As the saying goes, “When it rains, it pours!” Not only does the world have to contend with worrisome developments (such as those brought on by Donald Trump, Brexit, Vladimir Putin, Recep Tayyip Erdogan, Kim Jong-un, and Iran, etc.), but a recession is now expected in 2021, and a complete change (not evolution) in show business is also on the horizon owing to the massive (and impulsive) introduction of SVoD services.
This latest SVoD development, driven by Wall Street, has left the worldwide film-TV industry in a state of shock and disbelief, especially because there are no clear answers. Now more than ever Oscar-winning screenwriter William Goldman’s quote, “Nobody knows anything,” can be applied to show business.
For years, the U.S. studios wanted to “eliminate the middle-man” and go straight to the consumers. This desire was accelerated by the consumer’s (and Wall Street’s) obsession with Netflix. It’s not that the show biz sector necessarily wanted to rush into SVoDs, but when it was explained to Wall Street bigwigs that it would be unwise to give up the assured $11 billion worth of international content sales a year (just by the major U.S. studios combined) for potential SVoD revenue, investors on the Street almost unanimously responded, “Yes, but what about your future digital plans?” And to prove its resolve, the Street gave Netflix unlimited funds, despite the streamer’s $13 billion losses and negative cash flow.
So here we are now with over 10 major SVoD services in the works that will be sacrificing the studios’ $11 billion in international content sales in order to reserve programming for their own untested streaming services. At this point, no one knows if such streamers will be financially viable in the long term. We must wait at least five years to find out. By then the top brass who made today’s decision to go all in on streaming will most likely be retired, so the ball will be in the courts of new executives, who might never have been fully convinced of the soundness of streaming-only distribution business.
Plus, if the anticipated recession goes into effect right in the early phase of the SVoD launches, the negative outcome will be felt much earlier than five years.
However, the first consequences of this rush to SVoD will be clear as early as next year, when the U.S. studios withdraw content from the international TV market, affecting not only TV networks around the world, but trade shows such as NATPE, MIP-TV, and the L.A. Screenings, as well.
While organizations that set up markets such as NATPE and MIP-TV are actively searching for solutions to minimize the fallout, the L.A. Screenings are more vulnerable since it is an organic market piloted by the U.S. studios with no core organization behind it.
These important issues (i.e., the rush to SVoD, NATPE, MIP-TV, and the L.A. Screenings) will be discussed at length in the October (MIPCOM) edition of VideoAge.
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