February 2024

– 5 MINUTE READ (700 words) –

​Our firm has been valuing film and television content libraries and companies for more than 25 years, and the job has become increasingly more challenging because the business of distributing media has evolved so much. 
​

Likewise, there are no simple multiples on revenues, historical sales, nor profits that are remotely accurate.  The Fair Market Value* of any media enterprise is derived from a deep dive into the company’s growth prospects (or lack thereof), their profit-making ability, and the quality of their media offerings. 
 
Four factors that add value to any distributor or content library:

1.  Owning the content;
2. New releases of proprietary titles; 
3. Growing international distribution; and 
4. Gross margins above 40%.

​

→ Adding tons of non-proprietary content at low margins will not increase the value of the business. ​

Our firm has been providing How to Buy, Sell or Value a Film Distributor seminars and articles since the 1990’s.  Back then most companies were run in a similar fashion to their competitors. They were distinguished mostly by the quality and marketability of their catalogs.  Today, the landscape for media distributors has changed – radically.  Rarely do companies pay advances. Many still amalgamate their content from film festivals and producer relationships, but other distributors now license as much digital content as they can (at lower margins) to supply the insatiable appetites of AVOD and FAST channels.  
 
Almost all the companies, that we know, are now a hybrid film distributor, producer, and FAST channel operator.  Whether their content is theatrical, classic, documentary, or educational - most “home media” distributors today are highly diversified.
​

Because we are not valuing just one business, we are assessing the value of their distribution, productions, proprietary channels, and organization separately. Only then can we determine an accurate value of the entire enterprise.  As we have often stated, most companies do not have just one value. The truth is, they have many separate values that make up the whole.  Our recent M&A assignments have shown us that many buyers only want part (or most) of a company they seek to acquire or merge with. There are often other parts, or side-businesses, that the buyer does not need nor want. 
​

​Unfortunately, many media company owners create a fantasy valuation of their business, based solely on their desire for a high valuation.  But this fanciful thinking benefits no one. It is often a waste of time for the seller, the buyer, us, and a roadblock to getting a fair and equitable transaction closed. 
​

___________________________________
*Fair market value is the price a business, property or other asset would sell for in an open and competitive market where the buyer and seller have adequate information of relevant facts, a reasonable time to complete a deal, are under no compulsion, are acting in their own interests and mutually agree on the price. 

Special Thanks to Craig Sussman, Bill Sondheim, Igor Princ, and Philip Hopkins for their input and suggestions for this article. 
​

Categories: #content #distribution #valuations

June 2021

– 9 MINUTE READ (2200 words) –

PREAMBLE:
What we found interesting in our discussions about Marketing for Streaming Media companies, is that every company is having to forge their own unique marketing path.  There seems to be  no formula to follow that ensures your Channel will attract and sustain subscribers, advertisers, viewers, and create brand loyalty.  

For some, Marketing means building their brand through PR and Publicity on social media; for others it means promoting a specific show or live event; and, still, for others it means spending ad dollars on Facebook or YouTube to attract targeted viewers to their channel or specific shows. Some Streamers are blessed with strong brand names like: FUEL TV, FITE TV, REVRY.TV, or Shout!Factory.  To them, promoting their brand and marketing their channels / shows is the same thing.  While they do promote specific shows, PPV (Pay-Per-View) events, and personalities – everything is done underneath the umbrella of their brand.  

William “Bill” Sondheim, a long-time media executive, who has built, run, and purchased streaming media companies, brings his own unique insider insights on how to build better streaming businesses.  

Stephen J. Kerr, a 25-year veteran corporate and intellectual property appraiser, as well as an M&A intermediary, who has bought, sold, and valued streaming and home media companies, contributes his investment banking and rebuilding brands perspectives to this topic.  
This fourth article focuses mainly on the marketing of owned and licensed streaming media content, and brands. 

__________________________________________

I. WHAT IS “MARKETING”?

Damian Pelliccione, Chief Executive Officer / Co-Founder Revry, Inc. (www.REVRY.tv):  “Our money is usually better spent on places like YouTube, which is more targeted towards video consumers, when we're dealing with the kind of paid acquisitions on social. We are seeing a lot more opportunity on buying inventory, hero units, or featured placement via our third party platforms on which Revry has a channel. Revry has an allocation to spend money on places like Vizio, Samsung, or XUMO, etc.. We see a higher opportunity for the return on what we invest to acquire a viewer on those types of platforms. Independently, on the earned side, we are in the press, two or three times a week.

SONDHEIM: “When SVOD rose as the dominant income stream, driving consumer awareness become less critical because content suppliers were given flat buy outs, and title viewership no longer provided content suppliers with upside, because they had accepted a flat buy out from the SVOD operator. The shift we are now experiencing to AVOD once again allows content owners to participate in the content’s ratings, or performance, because they share in the advertising revenue generated. This makes consumer advertising and driving title performance critical once again, and the skills of placement and evaluation of advertising effectiveness are once again vital to profitability.” 

KERR: “The world’s streaming media companies have adapted quickly to the changing marketing landscape for growing their companies.  Many that started out 5 to 10 years ago as straight-forward subscription based channels, are now a hybrid of SVOD, AVOD, TVOD, Linear and even traditional cable, or broadcast.  This has meant that their marketing resources have also been spread out over multiple platforms and partners.”


Don Meek, Global Chief Content Officer/President and GM--North America, FUEL TV Group (www.FUEL.TV): "There is a set of traditional media properties with whom we can partner to get the word out, and then there's a whole bunch of new content creators that have accumulated on YouTube, Instagram, TikTok, and other social platforms. And very often, it's important to them to get additional viewership on their content. In exchange for providing that distribution we’re able to get reciprocal marketing consideration from them, to let their core constituents know that FUEL TV is back. Our biggest opportunity now is to let our audience know that we’re back and how to watch us.”


PELLICCIONE (Revry): “My instinct tells me that the best use of our marketing dollars moving forward is in the third party environments where we have live linear channels like the Samsung TV Plus’s. Because my firm belief is that connected TV is the cable killer of the future. We're already seeing that kind of adoption because the consumer says, ‘Why buy cable when my television comes prepackaged with my new Vizio TV smart set?’ To me, that is the future, and then how that interacts with your Samsung TV and your Smart handset and your mobile Android device.  TV Plus is killing the mobile market… and we're proud to be a partner.

→ Whether you rely on platform partners, content creators, or YouTube ad dollars, the ultimate responsibility for marketing your channel and programs remain with you.
 

II. YOUR MARKETING MACHINERY NEEDS TO FIT THE MEDIUM. 

Michael Weber, Chief Operating Officer, Fite TV (www.FITE.TV):     “Because we rely on a revenue share model, we give our partners the tools to help promote our shows. We have a database around 4.4 million users of our platform now. And so, we do a lot of grassroots direct marketing to our database. 

“But, then we also do a lot of stuff with affiliate programs. Google Search, Facebook… and then, on another level, we do co-marketing, since our programming is now available on ROKU, Amazon, Apple TV, Vizio TVs, Samsung TVs and LG TVs.  We work with all those partners to market shows because they take a piece of the revenue.  We make everybody a true partner. We say, ‘Okay, so if you’re a  partner and you're in the rev share percentage… then you need to help us market this event.’ The platforms are very responsive to that.”


KERR: “Most Streamers have witnessed phenomenal growth over the past three years and foresee more of the same in the future.  As more Smart TV’s and gateway devices like ROKU, FIRE, and APPLE TV proliferate, so too do they.  None of the Streaming executives that we talked to were as concerned about holding on to their audience, as much as they were getting ahead of the market and holding on to real estate that they have won on Smart devices.  

“Marketing for them is a function of staying relevant and available to their audience.  Social media is a big part of their outreach program, as is special features and maintaining a good image.  For many, loyalty is a product of ubiquity.  Social media is woven into the fabric of everything that they do.  Their communications teams are working overtime to engage their viewers into their upcoming events, new shows, or content partnerships.  No one seems to be all that worried about their subscriber base.  In fact, the newer Streamers have eschewed the subscription model altogether, in favor of being everywhere the consumer wants to watch them.” 


SONDHEIM: “Traditional revenue models like transactional-video-on-demands (TVOD) still remain an important source of income for many independent films and events – and it provides clear and measurable results when measured against marketing campaigns.  

“While placement on these growing AVOD platforms has been seen as relatively easy compared to placement with the studio dominated SVOD Mega Platforms, the enormous amount of content now available on AVOD makes building consumer awareness even more important to ensure consumers watch your shows and content.”


Gene Pao, Senior Vice President, Digital Enterprises, Shout! Factory (www.ShoutFactory.com): "We use the popularity of the shows we offer, and the talent in those shows to build the Shout! Factory TV name... a good example is Mystery Science Theater 3000 on Shout! Factory TV.  
“Recently, we acquired Ultraman, and while we're using Ultraman more to build TokuSHOUTsu, which is our newest channel, we're also putting it on Shout! Factory TV, and promoting it to people that we want to make aware of Shout! Factory TV. 

“The second thing that we do with our content is that we create promotional stunts. So, like for Ultraman, we're going to be doing a big stunt on ‘Ultraman Day’, on July 7th. We're going to be featuring Ultraman episodes and we've got celebrities that are fans of Ultraman helping us create new content. This allows us to make an announcement about it and get people excited about it… as well as launch social media and paid media campaigns.  And that helps us build the Shout! Factory TV and TokuSHOUTsu brand, depending upon what we're attaching to the show.”


→ Most streamers see marketing specific shows and events as the same thing as marketing their channel.  The thinking is, ‘If they like our shows they will love our channel.’ 
 

III. IT HELPS TO HAVE OTHER MEDIA AND MARKETING PARTNERS PUSHING YOUR CONTENT AND YOUR BRAND. 

MEEK (FUEL.TV): “In our world the traditional print publications that super-served each of our core verticals have largely disappeared.
“Today we’re working with digital publishers that are serving these verticals, including  the likes of Surfline and Beach Grit and an assortment of brands who have actually stepped in to fill the void that was left by the death of print. We're also working with regional partners across all of our verticals in Australia, South Africa, Canada, and China.

“A great case study is how we’re working with the surf brand called ‘Salty Crew’. This month we premiered three of their films on three consecutive Thursdays, as part of our ‘FRESH@5’ block. In exchange they promoted our premium SVOD service ‘FUEL TV+’ in dedicated email blasts, where we were able to provide a significant discount to their community.
The audience is still just as engaged as ever, but we’re now faced with needing to find them across a variety of touchpoints.”


PELLICCIONE (REVRY.TV): “As you may know, there were three new networks that Philo launched just last week, ironically on 4/20.  We have an internal Director of Communications who is constantly pitching stories to the press and media outlets. We obviously have a really good relationship with all the LGBTQ publications… most of which we have forged partnerships with. And they constantly write about either our newest content, platforms, or channel launches. So, it's a healthy blend of those two opportunities.”


SONDHEIM: “The distribution landscape continues to dramatically expand by leveraging several business models in this exciting digital age.  AVOD and F-A-S-T Channel revenue is a direct outgrowth of how many people watch your shows, and the platforms have made it clear that suppliers are solely response for driving their individual traffic.  The AVOD market provides an important new area of revenue growth that will eventually become the predominant income source for many of these independent suppliers. 

“Companies that learn how to best target their ideal consumers using social media will be well  positioned to weather the challenges that come from the transition to direct consumer engagement in the digital era.”


→ As the old adage goes, “You can’t be too rich, or too thin.” In the Streaming universe, “You can’t have too many friends in the media, or strategic partners to help you promote your content and your brand.” 
 

IV. IT’S 7:00 O’CLOCK.  DO YOU KNOW WHERE YOUR VIEWERS ARE?

KERR: “One of the most important things that we have learned, while interviewing the Streaming Media executives, is that most of these Steaming Channels are not that concerned about holding on to their subscribers or viewers in just one medium, or on one platform.  In essence, they are taking what the market is giving them and spreading their marketing dollars around to support those platforms and attract new viewers wherever they can find them."


PAO (Shout! Factory TV):  “Measuring the effectiveness of our marketing is really tough. We do know that promoting certain types of events doesn't really drive a significant amount of viewership… but we believe it drives a lot of awareness… so it's hard to tell.  It's not like we can do a marketing campaign or create a stunt, and then see our viewership increased immediately during or after the campaign.  We do get additional viewership at the start, but it's not an overwhelming amount. It’s not like you're watching the NFL Network and they do a lot of heavy promotion for a new show… which generates a whole lot of viewership. For Shout! Factory TV It's more about building our brand and our channels.” 


WEBER (FITE TV): “We do measure the effectiveness of our marketing and track our viewership quite a bit. We have very strong analytics on Pay Per View buys. What countries they come from, what platform the program was bought on, and all this kind of stuff. But we also know the other reason is our FITE 24/7 channel… which is essentially self-promotional.  ‘If you want to watch more programs like this, here's what we’ve got going on this week’ They’re commercials to promote our other shows. So, it's another very grassroots way to market our Pay Per View programming, be it Impact Wrestling this Sunday, which will be a very good show… or a boxing match the following week.”


→ Measuring the effectiveness of your campaigns is easier when you are the one driving eyeballs to your specific channels and programs.  You can look at the numbers in real time and know almost instantly if what you did worked.  Sometimes it does, and sometimes it doesn’t.
 

CONCLUSION:
The world of Streaming Media marketing is not the same as the world of Cable TV, or Broadcast TV that came before it.  As much as we like to compare this medium to its forbearers, it is not the same.  For one thing, Streamers are often much closer to their audiences than cable or broadcasters ever were.  Often they know their hits and misses in virtually real time. 
 
Also, Streamers have a bevy of marketing partners to draw upon, including platforms, content providers, publications, and social media like Facebook and YouTube, that can be a megaphone in the right hands… or even consumers themselves, who not only decide what they want to watch, but can also drag in like-minded friends and enthusiasts.  

The concept of “Event TV” was never closer to a marketing reality than it is when: FITE TV drops another “must see” cage match; Shout! Factory TV creates an Ultraman marathon; or Revry promotes a highly anticipated new LGBTQ series.  Or as Don Meek of FUEL TV put it, “I’m not at all concerned with doubling or tripling the size of our viewership, I’m focused on the challenge of 10X growth. There are more than 300 million people in the world that are active participants in the sports that we put on air.  All we have to do now is reach them.”

The right consumer marketing and the right co-marketing partners can propel your independent streaming channel towards triple digit growth.  Perpetuating your Streaming Media channels across multiple platforms creates horizonal growth and awareness, while marketing specific programs and events creates vertical growth.  

Both horizonal and vertical growth are essential to a Streamer’s success.

Special Thanks to our Industry Experts quoted in this article: ​

Our Firms… 

Looking for more capital, content, or other resources to help you make the right moves for your streaming media business?  


Bill Sondheim and Stephen Kerr can assist.  

• If you need a veteran media guru working alongside you to help fortify your streaming media business, or to initiate & complete licensing deals - please contact Bill. 
  [LinkedIn: https://www.linkedin.com/in/bsondheim/] 
  
  
• If you need a business or intellectual property valuation, IP acquisition / divestiture, or you want to discuss the sale of a company - please reach out to Stephen.
  ​[LinkedIn: http://www.linkedin.com/in/stephenjkerr/]

↓ Endnotes / References ↓

1 – CAPITALIZING ON OVER-THE-TOP CONTENT DEMAND — BMC Online – By STEPHEN J. KERR - 09/11/2018  
http://www.bizmark.net/blogs/capitalizing-on-over-the-top-content-demand

2 - STREAMING WARS CASUALTIES: CABLE TV CHANNELS ON CHOPPING BLOCK — The Hollywood Reporter – By ALEX WEPRIN – 04/28/2021
https://www.hollywoodreporter.com/news/cable-tv-channels-shutter-streaming
 
BAM News • BMC Articles • Greenfield Articles


Image Credits: 

HEADSHOT-LinkedIn_BillSondheim.jpeg – via Greenfield Media

​HEADSHOT-LinkedIn_StephenJKerr.jpeg – via Bel Age Medias

Categories: #content #distribution #marketing #streaming #entertainment #OTT #streamers #worldwide #SVOD #AVOD #TVOD #FAST #linear #broadcast #marketing 

March 2021

– 7 MINUTE READ (1900 words) –
 
PREAMBLE:

​Some of the things we hear from successful streaming media executives are that: you should never become complacent, you should never stop growing your audience, and you should never ever settle for just one medium, like SVOD or AVOD, when there are other ways to expand your reach. The term most often used by Streaming executives is ‘ubiquity.’  
 
Netflix, Amazon, and Disney+ might be able to remain subscription-based only services, but most OTT streamers need to explore every possible path to market including: SVOD, AVOD, TVOD, Linear and Broadcast, if they wish to succeed and remain relevant. 

William “Bill” Sondheim, a long-time media executive, who has built, run, and purchased streaming media companies brings his own unique insider insights on how to build a better streaming business.  

Stephen J. Kerr, a 25-year veteran corporate and intellectual property appraiser, as well as an M&A intermediary, who has bought, sold, and valued streaming and home media companies, contributes his investment banking perspective to this topic.  

​This third article focuses mainly on the distribution of owned and licensed content.

​DRAMATIC CHANGE & STEADY GROWTH ARE BUILT INTO THE OTT LANDSCAPE.
 
Philippe Guelton, President of Crackle Plus and head of VOD Networks at Chicken Soup for the Soul Entertainment: “I love the fact that the streaming media industry is changing all the time. I learn every day of a new platform, or a new device, or a new competitor. And it's fascinating. It's really exciting. It's rare to have an area of media that is growing so fast. At one point in media’s evolution, it was social media… at one point it was mobile, at one point it was digital. And now it's really the age of OTT streaming.  
 
“It's exciting to see how it's growing so fast on the audience side, but also on the revenue side. Whether it's consumer funded, or advertising funded… it's time to be in this space for sure.”

 
SONDHEIM: “The streaming landscape is going through a rapid bifurcation of services driven by the enormous multi-billion-dollar investments the studios and a few leading technology companies are making in the content streaming business. This has accentuated the divide between the major Hollywood studios and the dozens of well-known media brands that are also trying to transition their legacy distribution businesses into digital streaming strategies. 
 
“It would be easy to predict the global conglomerates will prevail due to their almost limitless access to capital and highly desirable content, but I believe these monoliths also allow potent narrowly defined niches to form, creating opportunities if you manage the growth of your smaller service in a disciplined manner. We often hear the expression that ‘Size Does Matter,’ well, I believe that operating a modest sized streaming business offers great potential for profitable growth if you can manage your content costs while refreshing your programming to ensure continued engagement.” 
​
 
KERR: “Courting new linear online platforms like Philo, STIRR and PLUTO TV can take months or even years, and managing advertising on your site may require hiring some in-house ad sales people, but in the long-run it will probably be worth it.  
 
“You always need to be looking years down the road while continually tweaking your content, technology, and customer interface to meet consumer demands.  But you also need to make sure that your channel is available anywhere, and everywhere, that consumers want to access it.  
 
“Even if the majority of your revenue comes from only one platform or viewership base, adding other platforms and media can be accretive to your long-term growth and can position your channel(s) for future changes in consumer viewing preferences.”  
 
