Revenue from International buyers tides British producers through the Covid crisis
While 2020 saw intense difficulties for the UK content production, a few key trends emerged which both pointed to the resilience of the sector and to an acceleration of widespread market changes.
This short report, produced in collaboration with Workshare, highlights major changes seen in the sector over the past few years, the impact of Covid, and the growing importance of secondary rights as a monetization vertical.
- WorkShare calculated that production revenue (excluding distribution) fell to around £3.4bn, a decline of 17% year-on-year.
- Across the same period, distribution revenue (Broadcast International) declined by just 8%, from £1.88bn to £1.71bn.
- Despite also seeing declines, International revenues proved resilient, and now accounts for around 40% of the total sector compared to 27% in 2015.
- Drama was the worst impacted genre,
- dropping in per-hour revenue (production) from £1.4m ($1.8m) in 2019 to £1.1m ($1.38m) 2020,
- the number of hours of drama produced declined sharply by around 25%.
- Distribution revenues, mainly derived from international content deals were far more resilient, declining just 9% from £1.88bn to £1.71bn
- Global spend on acquiring and commissioning English-language content (excluding sports and movies) passed £60bn ($80bn) in 2020. Acquisitional spend represented around £28bn ($38bn) of this and commissioning £31bn ($42bn).
- Acquisitional spend continues to grow faster than original, representing 47% of total in 2020, compared to 41% in 2015
Results are in for 2020: spend on content production has decreased sharply, an 18% year-on-year decline, falling to levels last seen in 2016. Given the length and severity of restrictions on production and the slashing of broadcaster budgets, this decline of only 18% can be considered nothing short of remarkable
Time should be taken to salute the creative talent and logistical efforts that faced down restrictions and came up with innovative ways to, initially, create content from full lockdown, and later to ingest and implement an incredible, complex and restrictive set of rules to enable live filming.
Local spending (In UK) in sharp decline whilst international showing some resilience
While top-line results were resilient, domestic production spending saw the largest decline, as broadcasters slashed budgets and spending.
Local spending on production fell by 22% compared to 2019; hence those companies reliant on domestic funding for production were hit far harder than those able to tap into budgets from international buyers.
International buyers provided some relief to an industry under siege. Revenues from international sources declined by just 8% year-on-year, compared to a decline by around 25% from domestic sources.
This continued the long-term trend of the growing importance of international budgets, for both production, and increasingly distribution for UK content. Non-UK revenue now represents around 40% of production revenue compared to 18%, in 2013.
Distribution revenues, derived from international budgets, again provide strength
While production revenues derived from primary rights saw 17% declines, secondary sales to international markets via distribution deals were not nearly as severely affected.
Distribution revenues, mainly derived from international content deals, were far more resilient than production revenues. Distribution revenues declined just 9% from £1.88bn in 2019 to £1.71bn in 2020.
In the UK, distribution sales have been enjoying an international boom, growing at double digits for the best part of a decade.
Increasing cost of content drives acquisitional spending across the globe
The last decade, up to 2019, has seen a rise in the average cost per hour of the most premium content; the new streamers have created competition, not just for customers, but also for quality drama producers.
Huge investment into original content has caused the cost of the average hour of drama produced to swell dramatically, from £916,000 ($1.5m) in 2013, to a high of £1.4m ($1.75m) in 2019.
A sea-change in the value of library content
Consumer revenues, generated across broadcasters, streamers and channels have also grown strongly across the last decade.
Savvy buyers looking to manage budgets, have increased acquisitional spend faster than commissioning originals. Acquisitional spend typically includes secondary markets for recently completed productions, but increasingly, over the last few years, library content has seen a range of very high value deals made for decades-old content.
“Our library has never been older and it has never generated as much revenue as it does today,” says Chris Ottinger, president of worldwide television distribution and acquisitions at MGM.
– Hollywood Reporter
This has created an industry sea-change in the way that library content is valued. In the middle of the last decade, companies were starting to write off the value of their content, with companies such as Viacom slashing the book value of their assets.
Major distribution deals for library content
The emergence of SVOD and the need to fill vast libraries with high quality, if not original, content drove up the value of these libraries.
With the accelerated adoption of VOD amongst consumers, and the associated binge watching consumption habit, it is likely that this trend of increasing value of library content will continue.
With AVOD channels being increasingly efficient mechanisms of monetization, combined with the plethora of niche and specialist channels emerging across the globe, legacy asset value will continue to appreciate for the foreseeable future.
In 2020 total spend on English-language content across the globe (excluding sports and movies) tipped the scales at $80bn in 2020 growing by more than $20bn over the past five years.
Acquisitional spend represented almost half (47%) of this, and has itself grown by 60% since 2015.
Companies best placed to tap into secondary market distribution are also best placed to realise the true value of their owned IP.
Vuulr’s marketplace – a simple and effective way to build resilience and tap into new budgets
As we approach the end of 2021, it is clear that the demand for international content (British Content) from buyers across the world is growing strongly and is becoming an increasingly important source of revenue and resilience for production companies. Hence the need for UK based production companies to put increased focus on driving international revenue growth.
The Vuulr Content Marketplace is an online platform that connects buyers and sellers globally, allowing production companies to have their entire catalogues, front and back, seen by buyers internationally.
At a macro level, over 66% of the +1,800 deals (representing approx 10,000 hours) enabled by the platform have been between buyers and sellers from different countries.
On the buy side, North America remains the single largest source of deals, but has seen the increasing diversification of buyers decrease its total share of deals on Vuulr’s platform (despite an absolute increase in North America deals YoY), from 55% to 35.5% as buyers from Asia Pacific, Middle East & Africa and Western Europe strongly increased their uptake of international content.
Overall, the region has sourced 32% of all purchased hours from overseas, bought significantly from the likes of Australia, the UK and the Netherlands.
From 2020 to 2021, North America sellers’ share of total hours sold on the platform fell from 63.8% to 54.1% in a period that saw buyers take up more content proportionally from other regions.
Western Europe sellers grew their share of total hours sold on the platform from 14.7% to 17.3%. There is also demonstrable interest in content from Eastern European and MEA sellers, with Eastern Europe growing its share from 1.8% to 7.8%, and MEA similarly growing from 1% to 7.2%.
APAC has sourced 79% of content hours from a wide range of overseas producers, from the US and the UK to Nigeria and Colombia, and through 2021 has moved to take a huge share of MEA content – representing 10.4% of content hours bought by APAC on the Vuulr platform in 2021. Most notably, the North American market saw its share of hours sold to APAC buyers more than double from 16% to 39.6% from 2020 to 2021
By removing friction from the traditional process of content discovery and acquisition, Vuulr allows buyers to easily license content from all over the world on a single platform, thereby enabling content distribution on a global scale.
Through Vuulr’s global reach, content producers and sellers have the opportunity to monetize their entire catalogue and unlock new international revenue streams at no upfront cost. This is an especially valuable proposition for indie producers at a time of growing global content demand. Savvy indies should look to leverage every avenue to ensure their content is discoverable by international buyers.
Sign up on Vuulr to realize the true value of your catalogue.