In the midst of both a streamer-driven content boom and a production landscape fraught with Covid challenges, producers are raising their voices to demand more favourable partnerships with the new players, and — in some cases — questioning their own ability to survive.
Martin Moszkowicz, CEO of German film and TV production powerhouse Constantin Film, has a framed letter from the wartime mayor of Sarajevo, Muhamed Kresevljakovic, hanging on the wall behind his desk. It thanks him for his efforts to get Bille August’s The House Of The Spirits — Moszkowicz’s last “hands-on” production — to the besieged city in 1993 for the one-off ‘After The End Of The World’ film festival, a precursor to today’s Sarajevo Film Festival.
Nearly 30 years later, the veteran producer, whose subsequent credits include the Resident Evil and Shadowhunters franchises, regards this “heartfelt” and “warming” letter as a pertinent reminder of the power of the collective experience of watching a film on the big screen, at a time when cinemas around the world continue to be affected, even devastated, by the Covid-19 pandemic. “It shows the importance of movies and why we need to ensure movies and theatres survive,” says Moszkowicz.
Ever the optimist, the executive believes cinemagoing in Europe will return with time. He acknowledges, however, that Europe’s entire independent film and TV production sector faces a watershed moment as it navigates a financing, production and distribution landscape altered forever by the pandemic. The past 20 months of on-and-off lockdowns have boosted incumbent streamers such as Netflix and Amazon Prime Video, and turbocharged the launches of Apple TV+ in late 2019 and Disney+ in early 2020. All eyes now turn to the arrival in Europe later this year or in 2022 of WarnerMedia’s HBO Max, NBCUniversal’s Peacock and ViacomCBS Networks International’s Paramount+.
At the same time, cinema closures resulted in a 70% fall in admissions in Europe to 300 million tickets sold in 2020, against nearly a billion in 2019, according to data released by the Strasbourg-based European Audiovisual Observatory (EAO) in July. This left an estimated $5bn hole in box-office receipts, which fell to $2.4bn against $7.5bn in 2019. The 2021 box office is also expected to fall short of pre-pandemic levels. Other sources of finance for the region’s independent producers, such as state subsidies and national broadcasters, have also come under pressure, especially in smaller territories.
The same EAO study suggested the number of feature films produced in Europe and the UK dropped by 30% to 1,403 in 2020, against 2,007 in 2019. It remains to be seen whether feature production levels ever return to pre-pandemic levels given the lower box-office revenues, weakened state film funding and changed viewing habits.
As a result there has been an increase in European independent producers who previously focused on features shifting their attention to drama series, which are increasingly bankrolled by the streaming companies. Recent research by Ampere Analysis showed that Netflix became the biggest single commissioner of European scripted content in 2020, leapfrogging longtime market leaders the BBC and Germany’s ZDF, while Amazon Prime Video and Disney+ have also ratcheted up European commissions.
Europe’s indie players in both the film and TV sectors are increasingly edgy, however, about the growing domination of the global platforms. None deny the role they have played in fuelling an unprecedented content boom in the region, but there is growing concern over the contractual terms they look to impose when boarding a film or TV project.
“In the past, when you produced a show for a European network, they would finance a large part of it, you would contribute to the budget with soft money, and then you would own the rest of the world. Admittedly, there was less of a market for European-language shows but this was where the producer had a potential upside,” says one producer who works regularly with the streamers. “Today, the streamers want all global rights.
“In the US, they solve this problem [of taking all rights] by paying the producers a ‘premium’ on top of the producer’s fee — that could be 10% or 15%, maybe more. The platforms have brought their US model to Europe but have forgotten to bring the premium too.
“Suddenly, as a producer, you’re being offered a 7%-10% fee but that’s it,” he continues. “In many cases, there is no contingency either. Independent producers are being reduced to the status of service producers on projects they have developed. From the outside, it might look like there’s a production bonanza, but the producers aren’t necessarily very happy. The margins are very small, so you may survive but you won’t thrive.”
Like many independents who now work regularly with the global platforms, the producer was cagey about discussing the issue openly and spoke to Screen International on condition of anonymity. It is impossible to find producers who will discuss actual deal terms as they are all subject to confidentiality and non-disclosure agreements. But many cited a growing trend for platforms to demand complete control over additional seasons or feature sequels and other potential spin-offs, even when the properties on which the film and TV projects are based have been independently scouted, secured and developed by producers using their own resources. In a related issue, platforms also attempt to tie up the author rights in a similar way when projects are adapted from their work.
“When we heard about these clauses, we thought it was ridiculous but it’s no joke,” says this producer. “They get the producer to produce the first season but reserve the right to bring in another producer for subsequent seasons or even take it in-house. Many producers don’t have the leverage to negotiate and simply have to accept these terms.”
