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FOR: Corporate / Film & TV Valuations, Mergers & Acquisitions,
Business 
Plans & Exit Strategies, as well as a broad range of 
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​New & Legacy Streaming Media Content, and Helping
Emerging Media Companies Prosper.

HOW TO BUILD A BETTER STREAMING MEDIA COMPANY (part 2)

1/12/2021

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Licensing and / or Buying 
​
Streaming Content Content

~~~~~~~~~~~~~
Written by 
William Sondheim, Greenfield Media
Stephen J. Kerr, Bel Age Medias
 & 
Sarah Nean Bruce, Bel Age Medias

************************************************************
Picture
-FEATURED GRAPHIC-HOW TO BUILD A BETTER STREAMING MEDIA COMPANY (Part 2).jpeg
​January 12, 2021

– 15 MINUTE READ –
PREAMBLE: 
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. 
“I think a lot of the best film libraries have been acquired. You are going to see very few independents left because there has been so much acquisition and consolidation.  It’s not like five years ago when there were 15 to 20 libraries out there that were substantial.” )
~ 
Philip Elliott Hopkins, The Film Detective (a Division of CINEDIGM)

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."
​

SONDHEIM: “The comments above reflect the dramatic variables that these small and medium sized streaming services face. They must decide how they will attract, and then maintain a robust customer base even when that customer base may have varied tastes and economic resources. Some Streaming media channels feel their best approach is to cast a wide content net that will appeal to many different viewer tastes in an effort to please as wide a group as possible. The challenge with this approach is you may not be defining a target audience… and that makes future marketing and content decisions less well defined. 

“The alternative approach would narrow the content selections to appeal to a specific audience and focus your marketing on a specific segment which you can satisfy. With limited resources, having a focused audience provides greater potential to satisfy existing consumers and find additional subscribers that match your core audience.”
​ 
AVAILS & LIMITATIONS.
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.
​
Justin Killion, GM & Executive Vice President, Operations & Content, COMPLEX.com: “Often we will commit to deficit financing a project which will premiere on our ad supported O&O platforms and shortly thereafter be licensed out non-exclusively to other distributors for a period of time. When the deal makes sense, this can be quite advantageous to us as it drives additional licensing revenue, but also because it serves to further grow our brands, the aforementioned series franchise, and our overall audience awareness. On occasion, a third-party platform may hear about a series we are deficit financing and seek to obtain the content exclusively. While these opportunities are not our primary focus, it is something we entertain provided the brand alignments are organic and the potential distributor puts forth a great marketing plan, and frankly enough dollars, too.”
​
Purchased content can come with territory restrictions that limit the acquiror to (for example) only North America, but still allow ‘in-perpetuity’ releasing.  Licensed content often comes with the most restrictions as to territory and duration.  
​

 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.”
​
CLANAGAN (Laugh Out Loud): “In terms of the stuff we license, we have two very premier series that we license exclusively.  What you start to see on the phat channels and platforms is the same content on ten different channels.  So, I do go for exclusives.  Like I have – ‘Def Comedy Jam,’ or Eddie Murphy on ‘The PJs.’ We have that on an exclusive basis, so you’re not going to see that on ten other AVOD channels.” 
​

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.” 
​
→ Whether you make it, buy it, or rent it – aggregating great content is essential to building a brand.
​

INVESTING IN OR PURCHASING CONTENT FROM THIRD PARTIES.
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.”  
​
→ There are more important considerations than just the price of programming when you are trying to build a brand name for your channels.
​
REAL WORLD VALUATIONS OF PURCHASED CONTENT.
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.” 
​
→ Deciding what to pay for new content should not be done on a dart board. There are tried and true methods to ascertain the value of intellectual properties that companies should follow. 
​
REV SHARE. 
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.”  
​
→ Rev sharing is an essential tool for most smaller Streaming media companies because it allows them to aggregate a lot of content at the lowest possible up-front cost.  Trust is a key component to the success of rev share deals. 
​
REFRESH, REST & REITERATE.
Many streamers recognize the need to refresh their content offering - regularly - if they wish to hold on to their audience and minimize viewer churn. 
​

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." 
​
→ Content fatigue is a real issue for Streamers.
​

GOOD DATA MAKES FOR GREAT DECISION MAKING.
We asked a number of the Streaming media companies if they were getting reliable data that helps them with their ongoing content creation and acquisition decisions. Here are their responses.
​

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.” 
​

→ The Streaming industry is not at a point - yet - where the platforms like ROKU or Pluto TV can give them usable demographics like they can garner from their own channel. 
​

CONCLUSION. 
​
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. 
 
–––––––––––––––––––––––––––––
Special Thanks to our Industry Experts quoted in this article: 
Picture
Philip Elliott Hopkins, President at The Film Detective (a Division of CINEDIGM)
https://www.linkedin.com/in/philip-elliott-hopkins-934a7b11
https://thefilmdetective.com 


Picture
Steve Saltman, Head of Domestic US Sales at Electric Entertainment (ElectricNow)
​https://www.linkedin.com/in/steven-saltman-2994894/
https://www.electricnow.tv

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

Picture
Jeff Clanagan, ​Co-Founder & CEO at LOL Network (Laugh Out Loud Network)
https://www.linkedin.com/in/jeff-clanagan
https://laughoutloud.com/

Picture
Justin Killion, GM & Executive Vice President, Operations & Content at ComplexNetworks (COMPLEX.com)
https://www.linkedin.com/in/justinkillion
https://www.complexnetworks.com/


If you’d like to Read Part THREE
↓ Stay Tuned ↓
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/]

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ABOUT: William “Bill” Sondheim – Greenfield Media – are content distribution experts who help producers and content owners navigate the rapidly changing entertainment marketplace with unique and current insights on SVOD, AVOD and TVOD exploitation.
​This organization leverages the expertise of several industry leaders and provides content and cast evaluation, distribution strategies, marketing and social plans and Key Art development. 
​
​
https://greenfield-media.com 

Picture
ABOUT: Stephen J. Kerr – Bel Age Médias / Business Marketing Consultants – specialize in Corporate / Film & Television Valuations, Mergers & Acquisitions, Business Plans 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 - 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 
​

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LINK TO INFOGRAPHIC VERSION OF THIS ARTICLE:
HOW TO BUILD A BETTER
STREAMING MEDIA COMPANY (Part 2)

Licensing And / Or Buying 
Streaming Media Content

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

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    Stephen Kerr is president of BMC (Business Marketing Consultants), a subsidiary of Bel Age Medias. 

    He has 30 years experience in the media and entertainment industry. 

    ​See more on his LinkedIn profile.

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