Tony Havelka, President of Ameba TV: “There really isn't a well laid path that everybody takes, that they can march down, that’s a guaranteed path to success. 
 
“Everybody's trailblazing. They see a little path and sometimes get into a dead end… move back and have to go do something else. …everybody right now is trying to get into AVOD, but show me a profitable AVOD. They are still trying to figure that out.”
 

→ You have to be nimble & flexible to survive & thrive the streaming wars.
​

MATCHING YOUR MESSAGE TO THE MEDIUM WINS DEVOTED FOLLOWERS.
 
GUELTON (Crackle): “Our biggest current challenge is prioritizing and delivering all these new products as quickly as we can. And yet, we've got to take great care of the users, etc. 
 
“This year we're about to relaunch both Crackle Plus and Popcornflix on brand new platforms. We believe that it's also very important to upgrade our Apps and offer a better user experience, better integration, better content discovery, and faster load speeds.” 


KERR: “We always cringe a bit inside when we hear Streaming execs say that their service is going to remain only subscription-based or only advertising-based… And that they have no intention of changing.  It reminds us of the Home Video days when some DVD distributors relied only on Walmart or only on Blockbuster to reach consumers.  
 
“When the crunch came, they were the first ones to fold. 
 
“Having said that, your content and your m­arket niche can play a major role in where you want to be seen. Not all streaming media services lend themselves to linear or advertising driven platforms.  The tighter your niche, the more focused you have to be to service your target audience.  If your audience is made up mostly of extreme sports enthusiasts or baking enthusiasts, for example, there may be no motivation to expand your market reach further than a half dozen platforms and mediums.  
 
“‘Know thy audience’ should be the first rule of any streaming executive.  Making your channel easy to find, easy to access, and easy to use, can be far more rewarding than making it available everywhere.”  
 

Bonnie Comley, CEO / Founder, BroadwayHD: “Like any SVOD service, content has been our biggest success, and new content is the biggest obstacle to growth. 
 
“BroadwayHD is a niche streamer and the tighter we focus on our niche of content – ‘Broadway shows’ - the more successful we become.”
 

SONDHEIM: “We are seeing niche content companies, catering to passionate, albeit limited audiences, continue to grow their user bases by being ‘platform agnostic.’ 
 
“The overall consumer base has become very fragmented using dozens of different services and formats to consume their various content needs. 

“The modest niche companies need to embrace this wide availability model with equal enthusiasm to secure distribution deals across AVOD and SVOD and even TVOD outlets.” 

 
Philip Hopkins, President of The Film Detective / Fandor (Divisions of Cinedigm):  “…it's a matter of getting the platform distributors to believe that your programing is going to work for their customers. But on top of all of that, you've got to really help them get an audience educated that they are going to get engagement with an enthusiastic group of admirers of the content. 
 
“With Pluto TV we did a joint venture with them five years ago which helped them in the background with social media, and made sure that people knew - that if you love classic movies, you can now watch them 24/7 on Pluto TV.”
 

→ To keep growing you need to keep innovating. 
​

WEIGH THE COST OF EXPANSION AGAINST THE FINANCIAL REWARDS.
 
SONDHEIM: “As we see the consumer options explode with various channels, making your OTT channel available as a subscription will appeal to your most committed audience, but a more casual fan may opt to watch some ads and avoid another monthly subscription to their growing list of bills. 
 
“Making both of these consumer models feel like a priority will prove an important way to mitigate risk and broaden income streams.” 
 

GUELTON (Crackle): “We are already now on close to 30 different platforms. And I'm talking about Crackle only. We are on all the traditional legacy platforms like ROKU, Fire TV, the VODs, apps on Samsung and Visio and LG. We obviously have our Android and iOS apps, mobile and tablets, and we have distribution on the setup box through Comcast. The list goes on and on.
 
“We just launched our first linear channels in December. Crackle had been just on-demand, but we thought it was very important to create linear experiences to allow viewers to sample our VOD content. So, we started with PLEX TV, which has been a very important partner for us. We actually were their first VOD partner. We launched our Crackle and Popcornflix linear channels on PLEX TV. 
 
“We've also just recently launched on XUMO. We're going to be on probably half a dozen new FAST (Free, Ad-supported Streaming TV) platforms in the coming month.”

 
HAVELKA (AmebaTV): “It took us two years to get on XBOX, but it turned out really well. We were lucky. It just it checked all our boxes to start off, like a small, focused App Store and huge market. And then that took off. Xbox is one of our biggest platforms still to this day. 
 
“And then the same thing happened with Amazon. When Amazon called us about getting a channel, we were like, okay, let's figure it out. We had to retool our entire organization in order to comply with Amazon's content requirements. How it has to be formatted, how you submit, how you do takedowns, how you deliver everything. We're constantly adding new titles to our channel, so we had to automate that. It was worth it, Amazon has become our biggest source of subscribers.” 

 
→ Jumping from streaming to linear can be rewarding, but there’s a risk! 
​

IF YOU HIT A GLASS CEILING IN NORTH AMERICA – WHERE DO YOU GO?
 
KERR: “Do not limit your service to just the USA or North America.  There is (literally) a whole world of consumers out there who are just waiting to see what you’ve got.” 
 

COMLEY (BroadwayHD): “International expansion is a large opportunity for BroadwayHD. As we acquire content, we have made a focus to try to grab all of the territories that are available to us with the goal of establishing large enough libraries internationally to justify the monthly cost to subscribers. 
 
“We recently put a focus on UK expansion as the obvious first market outside of the US.”

 
HOPKINS (TheFilmDetective / Fandor - Cinedigm): “I’m looking for the ability to scale and move into a lot of new territories that we haven't gotten into.  International is wide open for us. We've been talking to a couple of large foreign platforms that were able to test the waters. 
 
“What I'm looking forward to is not just the growth that we can afford now, but that we now have a larger organization which will allow us to scale.”
 

→ You need to have worldwide rights to enjoy worldwide growth.
​

CONCLUSION:
 
If ‘Content Is King’, Distribution is certainly Queen. Because without her… the King is nothing.  
 
Sondheim and Kerr have been around long enough to see entertainment and informative content proliferate from theaters and television, to home video, disks, cable, and now to streaming.  All the same growing pains that you are experiencing now, were there twenty and thirty years ago in the other mediums.  
 
What these Streaming media executives continue to tell us is that you need to think BIG! And, be everywhere and anywhere that consumers want you to be.  We are simply ushers for our audiences.  
 
Disney+ just exceeded 100 million subscribers in less than two years by providing consumers with beautiful content, well presented, on a platform that is easy to navigate.  
 
When we asked Phillip Hopkins of The Film Detective / Fandor what his future plans were now that he is a division of Cinedigm, he replied “World domination.”  We agree! You have to think like that… whether your niche content is Broadway musicals, cartoons, movie classics, or documentaries.  
 
World domination should be your goal.  
​

​–––––––––––––––––––––––––––––
Special Thanks to our Industry Experts quoted in this article: 
 

Tony Havelka, Founder / President of Ameba TV
​& President of TekGear Inc. 
[https://www.linkedin.com/in/tony-havelka-79b060b/] 
AmebaTV.com • TekGear.com

Bonnie Comely, CEO / Founder at BroadwayHD
[https://www.linkedin.com/in/bonnie-comley-7705a515/] 
BroadwayHD.com

Philip Elliott Hopkins, President at The Film Detective / Fandor (Divisions of CINEDIGM) 
[https://www.linkedin.com/in/philip-elliott-hopkins-934a7b11]
TheFilmDetective.com • TheFilmDetective.TV • Fandor.com

Our Firms… 

Looking for more capital, content, or other resources to help you make the right moves for your streaming media business?  

Bill Sondheim and Stephen Kerr can assist.  

• If you need a veteran media guru working alongside you to help fortify your streaming media business, or to initiate & complete licensing deals - please contact Bill. 
  [LinkedIn: https://www.linkedin.com/in/bsondheim/] 
• If you need a business or intellectual property valuation, IP acquisition / divestiture, or you want to discuss the sale of a company - please reach out to Stephen. 
  [LinkedIn: http://www.linkedin.com/in/stephenjkerr/]
  
  

ABOUT: Stephen J. Kerr – Bel Age Médias / Business Marketing Consultants – specialize in Corporate / Film & Television Valuations, Mergers & Acquisitions, Business Plans, Investment Profiles, and Exit Strategies, as well as a broad range of other Investment Banking services.  

​Alongside his partner – Sarah Nean Bruce – Bel Age Medias Revives Underperforming IP, Rebuilds Brands, Creates Financial Projections, Syndicates New & Legacy Streaming Content, and Helps Emerging Media Companies Prosper. 

https://belagemedias.com
​

↓ Endnotes / References ↓
1 – INSIDE THE FIGHT FOR EXCLUSIVE CONTENT AS STREAMERS ACQUIRE STUDIO LIBRARIES
— TheWrap – by DIANE HAITHMAN – 02/16/2021 
https://www.thewrap.com/fight-for-exclusive-content-as-streamers-acquire-studio-libraries/
 
2 – NICHE STREAMERS NEED TO INNOVATE, PIVOT, CONSOLIDATE TO COMPETE WITH ‘MUST HAVE’ SERVICES 
— Media Play News – By BILL SONDHEIM – 01/11/2021 
https://www.mediaplaynews.com/niche-streamers-need-to-innovate-pivot-consolidate-to-compete-with-must-have-services/
 
3 – SPENDING ON STREAMING SERVICES AND SOFTWARE COULD REACH $112 BILLION IN 2021 
— The Hollywood Reporter – By CAROLYN GIARDINA - 01/11/2021 
https://www.hollywoodreporter.com/behind-screen/spending-on-streaming-services-and-software-could-reach-112-billion-in-2021
 
4 – INTERNATIONAL STREAMERS INVESTING MILLIONS TO TAKE ON NETFLIX OVERSEAS 
— The Hollywood Reporter – by SCOTT ROXBOROUGH - 04/02/2019
https://www.hollywoodreporter.com/news/international-streamers-investing-millions-take-netflix-overseas-1198653
 
5 – CAPITALIZING ON OVER-THE-TOP CONTENT DEMAND 
— BMC Online – By STEPHEN J. KERR - 09/11/2018 
http://www.bizmark.net/blogs/capitalizing-on-over-the-top-content-demand
 
BAM News • BMC Articles • Greenfield Articles

Image Credits: 

FEATURED-GRAPHIC_HOW TO BUILD A BETTER STREAMING MEDIA COMPANY (Part 3)_FINAL.jpg – via Bel Age Medias  

INFOGRAPHIC_HOW TO BUILD A BETTER STREAMING MEDIA COMPANY (Part 3)_FINAL.jpg – via Bel Age Medias

INFOGRAPHIC-TITLE_HOW TO BUILD A BETTER STREAMING MEDIA COMPANY (Part 3)_FINAL_LI.jpg – via Bel Age Medias

HEADSHOT-LinkedIn_BillSondheim.jpeg – via Greenfield Media

HEADSHOT-LinkedIn_StephenJKerr.jpeg – via Bel Age Medias

Categories: #content #distribution #streaming #entertainment #OTT #streamers #worldwide #SVOD #AVOD #TVOD #FAST #linear #broadcast
​

*******************
If you’d like to READ Part ONE Article 
or SEE Infographic
CLICK LINKS 

HOW TO BUILD A BETTER 
STREAMING MEDIA COMPANY (Part 1) 
Advice for Companies Doing Business 
in the Streaming Media Industry


↓ ARTICLE LINK ↓
http://www.bizmark.net/blogs/how-to-build-a-better-streaming-media-company-part-1

↓ INFOGRAPHIC LINK ↓ 
http://www.bizmark.net/blogs/infographic-how-to-build-a-better-streaming-media-company-part-1

~&~
 
If you’d like to READ Part TWO Article 
or SEE Infographic
CLICK LINKS 
HOW TO BUILD A BETTER 
STREAMING MEDIA COMPANY (Part 2) 
Licensing And / Or Buying 
Streaming Media Content

↓ INFOGRAPHIC LINK ↓ 
http://www.bizmark.net/blogs/infographic-how-to-build-a-better-streaming-media-company-part-2

↑ Download this PDF of INFOGRAPHIC ↓ ​

​January 12, 2021

– 15 MINUTE READ –

Licensing or buying content (movies, TV shows, documentaries, talk shows, etc.) is fundamentally the same thing. The terms of payment and the contracts are different (paying over time, versus paying up-front) – but they are both remarkably similar ways to aggregate content for an OTT Streaming channel.  

Like Home Entertainment (DVD) distributors and Broadcast (cable & free TV)  before them, many Streamers start out licensing content from many sources, but then find it essential to create their own original shows. They may contract with known third party producers or have their in-house creative/producers/crews make the programming.  

William “Bill” Sondheim, a long-time media executive, who has built, run, and purchased streaming media companies brings his own unique insider insights on how to build a better streaming business.  

Stephen J. Kerr, a 25-year veteran corporate and intellectual property appraiser, as well as an M&A intermediary, who has bought, sold, and valued streaming and home media companies, contributes his investment banking perspective to this topic. 
​
This second article focuses mainly on purchasing and licensing content from independent third parties.

As we mentioned in our first article on this subject, excellent content with poor distribution is as ineffective as terrific distribution with poor content.  Neither will lead to success.  Only top shelf content coupled with broad distribution succeeds.  The more tailored to the specific audience, the better.

We’ve valued and sold many copyrighted and classic film and television libraries over the years, but those transactions seem to be hard to find these days.  Most of the best independent film libraries have been sold/licensed a long time ago, and the major studios that control the largest IP archives have all but closed their doors to licensing – instead, they prefer to populate their own OTT streaming channels with their own branded content. 

Smaller and mid-sized streaming media companies have to be judicious and smart about how they populate their channels with content.  They cannot spend like drunken sailors the way Netflix, Apple and Amazon have.  

We interviewed executives at five well-managed streaming companies to get their insights on producing, licensing, and buying programming for their linear and streaming channels.  Their answers were illuminating.
​
One thing we discovered was that acquiring content that fits and helps build an OTT Streamer’s BRAND is more important to some Streamers than it is to others. 

Steve Saltman, Head of Domestic US Sales at Electric Entertainment (ElectricNow):  “It is consistency in our branding and our marketing, and the message that we put out.  That’s where the return on investment is – it’s all about building our brand and investing for the future." 
​

David Kraus, CEO Flixx Media (Flixx.net): “Often we’re not out promoting Flixx, we’re promoting a particular show.  We are not going to go out and advertise Flixx, we’re advertising the shows. If the audience discovers and likes the show or series, we know that they will like Flixx as well."
​

Jeff Clanagan, Co-Founder & CEO (Laugh Out Loud Network): “One thing that we are able to track is that we are driving traffic to the channel and create brand affinity through our social media marketing. Pluto has 200+ channels, XUMO has 200+ channels, all the TVs have lots of channels, so we need to build our brand so that people make sure they are coming to the LOL channel."
​

Whether content is created (Executive Produced), purchased from third-party producers, or licensed, there are almost always restrictions with what one can do with it.  
​
When new shows or movies are created, usually – but not always –  the Executive Producer is in control of how (and where) the content can be used.  Often the Streamer did not pay 100% of the cost of creating the content, or they may have pre-sold the show to other, bigger customers (like HBO or Netflix) that have first window rights.
​

 SONDHEIM:  “Licensing existing content vs. producing original content is part of this decision process. We have seen that the major studios and streaming services like Netflix have benefitted from funding original shows, but the cost is enormous and requires deeper pockets and a sustained commitment. 

“Licensing provides the small and medium sized streamer some important advantages as they start to build their customer base. The Streamer only pays a fraction of the total cost to make the shows they license. Your channel benefits from pre-existing awareness the property has already created, which makes your service look valuable, with known and recognizable assets. 

“Finally, those well-known shows help to define your service.  You become known as a ‘Family’ channel or a ‘Kids’ channel or a ‘Horror’ channel, because of well-known programs you use to help define your service profile.”
​

KRAUS (Flixx.net): “Our first 30 pieces or so of content were licensed from influencers.  Now we are picking up shows that were produced for broadcast television. They were used once on broadcast TV and then just stuck on a shelf.  For example, we have a great show that came out of a production company in New Jersey which is looking for ways to repurpose their content. Even the big guys have programs that they used one time on TV and they are just stuck it on a shelf.” 
​

KERR: “As IP appraisers, we usually value media content according to one of two measurements, the first is ROI (Return On Investment), and the second is COMPS - comparing one piece of Intellectual Property to IP of a similar quality and nature.  

“Streaming media companies keen on building their audience may not care about ROI, or how much they pay for a particular movie or show, compared to what others paid, or even what they paid for similar content in the past.  Building an audience and building a brand can often take precedent over the price Streamers pay for any single piece of content.”
​

KILLION (ComplexNetworks): “Our Audience & Business Intelligence teams can give insights with respect to how a show will most likely perform on our ad supported O&O platforms prior to our producing and launching it. Therefore, we’re able to look at the CROCI (Cash-Return-On-Cash-Invested) in the first-run of the series before spending a dollar. We can look at each other and say, ‘We know this show is not going to be cash flow positive on a sponsorship or pre-roll point of view, but we think it will be great for the brand. So, do we feel confident that we will be able to license it to linear television after we have had our run on YouTube?’  We can then then perhaps come to the conclusion that while it might not be profitable on its first run, we know that it is going to be profitable on its second, third, fourth and fifth runs.”  
​

KERR: “We look at Intellectual Property valuations differently than the producers of IP do.  We are most interested in the remaining economic life left in the assets, and less interested in the critical success of the film / show, or how much it cost to make. 

“To arrive at a rational price for films or television shows, the buyer or seller should have someone run a Present Value Analysis.  To do that, one needs to project out what the future value that program will bring to the channel – less all the prep and exhibition expense.  That Net Revenue can then be projected over the expected economic life of the content.  One should then discount that Future Value to account for the risk they are taking, and the cost of capital.”
​

SONDHEIM: “The most important part of catalog valuations is to let the data do the talking. Catalogs come with historical sales data that clearly define the past revenue and draw a likely line to the future potential. 

“It is important to consider how the marketplace has changed, or will likely change, in the coming few years when reading past data to forecast future value. If you have a catalog that has strong DVD sales you will need to heavily discount that in future projections. Equally, if you have modest or no data for AVOD on that same catalog there could be substantial upside. 

“Understanding the macro market trends and how they affect your specific genre or titles is an art that comes from years of industry experience.” 
​

KERR: “When purchasing content, one of the hardest things for most Streamers to manage is Seller expectations.  Content creators / owners often have high hopes and unrealistic anticipations that are far above what Streamers are willing - or able - to pay.  

