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US digital giants go TV shopping

There's been a flurry of announcements from US tech giants announcing their ambitions to work with UK television producers in the past six months.

Internet subscription service Netflix launched here in January, offering UK shows such as The Inbetweeners, The Only Way is Essex and Secret Diary of a Call Girl for its £5.99 a month video on demand service.

The move follows an increasing push for UK content from US backed video on demand services such as Hulu as well as Amazon-owned Lovefilm. Hulu, for example, announced in July that it would co-produce the fourth series of Armando Iannucci's The Thick of It.

Meanwhile, YouTube said it had over £10m to spend on original content from UK producers as part of a plan to launch dozens of new channels in areas such as fashion, sport, music and news. Amazon also announced in May that it would commission original content for its live streaming service Amazon Instant Video.

It’s long been the holy grail for TV producers to generate revenue from the internet, and the moves by Netflix, Hulu, YouTube and Amazon suggest that it is happening at last.

This belief was validated last month when UK superindie group All3Media forecast its digital activity will account for 11% of group profits this year – much of this from licencing to VoD services.

However, others say that the returns from digital activities are still negligible at best – and sometimes not even worth the time taken to process the paperwork involved.

Smaller producers describe it as a nascent market, saying that it is best suited to superindie groups who can bundle shows through their well connected distribution arms.

Pact figures bear out the fledgling state of the market. According to its 2012 census of indie producers, new media accounts for just 2% of the £284m that production companies made from international and rights revenues last year. DVD and video sales, by contrast, make up 6% of international and rights revenues, albeit down from 12% five years ago.

Despite this, most agree that it is worth investigating the digital landscape more. “It’s the most exciting area of business in terms of growth potential,” says Zig Zag’s vice president of commercial and current production Leila Monks. “So it’s worth investing time and energy in now.”

Video on demand
Indie producers are making most of their digital revenues from video on demand services like Netflix, Hulu, iTunes and Lovefilm.

Netflix, for example, has been in conversations with many leading UK distributors and producers, acquiring finished programming for its US and fledgling UK service.

Indies say the prices Netflix is paying are similar to those of a secondary TV rights buyer, such as UKTV. Netflix is viewed as the most aggressive VoD player for TV content in the UK market and indies report that its entry here has led to a significant rise in prices for VoD content as it competes with Amazon-owned Lovefilm.

Both services have been seeking exclusive content in a bid to differentiate themselves, helping to create a price-war for streaming rights for UK TV content this year.

By way of example, Lovefilm signed an exclusive content deal with 20th Century Fox in June, giving it first run of the studio’s films, such as X-Men: First Class.

Indeed, such is the new level of competition that Ofcom recently announced that it was no longer investigating Sky’s long held grip on the pay-TV film market. It said that emergence of online rental services such as Netflix and LoveFilm had ‘materially’ altered the competitive environment and removed the need for extra regulation.

In the TV market, drama and comedy are the genres that are most in demand from VoD services, with series earning a reported £7-8,000 per hour. Factual content is a harder sell, and can fetch £3-4,000 per hour.

All3Media International’s vice-president of digital distribution Paul Corney’s job is to licence programmes to VoD services, and he has been building direct relationships with outlets such as Netflix and Hulu.

Corney says revenues have “been going north quite rapidly over the past year,” citing the launch of Netflix in the UK as a key driver as is the expansion of services like Hulu in the US. Hulu, for example, has a programme acquisition budget of $500m for 2012 and is keen to sign exclusive deals for content to differentiate itself from its competitors.

In fact, revenues from VoD services in the US have grown the most, he says, because All3Media International can more freely exploit the rights of its shows over there.

Corney says that scripted content from All3Media owned indies such as Skins, Fresh Meat, Ultimate Force and Midsomer Murders has done particularly well in the US, as has The Only Way is Essex. Factual shows, he acknowledges, “are not as popular but we do licence some content.” The key users of the services, he notes, are the technically savvy 16-34 year old age group.

Zodiak Rights, meanwhile, has sold US video on demand rights to Being Human to both Netflix and Hulu.

Zodiak Rights vp of sales and North American co-production Anthony Appell says both services provide “interesting new revenue streams” for producers, but plays down any suggestion that they pay big money for shows.

Netflix will pay upfront to take a licence for a certain number of years, while Hulu goes for a simple royalty share that sees them split revenues 50/50 and provide a quarterly report on viewing.

Netflix, says Appell, is strongly focused on 18-35 year olds who enjoy box sets of dramas and comedies and are often Twilight fans and sci-fi geeks. It was in this context that he approached Netflix to see if they would be interested in the UK version of Being Human, given that they already had the US version of the drama. “They were quite aggressive in picking it up,” he says. “If they really want something, they will stump up the money.” In future, he believes, Netflix will look to acquire more content on an exclusive basis.

