“The major producers are going to have to be smarter and more agile, and they’ll need to spend more on tech to become more efficient.” An Interview with Wim Ponnet, Advisor-in-Residence at the Project X Institute.
Wim Ponnet is a media and technology industry veteran, with decades of experience in digital media, sports and entertainment. Until recently, Wim served as Chief Strategy and Commercial Officer at Endemol Shine Group, the world’s largest independent TV production and distribution company, up until its sale to Banijay Group. Wim’s global remit covered all sales and commercial divisions, including oversight of corporate development and M&A, distribution, licensing, digital sales and monetisation, technology and IT.
Wim spoke with Jon Watts, Executive Director at The Project X Institute, to discuss recent trends and developments in TV production, as part of the Content Connect Initiative.
There’s been a huge amount of change across the TV industry in recent years. How much change have you seen in the production sector?
“The last few years have seen enormous change, driven by changes in content investment and commissioning across many of the largest TV markets, the US and Western Europe. Of course, the picture varies by genre.
In premium scripted entertainment, we’ve seen a huge inflation in budgets and ambition, driven by competition from the streamers, driving convergence between film and TV. Budgets are now often in the $5-10m range per episode. We are now seeing a bit of a slowdown, with reports of projects and budgets being cut back as streaming growth comes under pressure – but the long-term trend is pretty clear, with huge growth during the last decade. A lot of that money has come out of the US, where many of the major players are more diversified and are investing heavily to drive subscriber growth – but European companies are responding too, diverting budgets away from other areas to fund these kinds of shows.
For format producers, the market has become more challenging. We’ve not seen a steady supply of major new hit formats like Master Chef or The Voice during recent years and margins for producers who specialise in these formats are down. The major networks are still looking for big international shows, but viewing for these shows has trended steadily downwards, and the appetite for risk has reduced – in part because of competition for audiences and greater consumer choice, in many households. Some of the finals for these shows still drive large audiences, but most are declining. For producers focused on unscripted formats, sold around the world, the market is low or no growth.
How have major TV producers responded to these changes?
The big independent producers responded to these changes by scaling up across countries and genres, and diversifying where they could – into digital, merchandising, events, even commerce. I think the wave of major acquisitions is largely at an end now though. There aren’t that many targets left, certainly not businesses that would be transformational for one of the existing international super-indies.
Scale isn’t necessarily the answer to everything. The reality is that the economics of production have changed. In the old world, producers sold shows to broadcasters, who were generally operating in one country, and then looked to sell rights internationally – or tried to capitalise on merchandising. If you were a major international producer, you could sell to multiple broadcasters around the world. Large catalogues also had real value, because there were lots of buyers for secondary rights – mainly, linear TV businesses.
Today, things have changed. Almost all major commercial broadcasters have reduced their budgets, audiences have shifted to streaming, and the market is more fragmented. It’s much harder to develop and sell a major new show. Value is stagnating for many of the major catalogues.
There has been a boom in streamer spending, with Netflix leading the way, mainly spending heavily on premium drama, kids, comedy and a few other areas. But producing for the streamers is different. They take global rights, until the show is worn out – so there’s less upside for producers. In many cases, producers were work for hire – and top talent has been taking a much higher share of the proceeds, starting their own production companies. It’s a more concentrated market.
Production margins have come under increasing pressure during the last decade. Lots of shows don’t break even until series three. The old producer model was to make a show for a domestic broadcaster, and then sell it overseas. Now, increasingly, the big buyers want international rights. As a producer, selling a show once to a big buyer is lower risk, but lower margin – and you benefit less from a really huge hit.
Digital has created some opportunities. We are seeing producers launching their own SVOD and AVOD offerings, on self-service platforms – but these tend to be pretty small businesses. They’re really just a replacement for lost DVD revenues.
What about the opportunities for newer producers?
We have seen some talent-led producers doing well, but it’s become more difficult to start up a new production company, unless you’re a very experienced producer. If you’re spending $5-10m per episode on a new series, you’re far more likely to spend with a large, trusted producer, rather than a new company. There are exceptions, of course – and there are clearly interesting opportunities in digital for smaller producers, but it’s challenging.
What do you see as the big trends during the 2020s?
We are definitely close to the peak in terms of investment in premium scripted entertainment. When you look at the sums being invested in the US market, per capita, it was clear that there was a bubble – but things are slowing down now. Too many shows were being lost. The new wave of US-backed international streamers from Disney and Warner and Paramount will spend less than Netflix.
Growth in content investment will continue, but I expect to see future growth in unscripted entertainment, docuseries and cheaper productions – scripted-like content, but in formats that are much cheaper to produce.
We’ll see more spend in the middle tier, driven by AVODs and national broadcasters, to support their services, but these services will be lighter spenders and will look to leverage existing IP, rather than taking big risks on new shows.
I also see lots of opportunity to leverage technology to improve efficiency and automate catalogue exploitation. In many cases, the business processes, systems and workflows that support rights exploitation are often old-fashioned, with very little use of data.
There is money to be made from the new internet video platforms, like TenCent, Snap and TikTok – marketing shows, monetising catalogues and earning some extra money. In China, some companies are spending a lot on content for their local market. Some producers are getting established and are starting to do well in China and some other Asian markets.
There are also opportunities for independent creators on these platforms, but it’s very hard for international producers to scale up on these platforms. YouTube and crowd-funding platforms are good for small creators, but it’s hard to grow a large business on these platforms.
And what about 2030?
I think the market will look pretty similar, in some respects – the same large indies and the same major content commissioners, although we’ll see some further consolidation in the US and Europe. There will be breakout hits, I’m sure – with thousands of small creative companies working to produce for the big platforms, but it’s hard to pick the winners.
I think this means that the major producers are going to have to be smarter and more agile, and they’ll need to spend more on tech to become more efficient. It’s going to be a challenging decade, but I’m optimistic.
About the author:
Wim Ponnet is the founder and CEO of Ponninvest investing in Media, Sports and Entertainment. An avid deal maker, Wim recently left the Endemol Shine Group, the world’s largest independent TV production and distribution company, following its successful $2.4 billion sale to Banijay Group.
While at Endemol Shine, Wim served as Chief Strategy and Commercial Officer, with an expansive global remit across all sales and commercial divisions, including oversight of corporate development and M&A, distribution, licensing, digital sales and monetisation, technology and IT.
As a Media and Tech veteran he has also held various C-level positions for global corporations such as Yahoo! and Coca-Cola.
Passionate about the power of brands and their fans, Wim has developed and implemented a range of data and insights driven growth strategies within the media, tech and entertainment sectors.
A professional athlete in his native Belgium in his 20’s, he has been involved throughout his career in various sponsorship activities (UEFA Euro 2008) and digital rights negotiations linked to European Football (EPL digital rights).
As a digital native, he is recognized by his peers as an expert on digital transformation, fan engagement and brand building.
The opinions expressed in this publication are those of the authors. They do not purport to reflect the opinions or views of Mediagenix or The Project X Institute.