“It often falls to IP appraisers to intervene between buyers and sellers and render a neutral Fair Market Value opinion of the IP being considered. Sometimes even professional valuations do not end the disagreement between sellers and buyers of content. Emotions, misconception, and simple greed often cloud these negotiations.” 
​

Revenue Sharing (rev share) deals are very popular - and necessary - for many streaming media companies today because they allow the OTT Streamers to spread their content acquisition costs out over many years, and many properties.  Structuring Rev Share transactions – also – is an art in itself and requires the Producer’s faith in the Streamer’s ability to both promote the shows and to regularly report and remit their proportional share of the revenue once the content is viewed. 
​

HOPKINS (TheFilmDetective / Cinedigm): “Most of our OTT platform deals are rev shares.  That’s what we typically do with most of the larger, trustworthy platforms.  They have good reporting, so you know if and when you’re going to get paid.  We do the same thing for content that we license.”
​ 

KRAUS (Flixx.net): “We do a revenue share on the sponsorships and advertising with the content provider. Some of these shows from television already have embedded commercials and we allow them to leave those commercials in and don’t expect any revenue from those commercials.”  
​

SALTMAN (ElectricNow): “We rotate in and out properties.  We try to always offer something fresh, and at the same time our existing properties we might retire for a little bit and bring them back at an appropriate time.  Every month, some of our programming is pulled off and given a chance to rest. At the same time, new programming comes in. We always have that kind of rotation." 
​

HOPKINS (TheFilmDetective / Cinedigm): “No one gives us data that is as granular as we can get from our own platform.  Because we can get all the analytics and engagement on our channel.
​

CLANAGAN (Laugh Out Loud): “AVOD still does not have the capabilities at this point to give me psychographics on who is watching.  I can tell you how long people are watching, how many hours people are watching, but I don’t have a profile of them. In reality, nobody does yet, because there is no uniform measuring system." 
​

KILLION (ComplexNetworks): “We do robust audience development with a large business intelligence department, which works hand-in-hand with management to provide insights as to how we can optimize our audience engagement to enhance our overall company performance.  

“At the end of the day, we do make a lot of gut decisions.  The business and audience development teams are great to look at for advice going forward, but if you want to be ahead of the curve, which is what Complex is so much about, you need to take risks on people who have not necessarily had the exposure yet, to co-sign that they are going to be a star.” 
​

There is no question that consumers are getting more and more of their entertainment and information from Streaming media.  As we have seen, aggregating content for these channels is more of an art than it is a science.  The big media conglomerates have vast libraries and robust production companies that continue to churn out content for their growing audiences. But for the vast majority of the small and mid-sized Streamers, they have to be smart and frugal with their limited content acquisition dollars.  That is easier to do when a Streamer has a narrowly defined audience such as cooking, business, music, home shopping… or sneaker collectors.  

Many small to mid-sized OTT Streamers are focused on building their brand.  Companies like ElectricNow markets a brand of programming that is consistent with the movies and television shows of its founder Dean Devlin.  LOL Network relies on the star power of its owner Kevin Hart to attract branded shows, movies, and specials to their network.  

Social media plays an important role in the success of all of the Streaming channels, both large and small.  Flixx uses social media to promote targeted programs to its audience. LOL uses Kevin Hart’s millions of followers to drive traffic to their network. And ComplexNetworks.com relies heavily on social media to promote their edgy new shows.  Social media on YouTube, Facebook, Twitter, TikTok, Vimeo and others is an essential component to the marketing success of Streaming media companies.  Plus, they are a constant source of new content as “influencers” rise up and fade away – along with their millions of followers.

Building and maintaining a “brand,” and building and maintaining a high-quality stream of content is the daily toil of every Streaming media company.  They can never slow down, never give up, never lower their standards, because there are hundreds of other media companies out there looking to steal their audience away and make them their own. 
 
–––––––––––––––––––––––––––––

Philip Elliott Hopkins, President at The Film Detective (a Division of CINEDIGM)
https://www.linkedin.com/in/philip-elliott-hopkins-934a7b11
https://thefilmdetective.com 

David Kraus, CEO Flixx Media (FlixxTV)
https://www.linkedin.com/in/hiredavidkraus/ 
https://flixx.net 

The next article in our series HOW TO BUILD A BETTER STREAMING MEDIA COMPANY (Part 3) Distributing & Securing Your Place in the Streaming Universe will focus on distribution tactics.  
 
With the help of veteran OTT executives on the front lines of the Streaming Media industry, we will explore the ways to distribute content and proliferate brands over AVOD, SVOD, TVOD, and LINEAR distribution points.​

*******************
​
If you’d like to READ Part ONE Article
or SEE Infographic
CLICK LINKS 
HOW TO BUILD A BETTER
STREAMING MEDIA COMPANY (Part 1) 
Advice for Companies Doing Business
​in the Streaming Media Industry

↓ ARTICLE LINK ↓
http://www.bizmark.net/blogs/how-to-build-a-better-streaming-media-company-part-1

↓ INFOGRAPHIC LINK ↓ 
http://www.bizmark.net/blogs/infographic-how-to-build-a-better-streaming-media-company-part-1
 
 
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Our Firms…  
Looking for more capital, content or other resources to help you make the right moves for your streaming media business?  

Bill Sondheim and Stephen Kerr can assist. 

• If you need a veteran media guru working alongside you to help fortify your streaming media business, or to initiate & complete licensing deals - please contact Bill. 
  [LinkedIn: https://www.linkedin.com/in/bsondheim/] 
• If you need a business or intellectual property valuation, IP acquisition / divestiture, or you want to discuss the sale of a company - please reach out to Stephen. 
  ​[LinkedIn: http://www.linkedin.com/in/stephenjkerr/]

↓ Endnotes / References ↓  
​

1 - SPENDING ON STREAMING SERVICES AND SOFTWARE COULD REACH $112 BILLION IN 2021 – TheHollywoodReporter.com – 01/11/2021 By Carolyn Giardina https://www.hollywoodreporter.com/behind-screen/spending-on-streaming-services-and-software-could-reach-112-billion-in-2021

2 – HOW TO BUY SELL OR VALUE A STREAMING BUSINESS PART 2 – BMC Online – 06/24/2019 By Stephen J. Kerr http://www.bizmark.net/blogs/how-to-buy-sell-or-value-a-streaming-business-part-2
 
3 – HOW TO BUY SELL OR VALUE A STREAMING BUSINESS PART 1 – BMC Online – 05/30/2019 By Stephen J. Kerr http://www.bizmark.net/blogs/how-to-buy-sell-or-value-a-streaming-business-part-1
 
4 – CAPITALIZING ON OVER-THE-TOP CONTENT DEMAND – BMC Online – 09/11/2018 By Stephen J. Kerr http://www.bizmark.net/blogs/capitalizing-on-over-the-top-content-demand

BAM News • BMC Articles • Greenfield Articles
​

Image Credits: 
 
FEATURED-GRAPHIC HOW TO BUILD A BETTER STREAMING MEDIA COMPANY (Part 2)_FINAL.jpg – via Bel Age Medias  

INFOGRAPHIC-HOW TO BUILD A BETTER STREAMING MEDIA COMPANY (Part 2)_FINAL.jpg – via Bel Age Medias  
 
HEADSHOT-LinkedIn_BillSondheim.jpeg – via Greenfield Media
 
HEADSHOT-LinkedIn_StephenJKerr.jpeg – via Bel Age Medias

Categories: #content #distribution #streaming #entertainment #OTT #streamers #worldwide 
​

↑ Download this PDF of INFOGRAPHIC ↓ ​

November 16, 2020 

– 10 MINUTE READ – 

PREAMBLE:

This is the first in a short series of succinct articles.  Included in these pieces are questions posed by Stephen Kerr, and William Sondheim, along with their perspectives, and answers - via direct quotes - from owners and executives of streaming media companies who were recently interviewed. 

William “Bill” Sondheim, a long-time media executive, who has built, run, and purchased streaming media companies brings his own unique insider insights on how to build a better streaming business.  

Stephen J. Kerr, a 25-year veteran corporate and intellectual property appraiser, as well as an M&A intermediary, who has bought, sold, and valued streaming and home media companies, contributes his investment banking perspective to this topic.  

The industry execs, we interviewed, share their “in-the-trenches” perspectives, and experiences, on the “OTT” streaming media industry.

 

Sondheim and Kerr agree that more needs to be written about and for the more than 400 small and mid-sized streaming media companies in North America, plus the hundreds of others overseas.  What is published in the media trade publications mostly focuses on the five or six heavyweight streaming channels (like Netflix, Apple+, and Amazon Prime), which are all owned by giant media conglomerates.  

Much of what is written about the huge, multinational streamers is not very helpful to the abundant streaming company owners and executives hustling and struggling to compete in the crowded streaming media space.

Here it begins – everything streamers may want to know and are not afraid to ask.

_____________________________

WHAT ARE THE FOUR PRINCIPAL ASSETS OF THE STREAMING MEDIA BUSINESS?

Both, Sondheim and Kerr, concur that CONTENT, DISTRIBUTION, SUBSCRIBERS / VIEWERS, and INFRASTRUCTURE / MANAGEMENT are any streamer’s four principal assets.   

​How well these assets have been managed, and how fast they have grown and evolved, are what create and sustain strong streaming media businesses.  
 
Sondheim’s advice is aimed at strengthening a streamer from the inside out.  
 
Kerr’s guidance relates to making media companies more valuable from the perspective of bankers, investors, and suitors.   
 
Both points of view are important to smaller and mid-sized streaming media businesses.

 

CONTENT.

SONDHEIM: “Content is really the driver of all consumer traffic and therefore drives revenue. While it is important to secure strong distribution and it is equally important to have strong operating systems for accuracy and efficiencies, none of those elements will really drive success without the right content to create initial intertest and to sustain that engagement over time. In fact, focusing on strong and compelling content will often help a company secure broader distribution and better trading terms with those distributors.  
“Equally impactful, having well recognized content will draw in more sophisticated service vendors that want your business and that helps improve your operational workflows. The consumer appetite for content is enormous and must be used to create the momentum needed for strong placement and operational excellence.”

KERR: “From the perspective of an appraiser and business broker, whether owned or licensed, exclusive or non-exclusive, high-quality content (especially exclusive) is often seen as a streamer’s single largest asset. When we value a company we often look at their content first, to determine if the enterprise would have value to others. 
“We have found over the years that niche, enthusiast focused content is viewed as much more valuable than a broad range of unrelated titles. The large streamers like Peacock, Disney+, Netflix and Amazon Prime can try to be all things to all people because they have massive back catalogs.  But the small to mid-sized streamers need to offer focused, enthusiast-oriented content.” 

Steve Saltman, Head of Domestic US Sales at Electric Entertainment (ElectricNow): “The voracious eater of capital for us is content and marketing.  We can’t keep running the sprockets off of our existing programs.  We need to create and acquire new properties to keep the dynamics.  We’re making a big investment in production and getting the consumers to find us.”

   

DISTRIBUTION. 

​KERR: “The number and breadth of distribution contracts (Amazon Prime, ROKU, TUBI, XUMO) a streamer has, can sometimes be more valuable than their content.  Companies that have all non-exclusive content can still be very robust and financially successful if they have excellent distribution of their channel(s) across multiple platforms, and overseas.  
“But, it has also been our experience that ‘Content is not everything.’  SVOD, AVOD, TVOD and Linear distribution, well-placed and well-supported, can become a major asset for a streamer.  Of course, the combination of great content and great distribution is everyone’s Holy Grail.” 

​SONDHEIM: “Many content companies are still trying to navigate the rapidly changing digital landscape. Three years ago, a successful, smaller content producer might have been focused almost entirely on placing titles with Netflix. Three years later we see Netflix has pivoted to internal content development and production, and many smaller independent producers have little chance of placing their existing titles with them. Companies that have strong established deals in place with platforms can greatly accelerate their revenue growth.  
“Equally, companies that may have lagged behind in establishing those distribution deals with emerging platforms may benefit from merging with an entity that already has those relationships, and legal contracts, in place.  This is a proven technique to accelerate distribution capability and often is exhibited when smaller content companies, with excellent distribution in place, become attractive takeover targets for larger companies with stronger content, that may have struggled with new business development or been slow to adapt due to focus legacy businesses.” 

Victor Elizalde, CEO Viva Film Co. (Kidsflix): “If I had a large influx of funds I would use it to consolidate the marketplace.  With all the independent companies out there, the economics are such that they all can’t succeed, and they won’t.”

SALTMAN (ElectricNow): “The cream will rise to the top, and others will fade away.  I do worry about being an independent.  The Big Boys have leverage that I do not.  From a programming point there are  barriers of entry.  The Big Boys create what I call ‘pseudo walled gardens’ where they keep a lot of their best content for themselves and won’t license it out, because they have huge libraries of great programming, with big brands that people recognize and follow. As an independent we’re lucky as we have several significant brands that we created and we own.”

  

SUBSCRIBERS / VIEWERS.

KERR: “If a streaming media company is adding and retaining SVOD subs or AVOD viewers at a fast clip, this can be a huge attraction to any investor or suitor.  Included in this perceived benefit are a company’s marketing skills, success rate and global marketing reach.  
“Niche streamers often know their ‘enthusiast’ audience better than anyone else.  Using a combination of social media and affinity marketing, they can regularly grow their target audience faster than a much bigger media company with a large but non-specific audience.  It is still critical to have the right, freshest content, as well as great distribution… but inspired subscriber / viewer marketing really separates the professionals from the amateurs.”  

​SONDHEIM: “There are several factors that can drive rapid growth in both SVOD and AVOD outlets. Often content categories are underserved, or the defined target audience is unaware of the service being provided. Marketing and promotion are critical to finding a streamer’s audience, giving them clear reasons to initially subscribe, and then - equally important - retaining that audience so that they stay subscribers, lowering subscriber ‘churn.’  
“While there are many traditional advertising outlets like print and TV, we have seen a clear correlation between social media and the ability to reach and convert targeted demos into subscribers or frequent visitors.  Social media is both interactive and ubiquitous, that is why social media is able to generate high response rates and measurable actions. If you see something you like on a social media post you can often click instantly to a link and the transaction has begun. The group interaction on social media also tends to motivate like-minded consumers into action.  We have found that marketing budgets - and their measurable effectiveness - are far greater with social media marketing for digital consumers than any other traditional media outlet.” 

Ryan Swenar, Director of Sales & Biz Dev at WowNow Entertainment (WowNowKids): “The first place we want to put our resources is marketing. More visibility is key.”  

David Kraus, CEO Flixx Media (FlixxTV): “It’s all a land grab right now. And the ‘land’ is the viewer.”

ELIZALDE (Kidsflix): “There is no doubt that the medium is growing.  Platforms are growing.  The industry is growing globally.  One thing that we all need to learn from Quibi’s horrible mistakes is that we have to give the consumer the content in the format that they want to consume.” 2

   

INFRASTRUCTURE / MANAGEMENT.

SONDHEIM: “If ‘Content is King’ - then the managers and operators who have a deep understanding of content categories, and who have strong relationships with the creative community, are very valuable. 
“Experience with those niche content clusters can help avoid costly mistakes, and that can bring enormous value. Understanding a niche audience accumulates over time from successes and failures. Often niche audiences possess unique aspects that attract or repel them, time, and management experience are often the best ways to master those nuances.”

KERR: “Even the biggest media companies cannot cover all the niche markets, and an entrepreneur’s knowledge of a specific enthusiast group can make his / her company incredibly valuable.  This is especially true when the owner is perceived as a ‘celebrity’ or ‘influencer’ in that niche market.  
“Proprietary technology / infrastructure can also be perceived as major assets to a suitor if it will save that company money or make them more efficient.  Much of the technology required to run a robust streaming company has become almost omnipresent (technology democratization), but proprietary systems that offer a competitive advantage to a small company may be perceived as important to a much larger organization.”

SWENAR (WowNowKids): “Instead of partnering with a third party for avails and databases and lab work, we’ve brought all of that ‘in house.’  This has allowed our company to build up at a quicker rate, and with a smaller footprint.”

​SALTMAN (ElectricNow): “The ‘Big Boys’ are taking a lot of the oxygen out of the room in one sense, and in another sense universal access to the technology democratizes the process.” 

   

CONCLUSION: 
 
None of us really know enough about all the nuances of the streaming media industry to call ourselves “experts.”  Not the owners, not the business development execs… nor the consultants.  We are all constantly learning, as the industry itself keeps changing and morphing into something different every year.  

This is an extremely dynamic business and no one is brilliant enough or experienced enough to just to sit back on their content and distribution systems.  Content, distribution relationships, audience and infrastructure constantly change and evolve right in front of our eyes.  
 
There are few secrets in this business, mostly shared pains.  If we can learn from one another how to avoid the inevitable pitfalls and roadblocks in our industry, we can all prosper.
 
Consequently, the more we share our experiences and our knowledge with each other - the better we, and our industry, will become.   

Ryan Swenar, Director of Sales & Biz Dev at WowNow Entertainment (WowNowKids)
[LinkedIn: 
https://www.linkedin.com/in/ryan-swenar-b5897911b/]
http://wownowentertainment.com

David Kraus, CEO Flixx Media (FlixxTV)
[LinkedIn: 
​https://www.linkedin.com/in/hiredavidkraus/]
https://flixx.net

Our Firms… 
Looking for more capital or other resources to help you make the right moves for your streaming media business?  

Bill Sondheim and Stephen Kerr can assist. 

• If you need a veteran media guru working alongside you to help fortify your streaming media business, or to initiate & complete licensing deals - please contact Bill. 
  [LinkedIn: https://www.linkedin.com/in/bsondheim/] 
• If you need a business or intellectual property valuation, IP acquisition / divestiture, or you want to discuss the sale of a company - please reach out to Stephen. 
  ​[LinkedIn: http://www.linkedin.com/in/stephenjkerr/]

    

   

↓ Endnotes / References ↓ 

1 - STREAMING WAS PART OF THE FUTURE — NOW IT’S THE ONLY FUTURE — THE VERGE – Oct 28, 2020 By Julia Alexander
https://www.theverge.com/21536842/streaming-disney-hbo-max-peacock-cbs-all-access-warnermedia-viacom-nbcuniversal

2 - WHAT WENT WRONG AT QUIBI? JEFFREY KATZENBERG, MEG WHITMAN, AND SELF-SABOTAGE — BLOOMBERG – Nov 11, 2020 By JP Mangalindan 
https://www.bloomberg.com/news/features/2020-11-11/what-went-wrong-at-quibi-jeffrey-katzenberg-meg-whitman-and-self-sabotage
 
BAM News • BMC Articles • Greenfield Articles
 
Image Credits: 

FEATURED-GRAPHIC-HOW TO BUILD A BETTER STREAMING BIZ V2_sb.jpg – via Bel Age Medias  

INFOGRAPHIC-HOW TO BUILD A BETTER STREAMING BIZ.jpg – via Bel Age Medias  

HEADSHOT-LinkedIn_BillSondheim.jpeg – via Greenfield Media

HEADSHOT-LinkedIn_StephenJKerr.jpeg – via Bel Age Medias
​

 PREAMBLE:

This second article of our two-part series was written to educate, illuminate, and advise streaming company owners about their business – and its future. We continue discussion with our industry experts regarding the present and future value of streaming companies, as well as the state of the industry.
We are long past the time when anyone needs to justify the existence of streaming media as a business.  Traditional broadcast media is not going anywhere… yet. But streaming video services are clearly the future of the entertainment industry.

→ We’ve been saying for years that, “Consumers want their entertainment, when-ever, where-ever, and how-ever they want to view it.”And now they have it.  

Here is Part Two (Expert Answers to Questions 6 - 10). 
Part 1 was published in May.