Hulu, by comparison, is more likely to pick up lifestyle shows, thinks Appell, citing the success of The Only Way is Essex on the service. (The show’s debut on Hulu earned it a prominent piece in the New York Times, titled Real People, Fake Tans, True-ish Stories.) Zodiak Rights has also sold shows such as Desperate Scousewives as well as Being Human to Hulu.

The UK market, by contrast, is more restricted. Producers are not allowed to release new content straight away to VoD services.

That’s because UK broadcasters which put up the majority of the programme finance for a show can hold on to the UK territory rights for between three and five years themselves. According to their deals with the indie sector, the BBC and ITV can hold back shows in the UK for five years, while Channel 4 and Five can do so for three years each.

However, indies in the UK are pushing back on these hold back deals. Producers alliance Pact’s latest deal with Channel 4 saw the hold back period reduced from three years to six months in some cases.

There’s widespread acknowledgement that the VoD market is set for further growth in the UK over the next five years, as more televisions become connected to broadband.

But, despite being well financed, it is clear that there are significant challenges ahead for Lovefilm and Netflix to establish sustainable businesses. Previous entrants into the market have found it difficult to maintain a presence, as illustrated by the exit of SeeSaw and Fetch TV, and the delays to the launch of YouView.

Liz Warner, managing director of Betty, the Discovery-owned producer of Freaky Eaters and Country House Rescue, describes the VoD market as ‘nascent’ but adds: “VoD is really beginning to grow and show some healthier payments for us.”

Pact chief executive John McVay says spend from the likes of Netflix in the indie sector is “very welcome.” He acknowledges that his organisation’s most recent census showed little signs of VoD spend – but said it would be something to look out for next year.

He says that larger indie groups such as All3Media have worked hard and invested heavily to build up contacts and programme sales with organisations such as Hulu, iTunes and Netflix – and that this effort is now paying off.

Indeed, All3Media’s Paul Corney says the VoD sales are all additional revenue. “Because of these extra platforms, audiences and revenue streams, you have to get smarter…but in general it is all upside for us.”

To date, All3 has focused on English speaking territories, in particular the UK and the US. But, adds Corney, “now we are seeing expansion in Scandinavia and Germany and also, funnily enough, in Russia, where the VoD market is growing.”

McVay advises that, for smaller to medium sized indie producers, the best thing to do is, “to get a great distributor and make sure they are selling your programme properly and flogging your format around the world.”

Adds Corney: “My advice would be to get out there and get your programmes on as many platforms as you can and just learn from it.”

Commissioning content
Many of these tech giants are not just looking to stream video on demand that they have acquired from distributors – they are commissioning original content direct from producers. The likes of YouTube, Netflix, Hulu, Amazon and Yahoo have all been greenlighting shows from TV producers.

The reasons differ according to each platform. For YouTube, it makes sense to ensure that high-quality videos will be posted to the site alongside user generated content to attract even more eyeballs and ad dollars.

Netflix, Hulu and Amazon are commissioning because they need their video on demand services to stand out. After all, catch up services are proliferating and it is increasingly easy to access repeats on services such as YouView, 4oD and the BBC iPlayer – not to mention traditional services such as UKTV’s suite of channels.

So the leading players realise they have to offer something unique themselves in order to attract viewers. The move echoes Sky’s strategy (although not its spend) of investing in original British content as part of its effort to stop churn and hold on to its 10m plus subscribers.

To date, the original content push by Netflix, Hulu and Amazon has been US focused. Some 5% of Netflix’s content budget is reported to be spent on original content, including the reboot of acclaimed comedy drama Arrested Development. Hulu’s commissions include Morgan Spurlock’s A Life in a Day and documentary series Up to Speed from indie director Richard Linklater.

Meanwhile, Amazon unveiled plans earlier this year to commission original content for its live streaming service Amazon Instant Video. The internet retail giant said it had earmarked comedy and children’s series as its two priorities, calling for writers and programme makers to submit ideas to its content development division Amazon Studios.

Within the UK, Yahoo said that it would invest more than £1m in original digital video content in partnership with GroupM Entertainment.

The online portal said recently it was greenlighting six VoD series with “seven figure budgets”, in areas such as travel, lifestyle and showbiz sites.

The move follows the launch last August of Yahoo!’s 48-part parenting guide Bumps, Babies And Beyond, fronted by Myleene Klass, which was co-produced by GroupM and Twofour. The push is being led by Yahoo! head of strategy Piers North.

However, the most high profile entrant into the content market in the UK is Google which is investing around £10m in original content for its video-sharing site YouTube.

