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windowsThe advent of international OTT services has created unheralded demand for first-run drama. One result has been the traditional system of windowing, holdbacks and stacking rights for scripted programming changing. Stewart Clarke speaks to buyers, sellers and market experts

The process of windowing drama programming was stable for years. However, with the SVOD players competing for first windows, and new battles taking place over stacking rights (rights to ‘stack’ episodes on demand during a current season), the game has changed.

As with most of the disruption in the international business, Netflix is front and centre. The SVOD giant has reportedly said that if a distributor gives up full stacking rights – the kind it buys itself, and which are integral to its business model as they facilitate bingeing – to a network, Netflix won’t buy a second window.

The result is the dynamic between first and second windows has shifted. If a content owner doesn’t get their first window deal right a second window might be tough, or even off the table.

“It’s important to look at utilisation within windows,” says Jack Davison, former VOD product boss at UK cabler Virgin Media, and now managing consultant at the 3Vision consultancy. “How a broadcaster utlilises content in the first window has a material effect on the value of the second window. The [distributor] needs to think much more strategically about how they sell content.”

The clearest example of this is the tension around in-season stacking rights in the US. Broadcasters have largely seen their catch up limited to the five most recent episodes – the ‘rolling five’ – of a current season of a show they are airing. The traditional channels are now pushing hard for catch-up rights to all episodes, with Disney/ABC Television making a lot of noise in March about its ‘full stacking’ deal with Warner Bros. for the latter’s TV series. NBC has been similarly aggressive and pushed for a full stack for all of its new season shows.

“Channels are trying to capture a linear audience through scheduled TV and catch-up, and those worlds are blurring,” says Jamie Lynn, executive VP, sales and distribution, EMEA, at Deutschland 83 distributor FremantleMedia International. “The linear channels are finding it harder to explain it to the viewers if they can’t view all of the content they want. The viewer can’t understand why all episodes are not on catch-up, and they think the broadcaster is being mean.”

Not only does having full stacking rights allow viewers to binge and catch up, it creates valuable advertising inventory for commercial broadcasters. It also, however, lowers the value of the second window, meaning content owners have to calculate the opportunity cost.

Henrik-PabstDistributors are clear there is a value attached to full stacking rights. “If you want longer catch- up, or more episodes, it comes with a price tag,” says Henrik Pabst (left), head of Bosch distributor Red Arrow International.

Jonathan Ford, executive VP, sales and distribution at Line of Duty distributor Content Television & Digital, agrees. “The argument from the broadcasters is they need these rights to promote a show and drive viewers as the series goes out, but for a distributor, these are rights they could sell to someone else,” he says.

Catherine-MackinBritish channels group UKTV runs linear services including Alibi, W, Dave and Drama. As well as output deals with (its part-owner) BBC Worldwide and Zodiak Rights, it is a notable UK buyer of US scripted, recently picking up the likes of Rosewood from Fox and Quantico (below) from Disney. It often wants to buy across first run pay, pay, and free TV windows to service its channels, says director of programme acquisition Catherine Mackin (right).

In a fragmented viewing world, channels need an array of rights to maximise the value of acquired content, according to the UKTV acquisitions chief. “It’s such a crowded market you need as much as you can; you need to really build a strong force field around it,” she says. “You need much more control, for a period.”

The US studios have broadly similar deal terms, buyers say. UKTV, meanwhile, is “quite rigid” about its own baseline requirements, Mackin adds.

An oft-repeated refrain among both the buyers and sellers is that ‘it used to be so simple’. Movies largely went from theatres, via electronic sell-through and DVD (when that was a meaningful market), to pay, second pay, free and then SVOD windows. US TV series mostly went from free, to pay, to SVOD.

For a time traditional channels and platforms were happy to see content shopped to SVOD, not seeing the streamers as competition, but those days are over. The growth and expansion of streaming services has had a two-fold effect: the SVOD window has become richer, and rather than wait at the back of the queue, the likes of Netflix and Amazon are jostling for position at the front, and are buying in first windows.

Bruce-Tuchman2“All bets are off and the reason is non-linear services,” says Bruce Tuchman (left), who launched the MGM, Sundance and AMC channels globally, and is now a media investor and advisor.

“At first a lot of pay TV channels didn’t think the SVOD players were a threat, or even understand what they were, but now if a piece of content goes to one service it is competition for the other, so it is pay versus Netflix. They both want exclusive rights, and the winner takes all.”

Vanessa Shapiro, executive VP, coproductions and acquisition at TV movie specialist Marvista Entertainment, agrees that you need to make an SVOD versus pay TV decision. “You either license to an HBO or Starz, or Netflix. You cannot do both because they are all buying in the pay window,” she says.

Netflix, Amazon and their local equivalents have directly disrupted the market by competing for first runs, but the way they have changed viewing patterns globally underlines another change in the way content is bought and sold.

Binge viewing has taken hold, and with cord cutting a threat for the pay TV platforms, the major pay operators now demand channels bring streaming rights to the table as part of carriage negotiations. This forces the channels groups to chase these rights when they do content deals. “The joke is the platforms now say they’re not interested in the linear channel, only what you can bring in terms of on-demand,” says one international channels executive.