6. If a Streamer has plateaued and stopped growing, how does a new owner create a higher value than the current owner? ​

Gene Pao (Shout!FactoryTV): reveals that – 

• You need to secure or produce more content.  
• In fact, you need to constantly refresh your content to maintain your viewership or subscribers. 
• If you don’t have the appetite to acquire or produce original content on an ongoing basis, merging with another channel could be a better strategy.

Ed Frazier (Centerpost Holdings): advises that – 

• The new owner would need to be looking at the content.  
• Perhaps a content rich company without a platform would look to acquire a company that has a good operational platform and the expertise to on-board content quickly.

Bill Sondheim (Former President, Cinedigm): tells us that – 

• There are some very small, niche channels that had an unusual level of growth because there wasn’t a lot of competition.

• There is now fiercecompetition... and that is one of the reasons that these streaming channels are stalling.  

• I think you should look at who is stalling very carefully (instead of saying ‘stalling’ I’d use a different word ‘maxed out’).  Maybe the audience was not nearly as big as the company thought that it was… and maybe they are reaching a natural saturation level of what I would call ‘core fans’ - people who are willing to spend an additional amount of money to watch their passion.  

• If you have reached your natural layer of core consumers, can you still capture ‘casual consumers’ - ones that may like to view your content but may not be willing to pay $5 or $10 a month?  That is where AVOD can become a critical factor for growth.  
• The other factor for growth that you need to look at is the quality and variety of your content.  

Tony Havelka (AmebaTV): points out that – 

• Many content rich OTT channels were created by media companies that put their content over marketing and audience engagement or tech companies that put tech ahead of content or marketing. It is a balance of all four: content, marketing, audience and tech.
• A new owner does not have to go through the Start Up process again. They should be able to create a higher value by reigning in spending, increasing market awareness for the channel and building their subscriber or advertising base, slowly.

Overall Consensus: Netflix, Hulu, Amazon and Disney+ and the other giant streaming platforms can play the game of content, content, content. 

→ Smaller channels simply cannot play the game of being every-thing, to every-one. 
​
​

7. Are AVOD or SVOD Streaming companies more valuable?  What if the company operates both AVOD & SVOD (even T-VOD)? 

Frazier: I think typically both AVOD and SVOD will be blended to the best success.  

• It is hard to get people to put up a credit card for something they can’t see. 
• There should be a free component that may be ad supported to entice going deeper into the SVOD content.

Havelka: Like many streaming businesses, we started off as SVOD; as parents we did not want kids to be exposed to advertising.  

• We use AVOD as leader to SVOD.  SVOD is much more lucrative because advertisers have not been able to deliver eCPM rates high enough to challenge the earning power of consistent monthly subscription revenue.  
• If you’re talking about ROI, SVOD has made us more valuable. 

Sondheim: We used AVODs as what we called a “sampling device”– 

• When everybody was focused on trying to ultimately build an SVOD service, AVOD was merely a steppingstone into the SVOD world.  Gradually easing you into SVOD.  
• Now I think we’re seeing a new phase: we’re getting into the era where you have multiple ‘must have’ SVOD services. 
• The consumer thought that they were going to cut their cord so that they could cut their bill, but now the consumer is faced with all these new choices.  
• The consumer has only so much money to spend on their entertainment choices and these new entries to the market will put pressure on them to choose.  They’ll only put so many services on their credit card.  
• If your streaming service is not on what I call the “premium tier,” I believe that AVOD will become the default way that most people will see your content.  

Overall Consensus: There was once a strong demarcation line between SVOD subscribers and AVOD viewers.  Streaming companies had to choose which way to go.  But now, many of the streaming companies offer a hybridof both SVOD and AVOD for consumers, where the AVOD can be both the preferred way viewers watch their content, or a steppingstone to a SVOD subscription. 

→The value of these businesses rests mainly on how well they attract and retain customers. AVOD, SVOD, or even pay-per-view TVOD, can work together to make a company profitable and valuable.
 
​

8. Are their true economies of scale by owning multiple Streaming channels?  

Pao: Yes, there are definite economies of scale in operations (e.g., ingestion, programming, ad sales) and in cross promotion.

Sondheim: The answer is absolutely. 

• The more you can amortize the kinds of infrastructural investments that you have to make in creating these channels - the better.  You can’t save on everything, but there are huge economies of scale.  Accounting, tracking management system, same fixed cost. 
• Use development expense on one channel across all your channels.  
• If you have a great vendor that is creating new technologies for one service, you can then apply that technology to your other channels as well.  Amortize across all your channels.  
• Your management also gains greater skills.  If your management team learns lessons from managing one channel, they can then apply that knowledge across your entire spectrum of channels.  As they get better at running the business, everyone benefits. 
• Yeah, I believe in economies of scale.

Hopkins: Absolutely, especially if they are segmented by different audiences.  Although, the maintenance of multiple OTT channels can be challenging without the editorial / programming resources.

Andreas Kisslinger (Lightcast.com): It does not cost that much more for Lightcast.com to manage five channels for you, than it does just one. Managing multiple streaming channels - from a technology point of view - is not a big deal for us. 

Overall Consensus: Nearly every media company, especially broadcasters, know that bigger is most definitely better. 

Our experts agree that – 

• There is no comfortable middle ground; and 
• There is little or no room at the bottom.

→ As competition heats up for SVOD subscribers and AVOD viewership, the owners of these streaming companies will have to make a choice.
 
​

​9. Is a Streaming business that licenses most of its content and technology from third parties as valuable as one that owns most of its content and/or tech?  

Frazier: My thoughts are that owning content is best, technology should be farmed out.  

• There are white label systems that can seamlessly present a fixed brand.  

• These systems have constant challenges to stay current as the internet and system keep evolving, and a company is never done developing to meet the changes in browsers, smartphones, and other delivery devices.  
• Let someone who is focused on the platform technology keep growing it.  

Havelka: We built the technology that runs our streaming channel (AmebaTV) from the ground up. But we license 100% of our content.  

• Understanding what type of business you are is critical to success. Are you a tech company?  A marketing company?  A production company?  Each has their strengths and weaknesses.  By embracing the kind of company you are, you can partner with others instead of taking on the risk yourselves.  
• Owning a lot of content is no guarantee of success.  
• Our value resides in our market position and our customer growth and loyalty.  
• The fact that we own all our own backbone technology is essential to be responsive to changing market conditions. If you are locked into someone else’s idea of how a streaming service should operate, you may miss an opportunity for growth. 
  
  

Overall Consensus: Owning the content and owning the technology that populates a streaming business can be valuable, but profitability and growth are always going to be the measuring stick. 

Side Note: As appraisers, we (Bel Age Medias) look at streaming companies the same way we look at production companies and broadcasters: 

• Is their revenue growing and sustainable? 
• Are they profitable? 
• Does this company have management and systems that others could utilize; or
• Or are they simply a silo of content?

​
​

10. What other revenue streams, besides AVOD or SVOD income, can be generated by an OTT / Streaming business?  
 
Sondheim: Depending on the rights available... a company like Cinedigm buys all rights to the content.  So, it is not just streaming. They get the DVD rights, and pay based on the mature business, (like DVD or broadcast).  And in some cases, be able to then give that content to our streaming channels at a low, or almost “free” basis.  We have to pay royalties (participations), but we could put those on our service at a very reduced cost.  That is one important way that people can do that. 

Also,  

• Roll content in and out of your service. When you roll it out you go try to find some syndication or TV deal to make money.  
• License it to someone else.  Repurpose content.  Combine two westerns and release it as a DVD.
• You need to go back and forth at the different channels of distribution and then look at your assets and find new ways to re-monetize them, or monetize them before you bring them to OTT.

Hopkins: An OTT platform can also act as an incubator for launching any type of content and promotional opportunities. 

• Corporate sponsorships are good options. 
• The Film Detective.com leverages its growing collection of classic Hollywood movies.  
• We have linear channels on both Direct TV and STIRR (Sinclair); as well as 
• Licensing films and series to other OTT / streaming channels and broadcasters. 
• We have always kept one foot in the DVD business as well.  
• When you’re a small streaming platform you need to seek out every opportunity to create additional revenue.
  
  

Overall Consensus: One of the downsides of licensing all - or most - of your content is that you lose the opportunity to generate additional income through licensing, DVD bundling, and linear broadcast. 

• Smaller streaming businesses need to get creative with their marketing dollars and find inexpensive ways to build their subscriber base and drive AVOD traffic.  
• A single streaming channel has limited options when it comes down to building revenue and profits, but it can be accomplished by being active, pioneering, inventive, and dynamic.  

When you hit the ceiling (or the floor), you need to either -   
→ Get Creative… or Go Home.  


Summary:
Nearly every major (and minor) media company in the world has created, or is in the process of launching, a streaming business to complement their linear broadcast business.  With so many new streaming channels being created, it is inevitable that these channels and companies are going to consolidate. In any marketplace, there are winners and losers.  The consolidation of streaming media into oligopolies is already happening.  
 
End of Part Two (of Two).

↓ Endnotes / References ↓ ​

1 – OTT REVENUE GROWING BY $17B THIS YEAR, REACHING $159B By 2024 - STREAMINGMEDIA.com - June 10, 2019, By Troy Dreier, Senior Editor 
https://www.streamingmedia.com/Articles/ReadArticle.aspx?ArticleID=132301
 
2 – CAPITALIZING ON OVER-THE-TOP CONTENT DEMAND – BMC Online – 09/11/2018 By Stephen J. Kerr 
http://www.bizmark.net/blogs/capitalizing-on-over-the-top-content-demand
 
3 – TO EXIT, OR NOT TO EXIT – STRATEGIES FOR FILM DISTRIBUTORS– BMC Online – 09/18/2017 by Stephen J. Kerr 
http://www.bizmark.net/blogs/to-exit-or-not-to-exit-strategies-for-film-distributors

4 – HOW STREAMING GIANTS ARE SPENDING MONEY FOR TV PUSH – THE HOLLYWOOD REPORTER – August 23, 2017 By Natalie Jarvey
http://www.hollywoodreporter.com/news/how-streaming-giants-are-spending-money-tv-push-1031885

5 – THE OTT VIEW-NIVERSE: A MAP OF THE NEW VIDEO ECOSYSTEM – VARIETY – 04/29/2015 By Andrew Wallenstein 
http://variety.com/2015/digital/news/ott-map-video-ecosystem-1201480930/

6 – STREAMERS FLOCK TO AVOD – NAB SHOW MAG – April 2019 – By Daniel Franke
https://www.nabshow.com
 
7 – INTERNATIONAL STREAMERS INVESTING MILLIONS TO TAKE ON NETFLIX OVERSEAS – Hollywood Reporter – 04-02-2019 by Scott Roxborough
https://www.hollywoodreporter.com/news/international-streamers-investing-millions-take-netflix-overseas-1198653
 
Image Credits: 

IMAGE-streaming-media-where-do-i-go.jpg – via AtHomeMMS
PHOTO_Sarah&Stephen.png – via BelÂgeMédias

Categories:#content #distribution #streaming #entertainment #OTT #streamers 

First, please note that we now refer to app based channels like Netflix, Amazon, Hulu and hundreds of others, as “Streaming” channels, or STREAMERS, not OTT.  OTT has become an outdated term; let’s retire it. 

If you’re reading this article, then you’re probably in the content production and/or distribution business – and we believe you need to know this information and understand this business.  

Streaming media is here to stay. 

​Over the coming years it will continue to grow into an even more dominant media form.  Netflix is merely one of hundreds of new Streaming platforms around the world, and they are closing in on 150 million subscribers.  Other than press coverage about the major streaming channels, most of the creators of content, and distributors of films and television programming do not fully understand this business.  Hundreds of streaming channels have been created and launched around the world over the past ten years, with new ones debuting every week.  Streamers have become a dominant source of news and entertainment for global consumers that all media professionals need to study and comprehend.  

To bring a deeper understanding of the Streaming media business, our firm interviewed six experts in the industry, with deep, intimate knowledge of how to create, run and buy/sell these new media assets.  

Our questions were naturally from our viewpoint as business appraisers and M&A consultants.  We wanted to aggregate, analyze, and share how these Streaming industry experts view – 
​

• the current state of the Streaming media business, 
• the value drivers in Streaming, and 
• the economics of owning and running a Streaming business, be it subscription-based or advertising-dependent (or both).  

We asked these experts ten questions. Their answers were so illuminating and informative that we decided to split this article into two parts, so that our readers could benefit from our experts’ experience and wisdom, without having to spend too much of their precious time reading.  

Here is Part 1 (Expert Answers to Questions 1 - 5).
​Part 2 published in June. 

1. What makes a Streaming business valuable?  What are the ‘value drivers’ in the business?  

Ed Frazier (Centerpost Holdings:): The value to OTT is based on: 

• the programming they offer, and the potential audience for that content.  
• Additionally, the access the OTT platform has to promote that product and locate audience.  
• Ultimately, cash flow will be the value measure, but until there is significant experience with the OTT delivery, the early valuation has to be based on access to marketing and identifying content with an audience. 

Bill Sondheim (Former President, Cinedigm): What makes an OTT service valuable is: 

• I believe that content ultimately drives the valuation.  Depending on the content offerings you can provide a broad audience appeal or a narrow audience. There are also different levels of consumer passion that different content genres and topics elicit.  All these factors into audience size and loyalty or engagement.  The content that they have been able to amass, and the consumers that they have been able to attract and engage and maintain.  
• I also feel the audience demographics are an important factor in determining a lifetime value. Are you targeting highly affluent consumers that may bring greater consumer spending or a younger audience that bring longer consumer spending? These will factor into any valuation process. And the perception that companies provide that they are forward-looking and prepared the way content will be managed in the future.  

 
Overall Consensus: Value, like beauty, is often ‘in the eye of the beholder.’  

Gene Pao (Shout!FactoryTV) thinks that a Streaming platform’s value resides in its strength of distribution and subscriber (viewership) base.  

Philip Hopkins (TheFilmDetective.TV) feels that a Streamer’s value is a product of its dynamic and ever-refreshed content.  

As Pao adds, Ultimately, it will be about revenue and net income, but similar to the early days of cable television, having a footprint early is essential to generating revenue later on.  


→ No matter how good a channel’s viewership numbers or content offerings are, it usually comes down to profitability.  That is always the ultimate ‘value driver’. 


2. How should one approach a Streaming business’s value? 
 
Tony Havelka (AmebaTV): Where does your value lie?  It depends on the buyer and their needs.  Some buyers might need tech; some might need audience.  Existing streaming services are “time machines,” because theyhave invested years in establishing a channel which can be purchased instantly, with a known outcome. 

The value to us:   

• the tech comes first, it is the backbone of your service, it needs to reflect the way you do business and allow you to quickly react when your business needs change. If you don’t control the tech, you are locked into someone else’s idea of how your business should operate.  
• the catalog comes a close second.  It is what makes your service unique, but, for most services, it is licensed and may not be fully transportable to a new owner; and
• then a solid marketing strategy.  A buyer may have their own ideas about how to market the service, but a solid marketing strategy, that they could integrate or springboard off of, is key. 
  ​

Pao: I look at three components, the distribution, content library, and brand.  While distribution and content are the revenue drivers, the brand provides the foundation.  A strong brand drives distribution, which in turn allows an OTT channel to secure better content, which in turn allows the channel to secure better distribution and so on.  The brand facilitates this virtuous cycle.  

Overall Consensus: One thing that almost everyone seems to agree on, even Andreas Kisslinger (Lightcast.com), a streaming systems and technology provider, is that the technology that runs Streaming businesses has become commoditized.  It’s a part of the business that can easily be farmed out to third parties (like Lightcast.com).  

Havelka thinks that, It is not content, but marketing that is still king. If no one knows about your service, all the great tech and amazing catalog in the world will not bring in an audience.  

Frazier believes that …functionality of the platform, the user experience is the most important feature. 

While Sondheim, agrees that a sophisticated yet simplified user experience is vital, it is also expected and won’t allow you to stand out as a service.  He and others think that, the most important factors when looking at a Streaming channel are:  

• their existing subscriber base, how large it is, how long it has taken them to amass that subscriber base.  
• What the churn has been during that process… not just the churn rate at that moment but also leading up to now.  
• Looking at the rate of growth.  How sustainable is it?  
• Many of these factors are driven by compelling content and smart promotion as discussed above.  

→ Again, all these factors influence the company’s long-term prospects for growth and profitability. 

 
3. Do the individual assets of a Streaming business, such as the content it owns or the technology that runs it, have separate value?  Or, should they be addressed only as part of the entire enterprise?  
 
Hopkins: Owning the technology can certainly help, but at the end of the day content is king! 

Frazier: If the technology is not adequate it will be hard to retain subscribers. Content will, in the end, (be) the main driver, so owning or aggregating content will help to drive value.  

Sondheim: As I stated before, technology is important to ensure an easy and enjoyable experience but what makes a Streaming service truly valuable is:  

• the content that they have been able to amass, and 
• the consumers that they have been able to attract and engage and maintain through that content strategy.  

Overall Consensus: The experts agree that the separate components of a Streaming channel, such as its technology, customers and content, all play an important role in creating value for the company, but not separately.
 
→ Value is derived from the combination of many factors –

• New customer attraction and retention; 
• Growth in the advertiser (AVOD) base; 
• The ability to refresh content; and 
• The channel brand’s market niche awareness.  

 

4. Are niche/genre Streamers more attractive acquisitions than general consumer ones?  

Kisslinger: There is still a lot of room for growth in niche markets.  We help government institutions like cities, states and federal agencies create new OTT platforms.  Also, colleges and major corporations are creating their own OTTs.  Additionally, we see a lot of growth in independent sports and schools.  Lightcast.com is heavily involved with faith-based OTT channels that serve a defined congregation.  

Hopkins: Niche platforms are very attractive, especially where subs are very passionate about the content. Customers will likely add several platforms based on their interests. 

Overall Consensus: Frazier compares niche Streaming channels to the historic magazine business.  If they can achieve critical mass they can be sustained and profitable, but only if the audience is loyal and scalable.  
Pao cautions that even the best niche Streaming businesses need to cozy up to platforms like ROKU, Amazon, or AppleTV, to find, attract and retain viewers.  

→ General consumer streaming channels need to attract millions and millions of viewers to sustain profitability, whereas niche market channels can turn a profit with a much smaller viewership.  
 
​
5. What are the benefits of owning a Streaming business?  

Pao: Having your own OTT channel gives you control over how you present your content.  Also, every dollar earned from an OTT business is more valuable than a dollar earned from licensing content.  Again, the analogy is the cable television business – owning a network is more valuable than licensing TV programs and film.  However, there’s more work operating a network than licensing content. 

Frazier: The benefits are the same as the former benefits magazine owners enjoyed.  Video and mobile delivery of the video are making OTT a very good way to get content exposed and distributed.  

Overall Consensus: Kisslinger points out that it has never been easier or less expensive to start, build and maintain your own Streaming platform.  Companies like Lightcast.com – provide turn-key services to set up all your encoding and storage systems, eCommerce, streaming, geo-targeting or geo-blocking, and place your Apps on all App stores and platforms worldwide. 

Regardless of how good your content is, or how many online stores offer your App, Havelka believes that it is not content, but marketing that is still king.  