The money will be used to provide content for dozens of niche UK channels on YouTube, following a $100m push that began in the US last year that has seen the launch of channels such as animation service Cartoon Hangover, beauty channel The Stylish and automotive service Car and Driver Television.

In the US, YouTube has given advances to a wide range of creators, from small outfits to established media companies. The creators make content; YouTube monetises it through advertising and splits revenue after initial costs are recouped.

Here, YouTube is advancing producers around £500k a year as part of its original channels strategy, overseen by director of TV Ben McOwen Wilson. An initial commissioning round this Spring saw YouTube receive more than 150 pitches from UK content producers.

Despite this enthusiasm to engage with YouTube, many producers urge a degree of caution.

Pact chief executive John McVay says YouTube’s investment is welcome, but says it is “small beer, to be honest.” Compared to the programme budget of ITV or Channel 4, the £10m that YouTube is spending is “tiny”, he adds.

He says the economics of the YouTube deal is a “classic new media model,” with YouTube providing an advance which they then earn back through advertising. Only then does YouTube split ad revenues with the content creators. “You are not earning any revenue until [YouTube] earn it all back.”

McVay adds: “Selling a programme to Poland might be better business because they will pay me cash for my programme – up front.”

All3Media has already launched a suite of channels on YouTube, including Animal Madhouse, Embarrassing Bodies, and The Wine Guy.

They are not a major revenue generator, acknowledges All3Media head of interactive media and licensing Selma Turajlic. “You do generate some revenue around them, but you aren’t going to retire on them.”

But, she adds, it’s important to put time and resource into understanding how a video service as large and important as YouTube works. As more connected TVs come onto the market with YouTube apps on them, it’s likely that more content will be watched through YouTube.

The channels are also important for helping to build TV brands. “In the same way that we run Facebook and Twitter around our TV shows, YouTube is another social platform – but one that happens to deal with videos.”

Turajlic says YouTube also helps All3Media to understand its audiences much more. “The role of producers is changing. Historically, we have been in business to business, delivering tapes to broadcasters. Now it’s increasingly business to consumer, where you have to have a much greater understanding of the audience.”

The key US digital players

Online video provider Netflix is available in more than 40 markets outside Netflix’s home market of the US. It launched in January in the UK, offering its video on demand service for £5.99 a month. It has more than 26m subscribers worldwide. It is also commissioning original programming, with dramas House of Cards and Arrested Development set to debut later this year. Its content team is based in the US.


US internet retailer Amazon took full ownership of UK online movie rental service Lovefilm last year. Lovefilm has 2m subscribers in Britain, Germany, Sweden, Denmark, and Norway for its DVD and streaming service. Earlier this year, Amazon unveiled plans to commission original content through its US content development division, Amazon Studios, focusing on comedy and children’s series

YouTube is spending $100m on its Original Channel Initiative. Launched last October in the US, it’s part of a plan to launch more than 100 new video channels including dance channel DanceOn, news service Reuters TV and music channel Vice. Earlier this year, YouTube’s director of TV Ben McOwen Wilson said it was spending in excess of £10m on ideas from UK producers and was weighing up more than 150 pitches from UK content producers.

Only operates in the US, where it runs content from founding partners Fox, NBC Universal and Disney. Plans to come to the UK and Europe have floundered, but it is acquiring content from UK producers. More than 2m people are now paying for premium subscription service Hulu Plus, which gives access to a range of TV shows and films for $7.99 a month. Hulu is also investing in its own original programming.

UK video on demand market

BBC iPlayer: 1.94bn TV and radio programme requests across all platforms in 2011
4oD: 429m full length-programme views initiated in 2011
ITV Player: 376m long form video views in 2011
YouView: formally launched in July two years later than planned, combining the UK’s Freeview channels with on-demand content
Now TV: Sky’s new pay as you go internet TV service is launched this year
Blinkbox: Tesco acquired online movie provider Blinkbox last year
BT Vision, Sky and Virgin Media’s pay TV services offer extensive video on demand services.

Posted 25 July 2012 by Tim Dams

Broadcasting the Olympics to the world

Some 4.8 billion people are expected to tune in to watch this month’s Olympic Games from London.

And all the images and radio signals from the key events will first pass through a huge, gleaming shed-like structure that is the size of two football pitches.

Located inside the Olympic Park next to the hockey stadium and alongside one of East London’s busy arterial roads, the International Broadcast Centre (IBC) is the broadcasting hub for the Games.

For the duration of the Games, it will be the largest production centre in the world – its control rooms, edit suites, studios and offices will act as the processing point for 5,600 hours of sports coverage captured by 1,000 cameras and 52 OB units.

