, which also initiated the concept of binge watching. The SVOD (subscription video on demand) platform is now driving “television” viewing.
According to a September, 2020 article in a Deadline, the top media analyst at big credit ratings agency Moody’s said, “The future of television distribution is clearly here. It’s direct to consumer SVOD and it’s AVOD, and more of the money that has traditionally been spent in linear television needs to be gradually moved into this space,” senior analyst Neil Begley. (To read full Deadline article click here.)
The streaming services have been able to attract top-notch talent by allowing them the creativity in subject matter and tone, that the Networks have not been able to offer. The big name stars, edgy material and ability to binge watch have drawn consumers to the subscriber services, thus given them more money to budget original programming. Currently, the SVOD market in the US is worth $32 Billion and will grow to $45 Billion by 2025.
The numbers in Europe are growing as the international services such as Netflix and Amazon are catering to local markets and producing original programming in a country’s native language — pushing the numbers even higher. In February 2021 article in the Hollywood Reporter they noted a report from the European Audiovisual Observatory (EAO), consumers have gone all-in on streaming, helping to drive massive growth in video-on-demand services, which last year booked revenues of $14 billion (€11.6 billion) across 28 European countries. That compares to just $468 million (€388.8 million) a decade ago. (To read full report in the Hollywood Reporter click here.)
The surge in SVOD and AVOD viewing habits is having an effect on financing models as the Streamers are covering the entire budget, do not reveal their viewer matrix, and do not sell off ancillary rights. Without box office totals and ancillary sales, this wipes out the profit participation model. Without the profit participation model, the upside for producers and financiers is drastically limited. This necessitates a buy out or premium payment for the upside, which may or may not be greater than traditional profit participation that the entertainment investors are used to.
A new financing model is beginning to surface and this leaves the question of whether investors, large or small, will determine it worthwhile to invest in film and television. To be continued…