→ The financial benefits of owning a Streaming platform accrue to smart marketers who know how to – 

• *reach,
• *entertain, and
• *retain a loyal audience.

​​

–––––––––––––––––––––––––––––
Special Thanks to our expert panel:

Let us help you.

Our firm, Bel Âge Médias (B.Â.M.}, is a company specializing in providing Business Development, Branding Guidance, Mergers & Acquisitions (M&A) expertise, Exit Strategies, and Investment Banking services. Additionally, under out ongoing Streaming / OTT / 4K / Ultra HD initiative, we continue pursuing strategic alignments with high-end, entertainment technology providers, and explore low-cost alternatives for theatrical, televised, streamed, and online distribution of 4K and 2K films & television programs globally.
 
Bel Âge Médias • Santa Monica, California
Call Us - or Visit Us Online - or Email Us:
+1 310 666-6474 
https://belagemedias.com/  
Stephen(@)BelAgeMedias.com • Sarah(@)BelAgeMedias.com

LinkedIn-Stephen J. Kerr – https://www.linkedin.com/in/stephenjkerr
LinkedIn Sarah Nean Bruce – https://www.linkedin.com/in/sarahneanbruce

Endnotes / References: 

1 – CAPITALIZING ON OVER-THE-TOP CONTENT DEMAND – BMC Online – 09/11/2018 By Stephen J. Kerr
http://www.bizmark.net/blogs/capitalizing-on-over-the-top-content-demand 
 
2 – TO EXIT, OR NOT TO EXIT – STRATEGIES FOR FILM DISTRIBUTORS– BMC Online – 09/18/2017 by Stephen J. Kerr http://www.bizmark.net/blogs/to-exit-or-not-to-exit-strategies-for-film-distributors

3 – HOW STREAMING GIANTS ARE SPENDING MONEY FOR TV PUSH – THE HOLLYWOOD REPORTER – August 23, 2017 By Natalie Jarvey 
http://www.hollywoodreporter.com/news/how-streaming-giants-are-spending-money-tv-push-1031885

4 – HOW TO BUY SELL MERGE OR VALUE A FILM DISTRIBUTOR – BMC Online – 06/06/2017 by Stephen J. Kerr 
http://www.bizmark.net/blogs/how-to-buy-sell-merge-or-value-a-film-distributor

5 – CAPITALIZING ON OVER-THE-TOP CONTENT DEMAND – BMC Online – 09/11/2018 By Stephen J. Kerr 
http://www.bizmark.net/blogs/capitalizing-on-over-the-top-content-demand

6 – STREAMERS FLOCK TO AVOD – NAB SHOW MAG 2019 – April 2019 - By Daniel Franke
https://www.nabshow.com
 
7 – INTERNATIONAL STREAMERS INVESTING MILLIONS TO TAKE ON NETFLIX OVERSEAS– Hollywood Reporter - 04-02-2019 by Scott Roxborough
https://www.hollywoodreporter.com/news/international-streamers-investing-millions-take-netflix-overseas-1198653
 
Image Credits: 

​IMAGE-media-streaming-tunnel-730 – via KellyWarnerLaw.com 
PHOTO_Sarah&Stephen.png – via BelÂgeMédias

Categories: #content #distribution#streaming #entertainment #OTT #streamers 

We’re not talking about “A” list titles with big movie stars and successful theatrical runs, we’re talking about those otherfilms, the ones that were never released theatrically and were only sold to a handful of territories overseas.  We use to call them “straight to video” titles.  Almost every sales agent and distributor has a few dozens of thosetitles in their back catalog.  They are not badmovies, just titles that have not been worth flogging in the global marketplace. These movie titles might be languishing in the hinter regions at Amazon, Hulu, Cinemax or Netflix.
​
We presume that your company does not possess all rights to all the world’s territories for your movies/documentaries.  Most of you tell us, you have foreign rights only, and with those rights - sometimes - expiring in just a few years.  Or you may have domestic rights only, and your films are already available on Amazon or Netflix (or HBO / Starz / Cinemax / Epix / Showtime, etc.). 

You are probably thinking right now that hiring a film sales person to call buyers around the country, and around the world, will be prohibitively expensive.  

And, you are probably right. That is why making money off your back catalog of films needs to be systematic, automatic, and cost-effective.  

​The good news is the entire process of monetizing – ingesting, localizing, versioning, storing, transferring and collecting money from broadcasters and directly from consumers – has become seamlessly automated, and low-cost.  

To turn your slacker movies, television series, and documentaries into money making assets again, you need to do several important things:  

If your movie and television assets reside on a server as ProRes files, if all your meta-data is in place, and your distribution rights are in order – then you are ready to start putting those assets back to work.  

Also, if you don’t already know, there is a new data storage and transfer protocol called Interoperable Master Format, or IMF for short, that many OTTs are adopting. This format enables better versioning, and deliverables.

You probably are aware that some countries have different rules and censorship issues that may not work for your content, including violence, sex, alcohol, profanity and even smoking.  You may need to provide sanitized versions (similar to “airline versions”) of your content before they can be disseminated to certain territories.  As with delivery to foreign and domestic broadcasters, OTTs also need these sanitized versions for streaming around the world. What about localizing content, captioning, subtitling, and foreign language dubbing in the global landscape?With certain high-end, leading-edge, technology companies, these requirements can be met with one IMF file and your edit list of changes, additions, and omissions to sound and picture. 

​Now may be the time that you segment your legacy content into genre categories like horror/thriller, family, romance, drama, sci-fi, and art-house.  Consider bundling your niche titles (or do a content swap) and lay off titles that don’t define your brand.  Look to sub-license to specialists in a specific genre, such as Christian, Horror, or Art-House. There are OTT channels, and other specialty broadcasters, around the world that appeal to niche audiences, and who willingly pay for the rights to license your older genre titles on their platforms.

​If you have a strong brand, premium content, and loyal audience, you might consider your own OTT. 

There are several companies that can build, manage, deliver and monetize your content for your OTT at a low cost. Those companies have already created, and operate, the complex processing requirements. They may also leverage the power of cloud-based services from Amazon Web Services (AWS), and AWS Elemental.

To survive, you must find new ways to make money in the film and television distribution business, or you should consider merging or selling your company.  Distributors and Sales Agents have a fiduciary responsibility to their content producers – to manage the rights, and to keep the assets organized / intact. Otherwise, they should consider surrendering that content back to the producers and filmmakers so it can be exploited elsewhere. 

The BAD NEWS:No longer can you rely on your back-catalog titles to carry their weight and offset overhead costs, without doing some work.  

The GOOD NEWS:There is a huge and growing market for your content, including the 4K / UHD rights on your best titles. And, all this is just waiting for you to exploit it.  The global OTT market is massive, and is getting larger every day.  

​It’s time for your older movies, television shows, and documentaries to get off their rear-ends and start contributing to your bottom line. 

Endnotes / References: 
1 – THE OTT VIEW-NIVERSE: A MAP OF THE NEW VIDEO ECOSYSTEM |  VARIETY – 04/29/2015 By Andrew Wallenstein http://variety.com/2015/digital/news/ott-map-video-ecosystem-1201480930/

2 - TO EXIT, OR NOT TO EXIT – STRATEGIES FOR FILM DISTRIBUTORS |  BMC Online – 09/18/2017 by Stephen J. Kerr http://www.bizmark.net/blogs/to-exit-or-not-to-exit-strategies-for-film-distributors

3 - HOW TO BUY SELL MERGE OR VALUE A FILM DISTRIBUTOR | BMC Online – 06/06/2017 by Stephen J. Kerr
http://www.bizmark.net/blogs/how-to-buy-sell-merge-or-value-a-film-distributor

4 - CAPITALIZING ON OVER-THE-TOP CONTENT DEMAND | BMC Online – 09/11/2018 By Stephen J. Kerr 
http://www.bizmark.net/blogs/capitalizing-on-over-the-top-content-demand

5 - WHAT IS YOUR 4K / UHD STRATEGY? | BMC Online – 01/05/2017 by Stephen J. Kerr http://www.bizmark.net/blogs/what-is-your-4k-uhd-strategy

Image Credits: 
IMAGE-VIA-kcbi-sleeping-on-couch.jpg – via KCBI.org
PHOTO_Sarah&Stephen.png – via BelÂgeMédias

Categories: #content #distribution #entertainment #OTT

The continued decline (or complete absence) of DVD/Blu-Ray revenue, coupled with falling foreign sales income, has hit film and television distributors hard.  The rise of OTT channel revenue has not begun to replace that lost income.  Many veteran foreign sales agents informed us they have started domestic (USA) film marketing divisions to offset lower offshore film sales.  Others tell us they have created strategic alliances with would-be competitors, and increased the number of films they executive produce – all this to help rebuild their bottom lines.

The prognosis for 2019 is much the same.  

One of the bright spots continues to be Asia, where the gargantuan China market is just opening up to more Western IP.  Any foreign sales company without an Asia sales specialist on staff is missing out. 

Many of the major US platforms like Netflix, Amazon, Apple, HBO and others, focus on “originals” that they can buy outright.  Many know that this is in stark contrast to their former “domestic only” buying habits that allowed distributors to place a film at HBO, Netflix or Amazon, and then be free to sell that same film around the world.  These platforms now take global rights, because they can demand that.   As one veteran distributor stated to us, “There are more places to ‘sell’ films, but less ways to monetize them.”     
Film and television distributors know that they have some difficult choices in front of them. Do they stay the course and just hope they will acquire breakout hits to give them the revenue to keep going? Or, do they retrench and diversify their companies to stay competitive?  The answer of course is – both.

We have seen this before, and our tough-love advice to distributors if none of these paths appeal to them, is that they might want to radically change course and consider selling (or merging) their company with a stronger (bigger) company.
 
In the 1990’s our firm was heavily involved in publishing industry M&A activity.  By 2000, we saw the consolidation of that industry happening, and we advised many of our clients to sell or merge – which is exactly what most of them did.  Today the publishing industry is smaller, but healthier, because many of the smaller companies either left the business, sold out, or merged into financially stable ones.

From 1998 through 2009, we were instrumental in selling and merging numerous home entertainment companies. Many had risen up in the 1980s and early 1990s with the advent of the VHS/DVD business, and reached their peak in the late 1990s and 2000s.  We witnessed – and were glad to assist in – many payouts in the millions to home entertainment entrepreneurs who changed their course, capitalized on the trend – and then retired with hefty payouts. 
​
For almost a decade we have been cautioning the film industry that there are “still too many film distributors in the world, all vying for a shrinking number of marketable films.”  We have often suggested that merging a number of film distributors together would be a smart move for the entire industry. 

To be generous, 1000+ indie film distributors only account for - maybe - 15% of the total revenue generated by the film industry, while the big, global studios divvy up the other 85%. In the days of large DVD orders and robust foreign sales, this was a good and sustainable business… but today, with the low prices paid by cable and OTT channels, virtually no broadcast revenue, and meager DVD/Blu-Ray sales, it is getting harder for these firms to survive, much less grow.   

The cost of a limited theatrical release has become more expensive – as full theatrical releasing and day-and-date releasing has become riskier. The HBO’s, Showtime’s, Cinemax’s and Starz channels have focused on limited series and originals – acquiring fewer and fewer indie movies for their audiences.  Same for Netflix, Amazon Prime, Hulu, YouTube Red, SlingTV and the other OTT channels.  They are fast becoming “closed shops” that are concentrating their acquisition dollars on limited series, originals and big studio movies.  

This has all made it harder on the good men and women, who represent the legions of indie movie and television producers and who work tirelessly, to slot their productions into an ever-shrinking window in the global film marketplace.   

Our firm has access to financial resources, strategic alliances, and tactical maneuvers for companies who need to chart a new course through the rough seas ahead.  If you would like to discuss how Bel Âge Médias can help your company explore ways to navigate the unfamiliar passage, shift into higher or lower gears, entirely change course, or even, to exit the business gracefully – please contact us

Endnotes / References: 
1 - ARE THERE STILL TOO MANY FILM/TV DISTRIBUTORS? | BMC Online – 03/06/2017 by Stephen J. Kerr
http://www.bizmark.net/blogs/are-there-still-too-many-filmtv-distributors

2 - TO EXIT, OR NOT TO EXIT – STRATEGIES FOR FILM DISTRIBUTORS | BMC Online – 09/18/2017 by Stephen J. Kerr 
http://www.bizmark.net/blogs/to-exit-or-not-to-exit-strategies-for-film-distributors

3 - HOW TO BUY SELL MERGE OR VALUE A FILM DISTRIBUTOR | 
BMC Online – 06/06/2017 by Stephen J. Kerr
http://www.bizmark.net/blogs/how-to-buy-sell-merge-or-value-a-film-distributor

4 - VALUING A SINGLE FILM OR ENTIRE FILM LIBRARY (Updated) | BMC Online – 04/04/2017 by Stephen J. Kerr
http://www.bizmark.net/blogs/valuing-a-single-film-or-entire-film-library-updated
 
Image Credits: 
IMAGE-Sunset Sailing Boat-675847_1280_CC0 – via CC0 Creative Commons
PHOTO_Sarah&Stephen.png – via BelÂgeMédias

​Categories: #content #distribution #entertainment

#####################################################
PUBLISHED AT:

LinkedIn-Stephen J. Kerr – https://www.linkedin.com/today/author/stephenjkerr

LINKED AT: 
​LinkedIn Sarah Nean Bruce – https://www.linkedin.com/today/author/sarahneanbruce

BAM News – https://belagemedias.com/news/

​PREAMBLE:
We wrote this article because we wanted to help our indie TV & film producer / distributor business associates better understand current OTT opportunities.  We recently interviewed several of our OTT-channel business associates to get the inside scoop on how to capitalize on over-the-top content.

Most content creators are only aware of the biggest OTT platforms like Netflix, Amazon and Hulu, but have you heard of 420TV, PureFlix, Fuse, Outside TV, The Film Detective, Viceland, The Blaze, Shout! Factory TV, the Dove Channel, UP, Ride TV, WE TV, World Fishing Network, RFD-TV, Z Living or AFRO?  These are just a few of the hundreds of new channels available through Sling TV or as downloads to your ROKU, Apple TV, Fire TV, or game platforms – such as Xbox, PlayStation or Wii. 
​

Most OTT channels were created with legacy content – but, to retain and attract new viewers the channel operators are spending billions to create new, targeted content for their audiences.  Some of this content is being mined from YouTube, Vimeo and other video sharing sites, but the best, most-watched, original shows and movies are being created specifically for their viewers. 

​Throw out your old playbooks and embrace a new paradigm – movies, as we have known them, are becoming a thing of the past.  Except for the major blockbuster films from studios like Disney, Warner Bros, Paramount and Universal, most of the full-length motion pictures being delivered by indie producers are financially D.O.A. (dead-on-arrival). 

​Before you approach the owners of any OTT channel, get to know their audience and figure out how to either adapt your existing programming to their market, or create unique programs that speak directly to their constituency.  

Yes, the budgets may be smaller and the programming very specific to their target market, but the demand is there and your skills as a storyteller - and producer - have never been so needed.  Most filmmakers spend an inordinate amount of time looking for money, when they could be turning out important and influential content for some of the 500+ OTT channels that desperately need their storytelling skills and content.  

There are lots of OTT channels that are reviving classic movie, television and other content for their viewers and – often – with a twist.  Most OTT channels are not trying to compete with or replicate cable television.  Their audiences want to see something different, and specific.  A good example of this is Shout! Factory TV’s Mystery Science Theater 3000, where cheesy sci-fi movies from the 50s, 60s & 70s get hilariously lampooned by comedic commentators.

As with any content you plan to exploit, it is essential you have secured ALL the rights to your works before you approach an OTT channel (or any broadcaster, or distributor).  That means actors, music, imagery, etcetera, all need clearances, contracts, and releases (Chain-of-Title).

Even if you have licensed your past movies to cable broadcasters you may be able to get another bite out of the apple by licensing your film library to various OTT channels.  These companies thrive on branded movies and television shows that have not been seen for many years.  

Working with OTT broadcasters can be a lot like working with Public Broadcasting.  They provide the audience and the advertising support, but funding the cost of production is often your responsibility.

The OTT channel owners are spending millions of dollars to provide you with a platform for your shows, and a way to prosper financially from your talent.  What they are not is an ATM.  You need to approach them with your own end-to-end business model.  OTT channels tell us that experienced YouTube producers are sometimes easier to work with than movie and television producers, because YouTubers understand the need to find their own financial resources, and know how to create short, compelling content.  OTT channels may help with securing advertising and sometimes sponsors, but they (usually) will not provide up-front financing for your shows.

Many of the channels are owned by media companies that can utilize your programs on multiple platforms and syndicate them to other media, as well.  Case in point: The Film Detective uses interviews and behind-the-scenes footage of classic movies to create interstitials for their channel, as well as to sell to other broadcasters around the world.

You should also know that many of these new OTT channels have linear, ad supported, channels on traditional broadcast carriers like Direct TV, SlingTV, and PlutoTV, as well.

For almost every niche program that you can imagine, there is an OTT channel serving that audience. Acquisition people for these channels are looking for unique long-form and short-form content – with a “hook” – something that will grab the attention of their viewers.  

​Of course, $1,000,000 for a full 10-episode series, pales in comparison to series on HBO, Starz or Netflix – which can run upwards of $1+ million per episode.  But you can do a lot with a million dollars if you are frugal, nimble and create niche content.

A lot of OTT channels are ad supported. The revenue split between the content creators and the channel broadcasters varies depending on the quality and originality of the content.  Highly prized, original content obviously would pay more than off-the-shelf, non-branded content. 

You will probably find that the OTT market is very flexible as to the format that you need to use to deliver your content to them. 

Finding the money to produce a limited series, or ongoing series, for Ride TV or Outside, Z Living or any of the other hundreds of channels, is often a matter of finding some sponsors to pay for it.  The owners and managers of these brand-new channels have ambitions to dominate their niche, and most know that you can’t dominate with just the old, legacy content.  Even classic movie and television channels are supplementing their films and shows with interviews, access to memorabilia, and original, behind-the-scenes content

Most of these OTT channels are owned by smaller media companies that are highly approachable.  All you need is a great idea that speaks to their target audience, and a way to fund the production.  Most of the time, you will find that they are “all ears.”

With hundreds of new channels coming online every year, it can be daunting to know who to contact, and what kind of programming they are looking for. We know, and work with, quite a few of these new OTT channels. They are typically smaller organizations, and for us, the owners and acquisition people are easy to approach.

