The VoD invasion

Independent film sellers have always had to stay on their toes to maximise the value of their film libraries in the international marketplace. While demand for catalogue titles might surge one year thanks to the launch of, say, new pay-TV platforms in a particular region, it might just as quickly slump, as it has recently due to dramatic DVD fall-offs in many territories.

So at this month’s MIPCOM content market in Cannes (October 7-10), many film sellers will be looking to take advantage of library sales opportunities offered by the latest wave of international buyers: video on demand (VoD) and subscription VoD (SVoD) outlets in both established and growing regions of the world.

‘What we need is for companies like Netflix and Amazon to deal more directly with the international sales companies’

Mark Padilla, Myriad Pictures

For big sellers with deep libraries, the opportunities are already paying off.

MGM Television president of international distribution and acquisitions Chris Ottinger says that while his company has lately seen a steady appetite for library titles from free TV outlets, their digital terrestrial TV spin-offs and basic cable and satellite services, “in the subscription environment we’ve seen an explosion in the demand for features”. As a result, he says: “Our catalogue business is significantly bigger than we forecast it was going to be even two or three years ago. And that’s amazing for an asset that putatively people would say is depreciating.”

Independents with more modest libraries may have to be more patient but they too see opportunities opening up as new outlets grow and need more content than they can get through studio output deals alone.

“Because more people are emerging in the VoD marketplace, it’s giving us more opportunity to fill those slots,” says Mark Padilla, vice-president of sales and distribution at Myriad Pictures.

Among the new VoD buyers in established markets are subscription streaming services such as Hulu, Amazon, iTunes, the Amazon-owned LoveFilm (which now has 2 million members in five countries) and high-profile player Netflix (with 38 million members in 40 countries). The rapid growth of these services makes the opportunities they offer seem all the more enticing. But film sellers are still waiting to see what kind of deal models can be established and how the services’ programming strategies will develop.

Direct dealings

Up to now, the streaming services have, in an effort to streamline their buying activities, acquired most of their independent library films through theatrical distributors or rights aggregators in individual international territories.

Independent film sellers, however, suggest that direct dealings would make for more competitive pricing.

“What we really need is for companies like Netflix and Amazon to deal more directly with the international sales companies,” says Padilla. “If they really want to help themselves and have a competitive marketplace, they need to be more open to the independents.”

‘In the subscription environment we’ve seen an explosion in the demand for features’

Chris Ottinger, MGM Television

On the programming front, some streaming services that initially relied mostly on features are now seeking to bolster their brands by investing more in original series programming. After making a splash in the US with David Fincher’s Emmy-winning House Of Cards, Netflix said recently it expects in coming years to increase the proportion of its programming budget spent on original titles from 10% to 20%. And LoveFilm recently got into the originals business by signing a deal to give MGM series Vikings its first exposure in the UK and Germany.

The latter deal points to additional opportunities for independents handling high-profile series as well as features. But it remains to be seen whether an increase in original programming will mean a decrease in film buying by LoveFilm and its competitors.

Ottinger, whose operation has also done library deals with LoveFilm, thinks not. “That business is growing so fast,” he argues, “that even if, as a portion of revenue, they may be putting more into original programming, it doesn’t mean they’re spending any less money on other programming.”

Global growth

Demand for features from VoD and digital outlets in emerging and fast-growing world regions will certainly increase - it is just a question of by how much and where.

Regions that are already showing increasing appetites - and that are due to be represented in an October 7 MIPCOM conference session on new VoD markets - include Africa, the Middle East, Singapore, Russia and China.

With its lack of multichannel infrastructure and small number of pay-TV households, Russia is still a complex market, say film sellers, with many SVoD start-ups now switching to a free advertising-supported VoD model that is less favoured by copyright holders.

But in China - where quotas and censorship have limited the availability of western films in cinemas - buyers from streaming SVoD services have been particularly active over the past year, with Youku adding product from NBC-Universal to its existing arrangements with the Hollywood studios, Tencent’s Hollywood VIP service signing deals with Miramax, Lionsgate and Disney and Jiaflix announcing a deal with MGM covering new theatrical releases and more than 200 classic library films including Midnight Cowboy and The Thomas Crown Affair.

‘We believe there’s an opportunity on these platforms for classic Hollywood films’

Clay Epstein, Arclight Films

The Jiaflix deal, says MGM’s Ottinger, “was a great opportunity for us to get more of our content in front of Chinese consumers”. And Chinese VoD in general, he adds, “is a very, very dynamic, internet-driven business. Significantly more dynamic than the terrestrial [TV] business because it’s not regulated in the same way.”

Smaller independent sellers are also making headway in China, though they recognise the need to tread carefully in selecting and presenting titles that will work for the marketplace.

Sydney and Los Angeles-based Arclight Films, for example, recently opened an office in Beijing and signed a deal to represent the Hollywood Classics library - a huge catalogue that includes such vintage studio titles as The Wizard Of Oz as well as independent and European films - for TV and VoD in China and the rest of Asia excluding Japan.

“We believe there’s an opportunity on these platforms for classic Hollywood films,” says Arclight’s senior vice-president of sales and acquisitions Clay Epstein. “But we have to hand select films that still have significance and relevance. And they’re going to have to be remastered and remixed for people who want to watch them in HD on a flat-screen TV.”

New strategies

For one independent film seller, the opportunities opening up with new outlets and new regions has prompted a whole new strategic approach to library sales.

Earlier this year, Lakeshore Entertainment launched what it calls its Premium Digital Content plan, a strategy designed to get the most out of VoD and SVoD deals that tend to be for smaller packages and shorter windows than the pay TV deals they are often superseding.

As Lakeshore COO Eric Reid explains, distributors who sign up for the plan pay a flat fee and get the right to exploit any titles in the company’s library - whose 500 films include Underworld and its sequels and Oscar winner Million Dollar Baby - for a certain term. They can do this “in almost any manner they want, within reason, in their territory. And we’re providing a means for them to access the materials and make selections about which films they’re going to download and utilise by means of a cloud-based electronic delivery system.

“It is a true partnership with a single distributor in each territory for a very large volume of films to be digitally delivered and serviced.”

Though none of the partners have yet been named, Lakeshore International senior vice-president Todd Olsson, who is managing the plan, says distributors in half-a-dozen countries have already signed on and deals are pending in a number of other markets.

Most of the partners, says Olsson, have their own local deals with outlets such as Netflix or LoveFilm “and what they’re looking for is a large volume of content that has a certain fraction of high-level theatrical library titles and then a volume of reasonable other titles that are digitally ready to go”.

Lakeshore, says Olsson, has enough of the premium titles that initially lure distributors “to drive deals like this, which then encourage them to look deeper into the catalogue”.