“The big pay networks now require channels on their platform to put a percentage of their programming on their box set services, so they need the SVOD rights and they might not be able to get carriage otherwise,” says Content sales chief Ford.

The launch of authenticated TV Everywhere apps has largely been a US phenomenon, but is likely to spread from the States to the rest of the world. It exacerbates the pressure on channels groups to hoover up stacking rights as TV Everywhere apps require additional content to that on the linear service, generally in the form of box sets.

For the vertically integrated groups that run channels, produce content and sell internationally, there is a further issue because the sales division will want to take all rights to market, but the channels side will want to snag stacking and other rights.

“You want those rights but your own company is selling to Netflix and that pushes up the cost,” says one channels exec.

“Growth is flat or declining for many operators, and in carriage negotiations with the channels they are clear: it can’t just be about linear,” says Bruce Tuchman. “A negotiation will end if there are no VOD or TV Everywhere rights. SVOD is driving up the price of content and that shows no sign of slowing down, which means channels are in a hard place.”

Netflix’s leverage has only increased now it is a global player. “What has changed is before Netflix was mostly North American and now it is the whole world, so that affects windows not just in the US but the rest of the world too,” says Marvista’s Shapiro.

Selling a show around the world in one Netflix deal is a new and attractive option for content owners, but may not always the right choice. Netflix has traction in the UK and US, but in other territories remains at a much earlier stage, meaning that while there is hype and marketing, a show may not be getting maximum coverage (not that you will know how it has performed anyway). “The Netflix deal is intoxicating to some people, but once you do it your content goes into a black hole because there is no data,” says Tuchman.

Matt Forde“In some instances it might be better to parcel the rights with just one party, in another to parcel them out one by one,” says Matt Forde (left), executive VP, TV sales and digital distribution at BBC Worldwide. “It is short- versus long-term. It might depend on whether there is a funding deficit, or whether you are building a brand.”

Red Arrow’s Pabst agrees. “It’s also about what helps to build the brand; you can go for the quick money, or go window by window,” he says.

Demanding global rights could, however, work against Netflix if it has to walk away from a great show, because it can’t get a worldwide window, leaving a local player or rival to step in.

If the rights issues are largely about the tension between the traditional and newer players, there are examples of the two working to each other’s benefit. Netflix famously helped make Breaking Bad a mega hit on AMC by allowing viewers to binge and get up to speed ahead of its linear transmission on the cable net.

More recently, TF1 showed two episodes of Netflix’s first French original, Marseille (below), two weeks after it debuted on the streaming service. The deal confounded many in the industry who struggled to see the upside for the broadcaster. “They love the show – they saw it and wanted to share these big French stars with their viewers,” a Netflix rep told TBI at the time.

Marseille

CBS has sold its summer series Under the Dome, Extant, Zoo and Braindead to Amazon, with episodes added days after their TX on the broadcast network.

When a broadcaster has an affiliated streaming service, that SVOD-linear cooperation becomes easier. In Canada, Bell bought Doctor Who for its specialty channel Space and its streaming service CraveTV, which was a win for the series’ distributor, BBCWW, and allowed the pay network and SVOD service to coordinate their activity.

Another linear-meets-streaming deal struck by Worldwide was for the upcoming Top of the Lake season two, which will launch on basic cable net SundanceTV in the US before being available on streaming service Hulu a day later, proving that pragmatism can win out if the show is hot enough. “It’s a competitive market and when two parties want something they can be open to partnerships,” says Matt Forde. “Sundance wants to premiere the show, and for Hulu, this is the type of content it wants to be associated with. Together they can be more powerful.”

For producers, SVOD-linear deals also mean new ways to finance high end drama. “We were really pleased that we could find a way for both SundanceTV and Hulu to be able to broadcast the series in US,” says Hakan Kousetta, COO, television at See-Saw Films, which makes Top of the Lake. “The ambition for a show of this type means we have to be imaginative about how we finance a large budget and the readiness for both of the channels to find a way to work together ensures we are not forced to compromise.”

Savvy broadcasters are mindful that a streaming release of an older season – if well placed ahead of the launch of new season on linear – can be a powerful promotional tool. But whether an SVOD service can bolster a linear series is contingent upon the length of the holdback against on-demand. Mindful of the streaming competition, traditional buyers and especially pay channels, will look for up to 18 months, although around twelve is where it is mostly falls, with some examples of that now slipping to nine. The big SVOD players, in turn, want a holdback, mainly against pay.

Everyone is in agreement about one thing: every content agreement will be unique in the current environment. “Now every deal is different,” says Erik Pack, president of international distribution and coproduction at Narcos prodco Gaumont Television. “I can’t think of a single deal, even in the same territory with the same broadcaster, that is the same.”

For a content owner the challenge is to piece together the rights puzzle and execute complex deals, but in the same space of time as in the past. Timelines may even be compressed if a series needs to go day and date with the US TX, which is increasingly the case.

Will the windows and right situation rationalise? Many expect so, if only for a time. If things are complex now, just wait until a Facebook, Google or Apple comes to the party. Then the process of windows shopping will likely need to be reinvented over again.