 Endnotes / References: 
1 – How Streaming Giants Are Spending Money for TV Push By Natalie Jarvey | THE HOLLYWOOD REPORTER – August 23, 2017  

2 – The OTT View-niverse: A Map of the New Video Ecosystem By Andrew Wallenstein | VARIETY April 29, 2015

2 – YOU’RE ALREADY IN THE TELEVISION BUSINESS by Stephen J. Kerr and Sarah Nean Bruce | BMC ONLINE – December 2017
 
3 – Wikipedia: Over-the-top media services – [i] Source [i]
 
Image Credits:
IMAGE-remote-1140x500https-floatleftTV-applying-principles-qa-automation – FloatLeft.TV
​
PHOTO_Sarah&Stephen.png – by BelÂgeMédias 

​Categories: #content #distribution #entertainment #OTT

#####################################################
PUBLISHED AT:

LinkedIn-Stephen J. Kerr – https://www.linkedin.com/today/author/stephenjkerr 

LINKED AT:
LinkedIn Sarah Nean Bruce – https://www.linkedin.com/today/author/sarahneanbruce

​BAM News –
​https://belagemedias.com/news/

PREAMBLE: 
We had a conversation the other day with a prospective new client about the value of a motion picture library that they were looking to acquire – and the comparative value of the company that owns those films.  That conversation reminded us how outmoded the thinking is for many entertainment professionals who see the value of their film assets as unchanging. 
____________________________________________________

​As appraisers, we look at valuation differently than the creators of movies and docs do.  We are most interested in the remaining economic life left in the assets, and less interested in the critical success of the film when it was first released in theaters.  Yes, the cast, director and box office success of every film does play a part in its Future Value, but how exploited the film was upon release, and the state of the distribution rights, weighs heavily on its Present Value. 
​

Let’s explain by way of an example:  If you have two movies, one was critically acclaimed and sold extensively around the world under long term contracts, it may not be worth as much as a lesser known film of equal quality, that was not widely released.  The reason is that the second film can still be sold in global markets where it has not yet been exposed. And, the first, better known film could have exhausted 90% of its territory avails. 
​

​➜ ​The Present Value of any asset is directly proportional to its revenue producing future. ​

Even a great motion picture, or documentary, that has been heavily sold around the world under long-term contracts, can have very little future economic value – just a few years after it was released.
​

​➜ ​Beware of long term commitments. 

If you sell a motion picture to Netflix or HBO under an exclusive, world-wide, 7-year distribution deal, you might like the initial pay day, but the value of the asset could be diminished because the distributor (or producer) loses the right to then sell the film elsewhere.  Increasingly, the big OTT channels - like Netflix and Amazon - are demanding world-wide, long-term contracts to acquire films and series.  If you are getting top dollar from these broadcasters then by all means make the deal, but remember what you are losing – long-term income from incremental sales.  It’s a trade off that you need to consider.
 
Back in the day of disks and video stores, it was easier to continue selling film assets into an ever-expanding, global marketplace (piracy issues aside).  But today the free market for movies and documentaries has narrowed, with only a few global players dominating the digital channels of distribution.  Many film distributors we know are beginning to question why they are even attending the global sales markets.  With fewer international rights to sell, and low prices being paid for their legacy film assets, the costs of attending film markets may not be justified by the revenue generated.
​ 

​➜ ​The value of any intellectual asset is measured by its ability to return an income to its owner. 

If all the income has been drained out of an asset upon its original release to the marketplace, don’t expect that asset to spontaneously manufacture value simply due to its existence.
​

➜ ​​The marketplace for films is forever changing.  

Examples of asset value changes: you might have a film that featured Chris Pratt or Emilia Clark when they were still unknowns, and another with Mel Gibson or Kevin Spacy when they were well-knowns.  The value of every motion picture is dynamic and changes every year based on market forces, and the value of the underlying movie stars, directors, and producers (think Harvey Weinstein).  New markets (like China) are opening to English-language films that have previously been closed, and that can create new revenue from older IP, resulting in a higher asset valuation.
​

➜ A film library is not a bag of rocks – nor is it necessarily a bag of diamonds.  
 
Each production needs to be assayed for its commercial value and compared to other films of a similar quality, age and marketability.  Only then can intellectual properties be accurately appraised. 
 
If you are curious as to the current value of a library, or individual film, please contact us.  
___________________________________________________

Endnotes / References: 

1 – So What Exactly Are Film Libraries Worth Now? by Nikki Finke - https://deadline.com/2010/02/what-exactly-are-film-libraries-worth-now-25222/ | DEADLINE - February 11, 2010.

2 –  Film Library Acquisitions - Valuation and Strategy by Pras Chaudhuri -  http://prasenjitchaudhuri.blogspot.com/2010/09/film-library-acquisitions-valuation-and.html |OBSERVING ANALYTICS-DRIVEN TRANSFORMATIONS - September 29, 2010

3 – Valuing a Single Film or Entire Film Library By Stephen J. Kerr - http://www.bizmark.net/blogs/valuing-a-single-film-or-entire-film-library-updated |BMC Online - May 17, 2016

4 – How Much Are Films Worth? By Stephen J. Kerr - http://www.bizmark.net/blogs/how-much-are-films-worth | BMC Online - April 4, 2017

Image Credits:
 
WIKIMEDIA-Film_archive_storage_(6498619601).jpg – By DRs Kulturarvsprojekt from Copenhagen, Danmark (Film archive storage Uploaded by palnatoke) [CC BY-SA 2.0 (https://creativecommons.org/licenses/by-sa/2.0)], via Wikimedia Commons

PHOTO_Sarah&Stephen.png – by BelÂgeMédias

PREAMBLE: At the most recent American Film Market, we met with more than 25 film distribution companies.  About one-third of those companies said that they have no plans what-so-ever to enter the television series space, another third are just now starting to consider developing TV series, and the other third of the companies are actively developing series for the television market.

​We wrote this article because 99% of the films that independent distributors sell to the world will never see the inside of a multi-plex.  In fact, few will ever be released in theaters in any form.  So why are some indie movie producers and distributors still telling themselves (and telling us) that they’re only in the movie business?  Studios have long known they are in both the film and television businesses, and in this article, we explain why Indies should acknowledge that they are too.  

Stephen J. Kerr (SJK): Netflix, Amazon, Hulu, HBO, Cinemax, Epix, Vimeo, Sling, Google Play, Crackle, YouTube, TruTV, Hallmark Channels, Oxygen, BBC, TF1, TFD, IFC, AMC, Pivot, Starz, Showtime, SyFy, A&E, MTV, Univision, NatGeo, USA Networks, Bravo, Smithsonian, BET, Discovery, FXX, CMT, OWN, Spike, TLC, VUDU, Comedy Central, soon Apple and Facebook, and of course ABC, NBC, CBS, and FOX – in actuality – are all the places people watch movies… and are all essentially television.  By television, of course we mean the screens of actual televisions, plus laptops, smart tablets, smartphones, gaming platforms, and airplane screens.  

Even those 1% of films that get a limited or wide theatrical release are in movie theaters for – at most – three to four weeks of their entire lifespan.  So, it’s time to ask yourselves, what business are you in?  The movie business or the television business? 

​The answer is, of course, both.

SJK: Yes, excellent comparison.  A single TV series can run 10 to 12 hours, and thanks to binge watching, they are now the banquets, while movies are simply the appetizers.  Two-hour motion pictures are hard to stop half way through and then come back the next day to finish – like we can with serialized content.  Diminished attention spans have made it more difficult for people to concentrate on any program for more than an hour at a time. We now see movies and serials playing side-by-side on most networks.  There is a reason that Netflix, Amazon and HBO dove into original series, they found out quickly that people didn’t want to watch two-hour movies - one after another - anymore.  Viewers prefer a mix of both short, long-form, extended-form content, and the ability to binge on them at-will.

SJK: It doesn’t have to be.  When you stop thinking that there is a difference between them, and you begin to embrace limited television series as just another form of filmed entertainment, then you can start to incorporate serialized content into your development, production, and distribution plans.

​TV series are bought by almost all the same networks and foreign buyers that acquire movies.  Often the acquisitions person in charge of TV content will be different, but they all work for the same companies. 

SJK: Nowadays, the risk associated with selling a television series can be much less than a movie.  With a series, respected showrunners sell the concepts with either a “pitch bible” or a “pilot.”  On movies, you usually need to finish the film, and a trailer, before you can get a financial commitment from domestic and foreign buyers.  Veteran movie sales people can often obtain an indication of interest from the film buyers, but it’s getting harder and harder to secure advances and minimum guarantees.  If you are an Indie movie producer, you must make and deliver the finished movie before you get paid.  It’s the same with most TV movies, too – you get an order for it, but you usually don’t get paid until the day it airs.  

​SJK: If the 1960s were the “Golden Age” of television, today must be the “Platinum Age” of TV.  Shows like Game of Thrones, Fargo, House of Cards, Westworld, Breaking Bad and The Handmaid’s Tale have helped transform the networks and the OTT channels that created them.  Movies used to be the staple at HBO, Showtime and Cinemax, not to mention Netflix and Amazon.  Now the core content is anthology, limited (and unlimited) television series.
We read that the move toward the “anthological miniseries that can reinvent itself every season is a better fit for writers who have a strong story to tell over a small number of episodes but not 65 to 100 as in the traditional series format.”

​Limited television series are especially fluid to create. These small-episode order shows – with a beginning, middle and conclusive end – can wrap up their stories. They are created without the pressure of officially coming back for a second season.

SJK: Sam Sokolow, a veteran Indie television producer, an executive producer of Nat Geo’s scripted anthology series GENIUS, and a former Indie filmmaker who we work with, points out that the television industry has been experiencing a metamorphosis. He also reveals that even though the term “independent film” is a common and familiar one, “there now exists an opportunity to invest in - and co-produce - independent television programming.”
His company produces and shoots ten-minute “mini-pilot” presentations, with the star of the show (sometimes an A-List movie star) and head-writer / showrunner attached – and he presents these mini-pilots directly to the networks, studios and OTT channels.  Sokolow bypasses the laborious process of pitching a series and then having to rely on the network to fund a pilot.  
The mini-pilot presentation cuts through the red tape of selling television properties to networks.  These basically look the same as the series, and they give network execs a clear picture of the scope, and the feel, of the show.  The costs of these mini-pilot range from $100K to $300K… or about the same investment as an ultra-low budget movie. Doing it this way means that, if the series gets picked up, you could have a $10 to $20 million-dollar production on your hands – and that’s only Season One. 

​Conversely, smart TV showrunners working with Sokolow can “cut to the front of the line” with a mini-pilot in hand, and offer a more unique television series that serves up the unfiltered creative vision to the networks. 

SJK: In the traditional “development hell” sense - you can. Once you, Indie film producers, make the decision to invest in, co-develop and pitch television series with a proven television co-production partner, you are diversifying your company just like Disney, Warner Bros, Universal, Twentieth Century Fox, Paramount, MGM. and Lionsgate did 40 years ago.  The movie studios embraced the new medium of television and they were rewarded for their vision. 

​When you co-develop, co-produce, and sell television series, as well as movies, you now have the luxury of serving an entire meal to viewers – not just an appetizer.

​SJK: No one is saying that breaking into Indie television development, production and distribution is easy.  It takes a sincere commitment, just the right kind of content, and a seasoned co-production partner to get a series up on-air and then to sustain it over years.  But if you start small, co-produce and co-pitch just one or two mini-pilots for limited series per year, it will move your company in the right direction.  Being in the television series business should be seen as a long-term content building strategy, not as an overnight “game changer.”

​SJK: Many Indie film producers and distributors have access to great talent and know how to make and sell compelling content. You just need to know the right showrunners and the network buyers who acquire television content.

This process creates a more successful and quicker path to presenting television shows to content buyers, broadcasters, and/or distributors.

​Of course, we can give you a boost in the right direction.  Just like making and marketing movies, it all starts with inspired concepts – articulated by great writing and a sound marketing plan.  Entertainment is entertainment, whether it is (long-form) movies or (extended-form) television series.  The greenlight process may be a little different and the buyers may be new to you, but great entertainment will find an outlet with the right people on board. 

If you would like to discuss how Bel Âge Médias can help your company explore ways to work in the television content business, please give us a call.

Endnotes / References: 

1 - 17 Execs Explain Why They Keep Renewing Limited Series – HBO's Big Little Lies. Netflix's 13 Reasons Why.  HBO's The Night Of. AMC's The Night Manager.  Each of the above dramas were designed (and promoted) as limited series — small-episode-order shows with a beginning, middle and conclusive end that wrapped the story. And yet all four of them are either officially coming back or in talks to return for second seasons. – NOVEMBER 09, 2017 
http://www.hollywoodreporter.com/live-feed/big-little-lies-13-reasons-why-17-execs-why-they-keep-renewing-limited-series-1056663 
 
2 – The 18 most anticipated TV shows of 2018. Breaking through in a Peak TV world of more than 500 scripted originals is a challenging task, so top showrunners and stars continue to be in high demand as broadcast, cable and streaming platforms look to cut through the cluttered landscape with familiar faces, writes Lesley Goldberg (including the small-screen series regular debut for Oscar winner Sean Penn). – DECEMBER 01, 2017  
https://edit.hollywoodreporter.com/live-feed/18-anticipated-new-tv-shows-2018-1063308
 
3 – How Streaming Giants Are Spending Money for TV Push – AUGUST 23, 2017  
http://www.hollywoodreporter.com/news/how-streaming-giants-are-spending-money-tv-push-1031885 

4 – What if more TV shows were anthologies? Viewers might be less overwhelmed.
The Genius of Genius Anthology Series – Courteney Monroe (National Geographic): “It’s easier to expand an existing brand than to create one in the first place. When we see a spark of success, we always consider how we can nurture it into something bigger. With Genius, we knew we wanted an anthology series. Einstein worked. Picasso is up next. And you’d be safe to assume we are thinking about who else’s life and story will stand up to the Genius treatment next.” – JULY 31, 2017  https://www.washingtonpost.com/entertainment/tv/what-if-more-tv-shows-were-anthologies-viewers-might-be-less-overwhelmed/2017/07/31/7b8d3f56-760c-11e7-8839-ec48ec4cae25_story.html

5 – Tim Goodman: The Best of TV 2016 and the "Platinum Age of Television"
http://www.hollywoodreporter.com/lists/tim-goodman-best-tv-2016-955668/item/chance-tim-goodman-picks-2016-955686
 
6 – FX’s John Landgraf on Competition For TV Talent: ‘It’s Moneyball’ http://variety.com/2016/tv/news/john-landgraf-fx-moneyball-tca-1201681533/

Image Credits:

IMAGE_entertainment.ie_netflix-50s/372706 via entertainment.ie/news 
PHOTO_Sarah&Stephen.png via Bel Âge Médias

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PUBLISHED AT:

LinkedIn-Stephen J. Kerr – https://www.linkedin.com/pulse/… stephen-kerr/

LINKED AT: 
​LinkedIn Sarah Nean Bruce – https://www.linkedin.com/pulse/… sarah-nean-bruce/

​PREAMBLE:
We wrote this piece for entertainment professionals who own a film and/or television content distribution business, because they know what challenges impact their businesses. Challenges like lower revenue from foreign sales; disintermediation due to self- distribution; rising acquisition costs for quality productions; the need to invest earlier in films in order to lock up distribution rights; increased risk from foreign competitors, and more.  It has never been easy to be in the film distribution business, but lately the hurdles seem to be growing, and a clear path forward more challenging. 

​

Stephen J. Kerr (SJK): The last few years have been tough for film distributors, but it has also been one of the best of times to distribute content.  There are more places today to sell movies, documentaries and television serials than ever before. 

The world is a smaller place, with previously insignificant markets like India, South America, Africa and Southeast Asia now becoming viable markets for American entertainment. 

​With 500+ cable channels and as many OTT channels blooming on the internet and on your TV, there is an audience for almost every conceivable form of entertainment.  The challenge is that with all those choices, the audiences for each movie and show are smaller, and therefore content is less valuable. 
  
Being a film distributor has its rewards: lunch on the Cours Masséna in Cannes with actors, auteurs, and producers; red carpet photos with beautiful people at Sundance and Tribeca Film Festivals; pitching film buyers in Santa Monica, Berlin and Hong Kong.  That’s the fun part.
​

​SJK: The less fun parts are disgruntled producers, collecting money, paying advances, battling lawsuits, hiring and firing, monetizing 4K, reporting, trying to keep up with digital technology racing ahead at breakneck speed… and more.  Much more.
​

​SJK: Soon all distribution will be digital, with producers simply selling their films directly to digital outlets –without the help of middlemen at all.  It is already happening.  People may argue over the timing of this, but there is no argument over the certainty of it. 

In the 1990’s our firm advised many book publishers and music labels on how to sell their businesses – many heeded our advice and walked away with millions of dollars.  Others held on to the “bitter end” and got little or nothing for their companies and titles.  In the 2000’s, we helped several home video entrepreneurs cash-in on the equity they had built up in their companies. 

​Today, we are witnessing many of the same warning signs that indicate that film distribution, as a business, is reaching its twilight years.
​

​SJK: What was once an oligopoly of large and mid-sized independents is now a hodgepodge of micro, medium, and maximum sized content distributors.  This is the sign of an industry that has seen its halcyon days and has probably reached its apex. 

​Direct-to-consumer marketers like Amazon and Netflix, Showtime, Cinemax, HBO, HULU, VUDU and Starz are not only customers and producers, they are competing head to head with film distributors for the best product. 

How long before the producers decide that they no longer need film distributors to get their films in front of the public?  For small producers, distributors still serve a purpose as aggregators of entertainment content for the broadcast and digital outlets.  But this is not the game they want to be in when only the rich are getting richer. 
​

​SJK: Often, the most beneficial way to exit a distribution business is to sell to a much larger company.  In the home video era, our firm assisted more than a dozen DVD distributors sell their companies to friendly competitors and other media companies.  In some ways it is easier these days to sell a media company, without boxes of DVD’s sitting in a warehouse somewhere. 

​At their core, film distributors are basically a collection of contracts, connections, and digital content sitting on servers somewhere.  Companies that want to merge or otherwise consolidate, don’t have to worry about moving their physical product – only moving their contracts and transferring their media.  The digital video revolution has definitely made some things easier. 
​

​SJK: A smaller distributor may have a niche market that the larger company wants to get into.  They could also have direct put deals with one or more key digital channels (think Netflix).  They might have highly-prized, branded properties that could turn into a franchise.  Or they may just have great relationships with notable producers and directors that would benefit any larger company. 

​The fastest way for a big distributor ($40 to $100 million) to grow quickly is to acquire other companies.  The most lucrative way for a small distributor to exit their business is to sell to a big one.
​

SJK: Merge with another, equally successful, distributor. (2)  Sometimes this can result in making one strong company out of two weaker ones.  Our firm has helped many media companies travel this route, especially with Canadian, UK or other foreign houses.  

Combining film catalogs and marketing relationships can give both companies a boost.  Merging two or more companies can help insure the survival of both houses.  Each company brings its strengths to the table and by combining those strengths, can mitigate their weaknesses.

​Once merged, the now one, stronger company may become an attractive acquisition target for a large publicly held company or private equity group.
​  

SJK: The value for most distributors rests in its people and its relationships.  The catalog of past films, acquired over the years and sold to the world markets, is usually not a big value driver.​(3) 

We recently valued a 20+ year veteran distribution house with over 250 good movies and documentaries in their backlist.  The market value of their catalog was only $1.3 million, because they had sold off most of the world territories, and the remaining economic life of their titles was nearly exhausted.  