A month before the Games is to begin, the IBC (pictured above) looks very much a work in progress – like the Olympic Park itself.

First, you have to pass through stringent security that means it can take almost an hour simply to get into the Park. Passports are required for ID, while sniffer dogs are on hand as is airport style security.

The giant IBC building itself was completed in July 2011, but it teems with builders and engineers putting in the finishing touches. Swathes of office chairs are wrapped in plastic, ready for the arrival of the thousands of people who will be based at the IBC. Row upon row of boxes full of technical kit sit ready to be installed.

Paul Mason (pictured below) is the man in charge of making sure everything is ready on time, and that the pictures of the Games do indeed reach their intended global audience.

A remarkably calm figure despite the impending deadline, Mason is head of OBS London. OBS stands for Olympic Broadcasting Services, which was set up by the IOC in 2001 to act as the host broadcaster for all Olympic Games. Based in Madrid and run by Spaniard Manolo Romero – who has worked on every Olympic Games since Mexico City in 1968 – OBS is responsible for capturing and delivering the images of the events to all the broadcasters that have purchased the TV and radio rights to the Games. The BBC is the rights holder in the UK.

The reasoning for the existence of the OBS is that the Games needs a single, experienced host broadcaster to produce and transmit unbiased TV and radio coverage of the Games, rather than hundreds of countries sending in their own production teams to do so. Otherwise, the venues would hardly be able to fit in the spectators. The OBS coverage is known as the International Signal or World Feed. Rights holders then use this as the core of their coverage, adding their own commentary and supplementary camera work for their audiences.

Mason has been planning for this moment since he joined OBS London as its first employee in 2009. A former BBC exec who has been involved in major sports operations for the BBC, including every Olympic Games since Moscow 1980, he was technical director for the 2002 Manchester Commonwealth Games and advised the bid committee for the London 2012 Games.

To an outsider, the IBC looks an unfeasibly complex operation, with a vast control room, row upon row of racks and servers, and editing suites.

“Like all complex things, you start building from simple elements,” says Mason, as he describes how the IBC has been kitted out. And he started from the very beginning. When he joined, one of his first tasks was simply to find an office, hire a core staff of about 20 and set up a payroll for OBS’s London operation.

The OBS workforce will rise to around 5,600 people by the start of the Games, including 1,000 students from UK universities involved in a special broadcast training programme.

Coverage of the games will be captured in a completely tapeless environment in full HD, and all TV audio will be produced in 5.1 surround sound.

London games organiser Locog constructed the shell of the IBC building, supplying it with basics such as air con and power. But it has been up to OBS to kit it out and make it fit for purpose.

Mason acknowledges that it’s been hard work getting to this stage. But he credits OBS’s long track record of producing games coverage as key to their ability to mount the broadcast operation for the Olympics. “The fact is that there are so many experts around who have done it before. OBS is really good at the detailed planning and the timelines.”

Communication, with Locog and the rights holders, has been crucial to the job, says Mason. “We are in the communications business, but keeping communications across the various areas has been a challenge and something it was clear we had to get right from the very beginning.” Everything, from health and safety and sustainability policies through to working out the specific requirements of each rights holders in the IBC has to be planned and communicated. For example, OBS has had to work closely with Locog in all areas impacting broadcasting, including the competition schedule, the IBC, venues, transportation, accreditation, accommodation, logistics and technology. Then there have been regular meetings with the 147 rights holders to confirm their needs in the venues and in the IBC. “It’s complex - it’s about making sure all the bits fit into place,” he says.

OBS will also deliver some coverage of the Games in 3d as well as Super Hi-Vision. In total more than 230 hours of 3d coverage will be produced, with a dedicated 3d channel available that broadcasts for 16 hours a day. Up to 11 3d cameras per venue will capture sports like athletics, gymnastics and diving. Eight days of sport will also be captured in Super Hi-vision with 22.2 surround sound, with the high quality images broadcast to specially equipped cinemas around the UK.

The Super Hi-vision is “incredible quality” says Mason. But he stresses that his main priority is “just to get superb core coverage of the Games in HD.  There is a balance to be struck between expecting total reliability from a host broadcaster and pushing the envelope…the host has to be absolutely solid. So you can’t take any risks.”

Mason seems confident that the OBS can deliver. But he does acknowledge that certain factors –particularly transport and security in a city like London – are beyond his power to control in terms of successfully delivering the Games.

Then, after the Games, OBS London will be wound up and OBS’s attention will turn to the next Olympics in Rio in 2016. And for Mason, who says he doesn’t have any specific plans post Olympics, it will be the chance to take a “decent holiday.”

For more info see:

Posted 11 July 2012 by Tim Dams
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