Strong relationships with both domestic and foreign film buyers, and access to new and better films in the future, are the hallmarks of a valuable distributor.  Another potential way to squeeze out any remaining value on titles from the last few years is to consider re-releasing to OTT or others in 4K because that market is starting to become significant.(4) 

There appears to be a glass ceiling for film distributors at the $4 to $6 million level.  It is difficult for a company that reaches this revenue peak to get much bigger simply by working harder without the infusion of fresh capital to pay minimum guarantees, executive produce their own movies, and/or negotiate “put” deals with the big digital players like Netflix, Amazon or HBO. 
​

SJK: It is a still good idea to have an Exit Strategy even if they have no plans to put it into action for years.  There may be moves a film distributor can make to enhance the value of their company and make it a more attractive now, and in the future. 

One of the most beneficial, and yet overlooked, improvements to any distributor is knowing where all their contracts and elements are, keeping them up to date, and exploiting any unused rights.  It’s amazing how this much-needed piece of housekeeping can increase the value of any business. 

Another way to build value is to sell off non-performing assets (titles) that weigh catalogs down, but don’t  generate much value for the company.  

A third, value-building move is to negotiate an exclusive “put” deal with any major OTT or cable channel.  Exclusivity, of practically any kind, can create a higher perceived value of that distributor. 

​Of course, there are many more ways to help enhance a distribution company’s value. These are just a few where we have guided companies.  

Reference List: 
1 - ARE THERE STILL TOO MANY FILM/TV DISTRIBUTORS? | BMC Online – 03/06/2017 by Stephen J. Kerr
http://www.bizmark.net/blogs/are-there-still-too-many-filmtv-distributors

2 - BUY SELL MERGE OR VALUE A FILM DISTRIBUTOR  | BMC Online – 06/06/2017 by Stephen J. Kerr
http://www.bizmark.net/blogs/how-to-buy-sell-merge-or-value-a-film-distributor

3 - VALUING A SINGLE FILM OR ENTIRE FILM LIBRARY (Updated) | BMC Online – 04/04/2017 by Stephen J. Kerr
http://www.bizmark.net/blogs/valuing-a-single-film-or-entire-film-library-updated

4 - WHAT IS YOUR 4K / UHD STRATEGY? | BMC Online – 01/05/2017 by Stephen J. Kerr
​http://www.bizmark.net/blogs/what-is-your-4k-uhd-strategy

Image Credits:

IMAGE_ToExit-NotToExit-Vortex.png by Bel Âge Médias
PHOTO_Sarah&Stephen 2.png via Bel Âge Médias

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​ALSO PUBLISHED AT:
LinkedIn-Stephen J. Kerr – https://www.linkedin.com/pulse/exit-strategies-film-distributors-stephen-kerr/ 

​For more than 25 years our company has developed film, television, and other media properties – as well as provided business development, branding advice, and investment banking expertise. However, our primary service has always been advising business owners on how to value, buy or sell their media companies.
 
Some of the most challenging assignments we get are advising film distributors and sales agencies. 
​
We will refer to both film distribution companies and sales agencies as simply film distributors. The reason is that the line between what the entertainment industry has historically defined as a distributor and a sales agent has blurred to the point of being indistinguishable from one another.
 
Around the world, distributors often provide the same basic functions as do foreign sales agents; and, sales agencies sometimes provide complete film distribution services, both worldwide and in their home territory.

Buying, selling, merging and valuing film distributors is not impossible, in fact, it is done all the time. For the health of the film industry it is critical that media entrepreneurs know that they can buy other companies, sell their own businesses, or merge with strategic partners. 
​

​→ ​The Value Drivers

Key to these transactions is knowing how to properly value film distributors. What makes these companies more of a challenge is the degree to which each distributor controls the films they take to market and release.  Distributors that have only short-term representation contracts to films and documentaries have an assumed lower value than companies that have long-term, or perpetual rights to films. Companies that Executive Produced, or otherwise own all distribution rights to their film properties, are perceived as more valuable than companies that have long-term, but (eventually) expiring distribution rights. On the other hand, even a foreign sales agent, with limited, territorial specific rights to major films with gravitas, has value.
​

→ ​Analyzing Value Factors
 
The analytical keys to determining the value of any distributor are knowing what the company’s revenue drivers are. A foreign sale agency could have a high value, because it sells films with large budgets and big name stars. A global film distributor, with the same annual revenue, which represents mostly small, indie films and documentaries – without the A-List movie stars – might have a much lower appeal.

Value is not just a factor of whether a company has long-term or short-term rights to its film properties, or whether they control the films or simply represent them – it is more complicated than that.
 
A distributor’s value is often dependent on the quality of the films they own, control or sell.  Likewise, a company’s value is not just a matter of how many films it has under contract, or how long they have been in business. A distributor that has been in business just a few years, with thirty very current and significant films in their inventory, can be more valuable than a distributor that has been around for twenty years, and has more than 300 movies under contract.
​

→ ​The Economic Lifespan of Film Properties

One of the most important factors is the age of the films in a company’s inventory. Our firm has found that - other than award-winning or “legendary” titles - movies and documentaries that are over two or three years old typically have an extremely diminished value. Standard definition and public domain movies (except for “classics”) often have a very low, if any, asset value. A single film’s worth has a lot to do with the number of unsold territories that it has around the world. 
​

​→ The Valuation Methods
 
Determining the value of any distributor is not difficult. Our firm uses several proven methods to appraise the value of companies in the entertainment industry.

Paramount among these techniques is the “Income Approach.” There are several methodologies to apply the Income Approach, but the goal is to determine the Present Value of the future revenue and cash flow of a company.

We take a weighted average of the past years’ earnings, and create a predictive model for how the company should perform in the future. On this projection – we apply a discount based on volatility, market forces, the-state-of-the-industry, and the historic financial performance of the business. The Income Approach is almost solely based on the future cash-flow generating ability of the distribution company – not on its Balance Sheet.   
 
One of our preferred valuation techniques is called the “Excess Earning Approach.”  This valuation method utilizes the Weighted Average of a company’s historic revenue and earnings, and then adds to that - the company’s Net Worth (Total Assets minus Total Liabilities). 

The Income Approach works well when valuing many media companies, but we also utilize the Excess Earnings Approach, especially for companies that have a lot of cash, or other assets, on their books.

​Disregarding a company’s positive balance sheet completely can result in an inaccurate appraisal of the distributor’s true worth.
 
We often perform both methods of valuation for a client.
​

→ ​Diligent Documentation
 
Merging or selling any distribution company is not difficult if they have been well managed. This means that all the producer statements, financial records, chain-of-title documents, and required reports have been properly maintained. Plus, whether, or not, the owners have continued to aggressively acquire new, high quality titles.

​Regrettably, some distributors that are “For Sale” lack in one or more of these areas. Some have stopped acquiring new films, their film rights are a mess, they have let key people go, or sales tracking is non-existent.  Absent good financial reporting, new acquisitions and uninterrupted payments to producers, a company can be rendered unsellable. 
​

→ ​Transactional and Reputational Benefits
 
Successfully buying, selling or merging distributors has a lot to do with the strategic value of the conjoined companies.
 
Many companies are acquired because of their key personnel and their industry reputation.  These are often the greatest assets that a distributor possesses.  It is hard to put a direct value on experienced personnel and a good reputation, but these aspects are often reflected in higher earnings, better quality films, and company longevity. 

​Relationships are the key to success within the movie industry – and many companies have been pursued for purchase, or merger, because others covet their great relationships with both producers and buyers. Keeping the company heads and the employees around who built those strategic and worthwhile relationships is an important aspect of any successful transaction. As we all know, film producers and film buyers like coming back – again and again – to do business with people they know and trust. Building those lasting bridges with producers, and buyers, takes years for veteran entertainment professionals to accomplish. 
 
Many distributors have told us, 

→ ​When 2 x 2 = 22
 
Merging two or more distributors is often synergistically beneficial.  Rarely do two distributors sell to the exact same buyers at the major film markets; or have deals with the same cable/satellite companies, over-the-top (OTT), video-on-demand (VOD), electronic sell-through (EST), or DVD wholesalers/retailers.
​

By joining forces, distributors can trim overheads while growing market share. They can also combine the long-term industry relationships that made each company unique and successful. The resulting amalgamation can be exponentially advantageous because complimentary assets can represent multiple opportunities times multiple transactions.

​Additionally, companies can consolidate their back-office activities (servicing, reporting, legal, and accounting), plus their sales activities (film markets, advertising, marketing, and public relations).

→ ​Mission: Possible
 
In a highly fragmented industry, like film distribution, consolidation is one way to survive, and then thrive.  It is not difficult for business owners to have their individual worth professionally appraised, and then create a new entity for the combined companies. 
 
Our firm has advised numerous media companies on their mission to merge (legally, financially, strategically).  When entrepreneurs are honest with themselves, rational in their thoughts, and unconcerned with their ego or “legacy,” they will often see that combining their strengths with another (sometimes a continent away) will give their organizations a major boost (and even an advantage) in the global entertainment market. Sometimes they need look no further than their biggest content supplier or content buyer for that strategic partner. 
​

→ The Challenges & Opportunities

Our firm continually reports on the rapid changes confronting the global film distribution industry.

These marketplace changes include:

• the added competition of companies like Netflix and Amazon;
• the demise of DVD revenue, and the lack of commensurate digital revenues;
• the vanishing value of catalog film titles;
• the technological sea change that 4K / UltraHD / High Dynamic Range content represents. 

While film distributors face a host of new challenges to their businesses, they still provide producers with the vital service of bringing filmed entertainment to audiences around the world. 

Now may be one of the best times to contemplate making a change.  Film distribution is in a transitional state and those who make smart financial and transactional moves now will be the winners tomorrow.
 
Every company that makes a profit, employs smart people and acquires new titles – has value.  As we wrote earlier, no two film distributors are exactly alike.  It is not difficult for us to determine an accurate market value for these kinds of companies. 

​Similarly, buying, selling or merging film distribution and sales agency companies is a core competency for our firm.  It has taken training, knowledge, experience, reputations, relationships, and good information for us to do this well. 
​

→ ​Transactionally Driven

Our firm has been involved in the sale of over 50 media companies, and while each offered their own unique challenges, all transactions were completed successfully, to the benefit of both buyer and seller.  Mergers are sometimes our most taxing, but most rewarding transactions, because we get to witness how two, or more, entrepreneurs use their strengths to build one, better company.  

The value drivers of a film distributor take some detective work to be ascertained, but every company has them.

There are tried and true techniques that we can use to arrive at an accurate appraisal of film rights and companies, when all the facts are known to us. A company’s human assets are sometimes more valuable than their movies.  Every distribution company represents a patchwork of assets. 

Sometimes its worth is found in relationships, sometimes it's found in rights and titles, sometimes it’s a result of longevity and good management, and sometimes it is anchored in geographic significance.  
 
No company has just one value.

Value is often a question of “to whom?”

Our job has been to help company owners determine what that value is and how to best maintain it, multiply it, cash-in on it, or capitalize on it.    

Reference List: 
​1 - ARE THERE STILL TOO MANY FILM/TV DISTRIBUTORS? |
BMC Online – 03/06/2017 by Stephen J. Kerr
http://www.bizmark.net/blogs/are-there-still-too-many-filmtv-distributors  

2 - WINNING BEFORE YOU SHOW UP | BMC Online 07/24/2014
by Stephen J. Kerr
http://www.bizmark.net/blogs/winning-before-you-show-up  

3 - HOW MUCH ARE FILMS WORTH? | BMC Online – 05/17/2016
by Stephen J. Kerr
http://www.bizmark.net/blogs/how-much-are-films-worth   

4 - VALUING A SINGLE FILM OR ENTIRE FILM LIBRARY (Updated) | BMC Online – 04/04/2017 by Stephen J. Kerr
http://www.bizmark.net/blogs/valuing-a-single-film-or-entire-film-library-updated

5 - EVEN IF YOU'RE ON THE RIGHT TRACK... | BMC Online – 06/28/2014
by Stephen J. Kerr
http://www.bizmark.net/blogs/even-if-youre-on-the-right-track

Image Credits:

GRAPHIC_BUY, SELL, MERGE, VALUE by Bel Âge Médias

IMAGE_SYNERGY-MERGINGS-CIRCLES.png by Bel Âge Médias

PHOTO_Sarah&Stephen 2.png via Bel Âge Médias

ALSO PUBLISHED AT:
LinkedIn-Stephen J. Kerr – https://www.linkedin.com/pulse/how-buy-sell-merge-value-film-distributor-stephen-kerr

Our firm is all about helping companies build and realize their highest value: whether it is in film, television, music, video games, publishing or online.  As you get ready to go to Cannes, we want you to think about what makes your company valuable, and to consider what you can do to enhance that value as you do your work of buying and selling films. 

Many companies go from show to show, building their catalogs and selling territories without giving much thought to their overall company image or “brand.”  But a company needs a brand.  It needs to be known for something more than just an “eclectic collection” of films. 

That is, in fact, what a lot of the foreign sales (and distribution) companies have become: A mixed assortment of movies and documentaries.  We cannot discern much of a plan or corporate image from their list of titles accumulated over the years.  Most titles were picked up because they were priced right and expedient, and the acquisition team knew they could sell them to a certain number of buyers.  Not much thought was given to how this or that title fits into the overall company “brand,” or how a title will enhance the value of the corporation (and its library), as a whole.  It often gets down to price, terms and sell-ability.  Deal done.

But that is not the end of the deal.  That title will become part of the company’s long term identity.  We know the phrase “you are what you eat,” well… 

We realize that building your corporate brand is crucial to the long-term successful growth and financial health of your company. 

• What are you known for?  Why do buyers want the films that you take to market? 
• When you want to recruit top talent for your team, why do they want to work for your company? 

​Let’s picture in our minds some of the following companies: EuropaCorp, Fortitude International, MarVista Entertainment, Lakeshore Entertainment, IFC, STX, Archstone, A24, Participant Media, and Electric Entertainment. 

​We pretty much know what type of films (and television projects) they create, buy, sell, and release.  

They are brand conscious.
​

​Buying and selling films is more about personal relationships than it is about moving inventory.  Often a film you acquire from a producer is because you sold their last film – and you may want their next one.  But how does that relationship and property help your company build your brand?  What is your long-term strategy, and how does this film help you?
​

Ten years from now, will you look back and be glad that you acquired and sold this or that film, or will it be just another brick in the wall?   

We advise you to build your brand.  Establish your niche in the vast entertainment business.  Movies are not bricks. 

​Acquire only films that will enhance the overall value of your company, and give you a catalog of titles that others would admire and wish they had acquired.
​

When we compromise our values for what is financially expedient, we lose sight of why we are in this business in the first place. 

Sure, we want to make money.  But in the end, we want to be remembered for having done more than just making a profit – we want to have done something great.

In June 2014, we wrote:

It does not matter if you have the best collection of creature features, Anime, Sci-Fi, romantic comedies, rock docs, international spy thrillers… or kid vid.
​

A lot of people talk about branding. Few companies (and we know who they are) in our business actually do it. 
 
As you get ready to embark for France in 2017, think about your long-term goals and objectives. Carefully consider what you want your company to be known for; and what you - yourself - want to be remembered for.
​

Let us help you.

Our firm, Bel Âge Médias (B.Â.M.}, is a company specializing in providing Business Development, Branding Guidance, Mergers & Acquisitions (M&A) expertise, Exit Strategies, and Investment Banking services. Additionally, under out ongoing Streaming / OTT / 4K / Ultra HD initiative, we continue pursuing strategic alignments with high-end, entertainment technology providers, and explore low-cost alternatives for theatrical, televised, streamed, and online distribution of 4K and 2K films & television programs globally.
 
Bel Âge Médias • Santa Monica, California
Call Us - or Visit Us Online - or Email Us:
+1 310 666-6474 
https://belagemedias.com/  
Stephen(@)BelAgeMedias.com • Sarah(@)BelAgeMedias.com

LinkedIn-Stephen J. Kerr – https://www.linkedin.com/in/stephenjkerr
LinkedIn Sarah Nean Bruce – https://www.linkedin.com/in/sarahneanbruce

Reference List: 
1 - “The Most Important Thing To Remember At Cannes” | BMC Online – 04/27/2014 by Stephen J. Kerr - http://www.bizmark.net/blogs/the-most-important-thing-to-remember-at-cannes

2 - “The Search for Relevance” | BMC Online – 6/6/2014 By Stephen J. Kerr - http://www.bizmark.net/blogs/the-search-for-relevance

​Image Credit:
logo_cannes.jpg

If you want to buy or sell all the rights to a film, you do not necessarily have to call an appraisal company to arrive at a fairly accurate value of the property.

My firm has been valuing book, music, software, film and television (intellectual) properties for more than 25 years and we have also studied the valuation techniques of many other firms as well, and for the most part, it comes down to “apples to apples”.

 → STEP ONE
Break down the film, or films, by director, star(s), genre, original box office (or DVD) revenue and foreign/domestic exposure.  ​
​

Contact other producers or distributors with similar genre films (with the same director/stars if possible) in their library.  These are your “comps”.  Find out how those films performed over their lifetime.  

Once you have a great enough sampling of “comps”, determine an average baseline value for similar titles.  If you ask the right people, you might be surprised how forthcoming most rights holders are with this information, they have nothing to hide and often gain valuable information about their own films in the bargain.                                            

Researching the past sale price of similar films is a bit tricky, but there is a lot of published and unpublished information about past film sales available on the internet.  Again, it is wise to turn to your friendly competitors and other rights holders.  You will probably find, as we do, that you can develop a consensus of thought about any particular film based on its genre, star and director. 

Example: If you find that 5 to 8 year old films (like yours) were sold from one rights holder at $7,000, another at $9,000 and another at $12,000, then you can form a consensus market value of similar titles at about $10,000.  That is your baseline value. 


→ STEP THREE
Our firm gives each film in a library a rating (1 Worst – 4 Best) depending on the film’s past financial performance, the presence of known “movie stars”, the age of the film, and the film’s director, producer and debut reviews.   

We total the points for each of these factors and create an average (Example: 2.3).  So, if the consensus, general market value of films of a similar nature is $10,000, then you apply your multiple (for example purposes only: 2.3).  Fair Market Value $23,000.

​
→ STEP FOUR
Applying a discount.  You may need to discount the film’s value based on many possible factors; among them are the number of territories sold/unsold (and currently still under contract), the availability of clear chain-of-title information, and the quality of the original print.  If the print has not been digitized and is not in high definition (standard def), then that becomes a factor too. In one recent valuation, we had to give standard definition “B” and “C” titles zero value.   We add up the discounts and apply them.  It usually comes in at .50 to .80.  This is your discount rate.  For example purposes only, let’s assume that we have created a discount of .67.  We multiply our film’s gross value of $23,000 times .67 to arrive at a Fair Market Value of $15,410. 

That is a very accurate assessment of the value of this property.    

You may be wondering why we first create a rating point system and apply it to an average industry consensus of similar films, and then discount that gross value to arrive at a Fair Market Value.  We do this to make sure that we are treating each film fairly and accurately.  Just because a similar Kevin Sorbo or Mark Harmon picture sold for $22,500 in 2013, that does not mean that's what your film is worth.  You will need to rate all of the elements of the film and apply any discounts to be accurate.   

The days when DVD was king are over, and films today are very much valued on their digital distribution rights.  If those rights, or elements, are not available, then the value can fall to the floor.  

We understand that this is not a cookie cutter valuation method, but it forces you to look at all the positive and negative aspects of a film and apply a numerical value to them.  I promise you that if you use this process you will feel that you have a handle on the true market value of your film property, or properties.  ​

REFERENCE LIST: 
1- DIAMONDS & RUST,
BMC Online, Stephen Kerr, 03/24/2013

2 - HOW MUCH ARE FILMS WORTH?,
BMC Online, Stephen Kerr, 5/17/2016

3 - VALUING A SINGLE FILM OR FILM LIBRARY,
BMC Online, Stephen Kerr, 04/14/2014

Image Credit:
STOCK-IMAGENES-ES-SFTCDN-NET_multiplex-1.jpg​

​
In 2017, I still think that while the film industry would benefit from stronger, better funded distributors and sales agencies, the ones that remain have proven themselves highly adaptive to the new digital delivery marketplace.  

Over the past three years some distributors and foreign sales agencies have consolidated with competitors or simply gone out of business, and still more have cropped up in their place. 

While revenue from foreign and domestic film sales is still down (compared to the 2000-2008 “high water” period), many distributors are still clawing out a living – others are thriving.  Some global sales agencies are benefiting from the emerging markets in Asia, Latin America and Eastern Europe – while others are concentrating on domestic delivery only and letting others handle the foreign.


Today ~
Our advice to small/midsize distributors and sales agencies is:

• specialize in a specific genre, seek out global partners,
• find a company to merge with, and educate yourself on the global 4K content marketplace. 

Our advice to the large, better funded distributors and sales agencies:

• consolidate your market niche,
• build strategic alliances, and
• own outright more of the films you release.

Now, we realize better there is room for everyone in the entertainment industry.  And, one need only maximize what one has.  

Moreover, the coming explosion of 4K content should be of keen interest to everyone.  While the 4K / Ultra HD revolution is still in its early days, we not only encourage everyone to get ahead of the curve, we are eager to facilitate it for ourselves and others (WHAT IS YOUR 4K / ULTRA HD STRATEGY?).

And the future?

There may come a time that all distribution rights to new motion pictures and documentaries are put up on some giant online auction site and the world’s film buyers and broadcasters will simply bid on those territorial rights like some entertainment industry version of EBay. 

​Until then we have a system of global film markets and film festivals that we must all attend to sell, titillate, and cajole the buyers to pick our films from the thousands of other offerings. 

​We trade heavily on our personal relationships and our reputations to get this job done. 

It is an important job because thousands of producers, directors, investors, actors and crews are counting on us to succeed.

And ultimately, there are millions of consumers around the world who seek our film and television content.

The explosive growth of companies like Netflix, Hulu, Amazon, HBO, Showtime and about 500 other direct-to-consumer (over-the-top/OTT), and subscription movie services (SVOD), has made the job of distributing features, documentaries, and limited television series, both easier… and harder.
 
➜Producers are Distributing and Distributors are Producing.

A feature or documentary producer can finance, self-distribute and even sell their content directly (via YouTube, or Vimeo) to consumers.  A distributor might play a significant role before, during and after the production of a feature/doc, and then distribute through all the usual windows. Or they might decide to go directly to the consumer as well. 

Most of us know that Netflix, Hulu, Amazon, Crackle, HBO, Showtime, Cinemax, and The Movie Channel no longer just offer consumers filmed entertainment.  They initiate, develop, produce, finance, and proliferate productions on all platforms around the world – including (sometimes) theatrically, at retail, and on competing channels. 

That’s not even touching on what the television channels like A&E, SyFy, Lifetime, Hallmark, NatGeo, and Discovery are doing. 
 
➜Established distributors hire firms like ours to help attract and set-up multi-million dollar “Minimum Guarantee Funds” to enable them to acquire better productions.

Sometimes, projects are acquired by distributors years before they are made and distributed to the theaters or broadcasters. This trend of distributors acquiring projects early on has turned many ‘Heads of Acquisitions’ into ‘Heads of Development.’

There was a time that a global film distributor or international sales agent could simply wait for good features and documentaries to come to them at film markets like AFM, EFM, MIPCOM, Hong Kong – or they would bid on completed projects at one of the dozens of film festivals that go on – seemingly every week – around the world. 

However, when companies like Netflix, Amazon and HBO began snatching up the best projects from the top festivals and markets, and started paying prices that no indie distributor could possibly match – it most definitely changed the game. 

No longer can independent distributors and international sales agencies afford to bide their time to pick up feature films that the big studios (or TWC) passed on. 
 
➜Often today, distributors need to lock up foreign and domestic rights by connecting with producers while their projects are still at the script stage, and sometimes even before there are any cast attachments.

Distributors do not always have to make investments directly into the film projects, or even make advance payments based on Minimum Guarantees, they can sometimes make sizable P&A commitments in the project’s theatrical, or day-and-date, distribution. 

Securing a theatrical release of 1000 screens, or more, can do wonders for foreign and domestic sales.  Distributors and Sales Agents have told us that quotes from foreign buyers can be as much as 300% higher for a US theatrically released movie.  Assuming of course it was not panned by the critics, then it will only be slightly higher.
 
➜The Producer’s Dilemma.

Many film producers have not woken up to the fact that revenue estimates for international sales and domestic OTT or pay cable pickups are often unreliable.  Some distributors/sales agents are not entirely truthful and just want their market fees, so they give producers grossly overstated sales estimates.  

This makes it more difficult for the scrupulously honest distributors who give their producers the real numbers.  The producers are torn between: giving their investors the lower estimates, and risk not getting their movie made; or giving their investors inflated numbers, and just hope that it all works out. 

Distributors who make early investments into films have to be sure of their sales estimates because they are sharing the risk that their numbers will prove out.
 
➜Life can be difficult for a distributor’s Head of Acquisitions who travels to film festivals with empty pockets.

Distributors have told us that it is definitely an advantage to have a fund set aside to offer filmmakers advances and make early stage investment into worthy feature films and documentaries.  Niche players who specialize in campy horror, foreign, art-house, Christian, Latino, urban, gay/lesbian features, or music docs, may not encounter these issues as much. 

The major OTT’s, broadcasters and Pay-TV outlets do not focus on, or pre-buy, most genre films.  Some genre product will find its way onto Netflix, Cinemax or SyFy, but specialty distributors rarely have to compete with these broadcasters for the distribution rights on niche films. 
 
➜The challenge for international feature film distributors and sales agents is finding product that is “bankable.” 

Distributors know this means features have strong enough casts, directors and genres that the banks will lend on the distributor’s revenue estimates.  One can count the number of distributors on their fingers and toes whose sales estimates are considered reliable enough for bankers to lend against. 

Producers use to be able to walk their signed territory sales agreements into the bank and get up to 70% on those estimates.  These days, they are lucky to get 30% on estimates… and then - only from the top territories like Germany, UK, Australia, France, and Japan. 
 
➜Currently, most film buyers around the world want to see the finished movie before they will make a financial commitment. 

The reluctance of foreign film buyers to make a pre-release commitment to even better quality feature films has made providing Minimum Guarantees very dicey.  The better-heeled companies like A24, IFC, Bleeker Street, Magnolia, Roadside Attractions, STX, Freestyle, FilmRise, Archstone, The Orchard, e-

One, and others, still pay advances and/or put up P&A money for top shelf theatricals.  The foreign buyers are more apt to take a pre-release risk on their pictures, than on others.   
 
➜The benefit for distributors, and their investors, to pay advances to producers is that they are usually last money in and first money out. 

As soon as the first big territories are sold, MG money is often repaid.  In some cases, filmmakers arrange for some cash to go back to their investors from early territory sales (“corridor”). But in most cases, a film’s investors recoup well after the distributor.  

Film distribution has always been the world of HAVES… and HAVE NOTS.  The most successful companies have sizable acquisition and production funding, often provided by a hedge fund, venture capitalist or high net worth individual.  This is not the game that one can successfully play without cash.
 
➜Companies hire us to quietly and privately seek out, and arrange, strategic partnerships.
​
While a lot of money is still pouring into indie film productions by investors all over the world, a number of the more savvy financiers are placing their bets on distributors. 

Our firm works with investors from China, Dubai, Germany and right here in the USA who recognize that owning a piece of an international sales agency or film distributor is the way to go. 

​Financiers have found out that making several smaller bets on movies and documentaries is better than making one big bet on a single production.

In 2014, we wrote an article entitled Too Many Film/TV Distributors (see link below) which suggested that through a series of mergers, the proliferation of small distributors and sales agencies could be consolidated into fewer – but stronger ones. 

Investors are looking for opportunities in film distribution, but they are mostly attracted to larger companies ($10 million and up) and insist on an equity stake. 

​We have found that loans, or revenue sharing, do not appeal to financiers.  It’s most often equity, or nothing. ​

Reference List:

1 - “What Filmmakers Need To Know About Indie Distribution”  | Filmmaker Magazine - Sep 1, 2016 by Paula Bernstein- http://filmmakermagazine.com/99705-what-filmmakers-need-to-know-about-indie-film-distribution-in-2016/#.WIpE9LGZORt

2 - “Too Many Film/TV Distributors”| BizMark Online – 2/20/2014 By Stephen J. Kerr - 
http://www.bizmark.net/blogs/too-many-filmtv-distributors

3 - “Make It High, Make It Low”| BizMark Online - 8/18/2013 By Stephen J. Kerr - http://www.bizmark.net/blogs/august-18th-2013
 
4 - “Even If You Are On The Right Track…”| BizMark Online – 06/28/2014 By Stephen J. Kerr
http://www.bizmark.net/blogs/even-if-youre-on-the-right-track

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Article Image: 
 
IMAGE_archerweiss-cd-rates-risk-reward.png 

Sarah Nean Bruce (SNB): Why should film distributors be interested in hearing about 4K / Ultra High Definition content and delivery platforms?

Stephen J. Kerr (SJK): To deny the onrush of 4K/UHD as the new standard in motion picture, online and television delivery makes about as much sense as denying climate change. You can ignore it all you want, but to your own peril… Both are coming anyway. 

SNB: How come 4K is in your forecast? 

SJK: For several years now, virtually every major motion picture and most television shows have been shot on film, or on 4K, 6K, and even 8K - digital cameras. Almost every significant post production house around the world has already upgraded their editing equipment and software to the new 4K standard. According to an April 2016 article in Home Media Magazine,  

​SNB: With so many new 4K Ultra HD televisions, computers and handheld devices being sold, where can consumers access 4K movies and television shows?

SJK: Sony, Warner Bros, Paramount, Universal, Fox, Disney and Lionsgate all have major 4K initiatives in place. 0The technological problems of encoding, storing, transferring and displaying 4K content have mostly been resolved. Nearly every one of the OTT streaming devices – including Google Chromecast, Apple TV, ROKU Premiere+, Amazon Fire, Dragon Box, and about a dozen others – are “4K Ready.” 

In addition, most 4K Ultra HD televisions being delivered by manufacturers today have 4K pre-loaded apps that allow viewers to stream and download movies and other UltraHD programming. 


SNB: Can you explain why there isn’t a lot of 4K content available even though there are so many 4K content delivery devices (including new smartphones and game consoles)?

SJK: We estimate that only about 1% of the movies, games and other programs are currently available to consumers in 4K.  

While the big movie studios, and a few major independents – like Shout! Factory – are gearing up for this new platform, many of the independent distributors and producers are still lagging behind. 

If they continue to do so, they will most likely lose out on this huge emerging market opportunity. 


SNB: Why aren’t more of the independent distributors capitalizing on the growing demand for 4K content?

SJK: Other than technology leaders like Dean Devlin at Electric Entertainment, who says that he has been “mastering in 4K for years,” I think most sales agents and distributors have not recognized that 4K is the de facto heir apparent to HD.  

More importantly, I think most independent distribution companies do not yet know how to monetize their existing content in 4K / UHD, that is presently in 2K or 1080p / HD. Nor do they know how to make the new crop of 4K films and television shows available to the growing number of 4K-ready platforms. 

The home consumer installation of 4K televisions, computer screens, and handheld devices had been relatively small up to 2016, but it has grown rapidly in the past year. Just go to any Best Buy or Costco and watch the stream of 4K Ultra HD devices rolling out the front door. 2014, or 2015, was probably not the time to jump on the 4K bandwagon – but 2016 was, and 2017 is most definitely the year to go 4K. 

4K/Ultra HD, is the undisputed darling of the over-the-top (OTT) streaming video community. Amazon Studios is shooting all of its original content in 4K; Netflix is out with their $11.99-per-month 4K streaming package for Ultra HD content. YouTube, UltraFlix, Sony and M-Go, among others, are all trying to fill the 4K void. And where the OTT providers go, the cable companies cannot and will not be far behind.


SNB: How can producers and distributors monetize their newest films, documentaries and serial programs in the emerging 4K/UHD space?

SJK:

• Step 1: Require all new content be shot, edited, mastered, and delivered in 4K/UHD.  Ultra HD content can always be down-converted beautifully into HD (2K or 1080p) for those deliverables. 

• Step 2: Reach out to your domestic and foreign broadcast/content delivery partners and ask them what their 4K delivery standards are, and what their protocols are to transfer 4K files. 

• Step 3: Re-release, in 4K, films that debuted last year (or even a year or two ago) that were probably shot in 4K. 
  

• Step 4: Scan in or transfer (cross-conversion) 35mm and 65mm film to brilliant 4K. And finally, perhaps up-convert the very best of your older, most popular content, originally shot on 2K/HD digital cameras, to 4K/UHD.  
  

Just like any other release strategy, costs should be weighed against the potential economic benefit. (Older 2K or 1080p content can be up-converted to 4K for about $50.00 per minute.) 


SNB: What kind of films and documentaries work best for 4K/UHD?

SJK: It’s true that not all content benefits from 4K viewing. That’s why early adopters are looking for movies with great visual effects - like sci-fi, historical dramas or animation; plus heart-thumping action, or eye-popping landscapes/cityscapes; also creature features.

Visually exciting films/docs, with bold or beautiful imagery, benefit the most in 4K/UltraHD. Romantic comedies, home-town dramas, or contained thrillers may, or may not, benefit from being viewed in 4K. 

It’s all about the visceral - ‘theater-like’ - experience.

We recommend distributors do a low-cost 4K conversion test of a select scene to evaluate whether the content would be demonstratively better in 4K/UHD, or not. 


SNB: To me, some 4K programming looks too stark, and more like video than cinema. And we have read that 8K televisions are already being tested by the manufacturers! What can you say about this? 

SJK: There are “cinema” settings on most of the newer smart televisions that smooth out the image and give viewers a more “movie theater” look and experience. These in-TV adjustments help make images look less like video, and more like 35mm film. 

The industry is just catching up to the new 4K / Ultra HD standard. The positive aspect of 4K resolution is that it approximates the clarity and richness of 35mm film that we have come to know and love over the past 100 years. 

As to 8K, television manufacturers tell us that format is not in their current plans and is probably be more than a decade away. A move to 8K by the electronics manufacturers would neither benefit the industry, nor the consumer.
​

It’s been more than three years since President Barack Obama signed the JOBS Act creating Rule 506(c) of SEC Regulation D, allowing private placement issuers to use “general solicitation” to raise money from qualified investors. The SEC released final rules under Title IV June 19, 2015. These rules, commonly referred to as Reg A+ and allow for non-accredited investors to participate in private offerings.  According to 2014 data by the SEC, more than $14 billion has already been raised by early adopters who have taken advantage of the opportunity to publicly advertise their offerings. The legislation has three central provisions. The first makes it easier to launch startups through the use of crowdfunding. The second allows venture-capital firms and others seeking investment to make "general solicitations"— appeals via mass media, or social media – to potential investors. The third is called the "IPO on-ramp." This provision makes it easier for a company to go public, in part by allowing its owners to make less onerous disclosures.

I refer to this as the “Poor Man’s IPO.”  It allows companies to raise up to $50 million per year in a SEC registered and reviewed offering.  Shares are freely trade-able upon their issuance, offer lighter financial and non-financial disclosures compared to a full-on IPO, and ongoing reporting requirements which are reduced both in terms of the quantity of information and the frequency of reports.  Rule 506(c) gives you the opportunity to reach a much broader audience and potentially reduce your cost of raising capital. It also gives a whole new group of investors the chance to participate in private placements.

Rule 506(b) is familiar to most of us in this finance industry. Companies using this rule can sell securities to any number of accredited investors, and up to 35 non-accredited investors. You don’t have to verify investors’ accredited status yourself, but you must not advertise the offering publicly in what’s known as “general solicitation.” And, you must take great care to only offer your securities to buyers that you already know and believe to be accredited.

The new Rule 506(c) allows you to advertise your offering. There need not be a prior relationship with the investors who buy your securities. But, you do have to verify that anyone who actually invests is an accredited investor.  When issuers advertise their offering, they can raise more money, faster, by appealing to a wider range of investors. You don’t have to rely on “friends & family” or the traditional gatekeepers to help find suitable investors.  Now you can make your case directly to the market and let the strength of the offering speak for itself.  From the investor’s perspective, an advertised 506(c) placement is a huge new opportunity, too. Investors can more easily search for placements that suit their needs, and they don’t have to have any kind of insider connections to uncover the best offerings.  It’s much more a level playing field now.

For entertainment entrepreneurs you now have two attractive options to raise large amounts of money for your movie, television show(s) or slate of projects: Tier 1 allows issuers to raise up to $20 million, but you cannot make general solicitations to the public; Tier 2, allows you to raise up to $50 million and advertise your offering.  In both Tier 1 and Tier 2 offerings issuers must submit, and have approved, an “offering circular” to the SEC.  For Tier 2 offerings, the SEC included a provision that allows you to ‘test the waters’ — allowing you to validate investor demand prior to preparing a full-blown offering circular.  Tier 1 offerings (up to $20 million) are not exempt from blue sky filings, which require issuers to file documentation with each state that they plan to raise capital in. While Tier 2 (up to $50 million) offerings are exempt from blue sky filings, Tier 2 issuers must make semi-annual and annual filings with the SEC that include audited financial statements for the two most recent years, along with narrative disclosures.

These new fundraising tools work best for companies with highly recognizable brands and market awareness.  But the process is there for everyone to take advantage of.  All you need is a good securities lawyer and experienced CFO, and you could raise up to $50 million using the Reg A+ system.  For example: If you are Michael Mann and you wanted to make the sequel to Hancock - you could simply set up a production company under Tier 2 guidelines and raise up to $50 million from the public, without having to file all the onerous IPO paperwork or submit to tedious Sarbanes Oxley accounting requirements.   

It should be noted that if all you need is less than $5 million, Reg D 504 and 505 offerings are still the best way to go. No blue sky provisions, no need for audited statements and no reporting requirements.  All you have to do is file a Form D with the SEC and you are in business.  504 offerings can be advertised to the public, but you can only raise up to $1 million in 12 months.  505 offerings allow you to raise up to $5 million in 12 months from accredited investors and up to 35 non-accredited investors – but no general solicitations are allowed.

So, times have changed... Entertainment entrepreneurs who don’t at least consider the new Rule 506(c) are leaving valuable options on the table.  And as fundraising efforts continue to shift online, becoming more transparent and efficient, entertainment fundraisers will win as they enjoy better, faster, cheaper access to the capital they need to thrive.