Another producer highlights the complications of extricating IP from development deals when a platform decides not to go forward with a production. “They can be very tough on turnaround terms,” she explains. “On the face of it, it looks like it’s relatively easy to recover your rights but then you discover a long list of sub-clauses that make it difficult for you to reboot the project or take it to other platforms.”
There is also concern that when streamers tap into European state funding or fiscal incentives via local producers, this contribution to the budget is not factored into contracts to give these partners an equivalent share of the rights. Producers in both film and TV sectors warn this model is stripping creative producers of the resources to develop further shows or grow. “For every show we get commissioned, we might have developed 10 others that don’t come to fruition; this costs money and it’s risky,” says another producer. “That’s why we need returns out of the IP that have been commissioned.”
One veteran producer said the situation was even tougher for producers in smaller territories. “You’re looking at 5%-6% but the European standard to simply cover overheads is 7%,” he says, also speaking anonymously. He adds for dramatic effect: “You might be for a revolution, but you don’t necessarily want to be the one sacrificing your life on the barricades.
“Not intentionally, they’re destroying a market based on independent producers,” he argues. “What we want to say to all the streamers — not just Netflix, but all the streamers — is that Europe has a very fragile ecosystem with rules that allow producers in 27 counties to produce very different works. We love this diversity, and it’s also one of things the platforms love too. But the business rules they are proposing will end up creating a very homogeneous set of companies producing only what they [the platforms] want.”
This situation is felt most acutely in the TV drama sector but feature film deals are bound by equally tough deals and, while platforms buy relatively few independent films, there are fears the all-rights model will have a trickle-down effect for feature film production. “For now, we’re trying to not go to streamers on our feature film projects, even if we work with them on series and are not religiously against the idea of working on an original,” says one producer. “We are trying to stick to the pre-sales model to keep hold of our rights but of course the platforms’ way of doing business will have an impact on feature film production in Europe in the longer term if it is allowed to continue unchecked.”
Against this backdrop, bigger European players with clout are beginning to speak out openly. Moszkowicz’s Constantin Film has worked successfully with Netflix and Amazon Prime on shows such as Perfume and We Children From Bahnhof Zoo, but he is among those who have felt compelled to voice their concerns publicly.
During a keynote speech at a Cannes Marché du Film seminar in July highlighting the challenges facing independents on working with platforms, Moszkowicz said: “When it comes to deal terms with the streamers, it’s tough; in some parts, it’s a nightmare. Of course, they’re trying to leverage their power, their 200 million subscribers there, 80 million here…
“We have to find a way to keep our business going and work for them without being swallowed and spat out. Every producer knows how difficult it is to get some material developed. Nobody will be there unless it’s a worldwide bestseller. You take a big, big risk before it pays off and we want to be rewarded for that.”
The event was co-organised by the European Producers Club (EPC), the European Film Academy and the German Film Producers Association in partnership with the European Film Agency Directors body, which have been at the forefront of a growing collective movement calling for a more equitable relationship between the continent’s independent producers and the streamers. In March, the EPC launched a four-point code of fair practices (see below), calling for producers to be able to hold onto their IP, for more transparency around a work’s performance and for additional revenue based on how much a work is viewed.
Also speaking at the Cannes event, EPC managing director Alexandra Lebret said its launch had prompted “mixed emotions” within the sector, ranging from relief the issue had been put out in the open to fear of the consequences for publicly showing support. “We are asking our best partners to change their business model,” she stated. “The platforms represent an amazing opportunity for the European audiovisual sector, they’re commissioning a lot and they’re investing a lot. Everyone wants to get a show commissioned by a platform. But they’re also a threat to us and we need to make them understand we cannot follow the rules they want to impose.”
As well as starting a conversation, one of the objectives of launching the code was to raise awareness among EU and member state regulators around the challenges facing the region’s independent producers. “They see a lot of money flowing into the industry but are not really aware of the conditions under which this is happening and how little power we have to negotiate,” said Lebret.
Few independent professionals expect the platforms to voluntarily start offering more equitable terms and there is a growing consensus that some sort of pan-EU regulation is required, especially for smaller territories that do not have the economic clout of countries like France and Germany. Lebret noted that while the EU’s new Audiovisual Media Services Directive, updating the bloc’s legislation around the film and TV sectors for the digital age, set a 30% European content quota for streamers operating in EU territories, it did not stipulate that quota had to be filled by independent producers.
France, however, has blazed a trail in its implementation of the directive by stipulating that streamers operating in the territory need to invest 20%-25% of their turnover in French local content, of which 85% needs to be in the French language. Within this 85% tranche, 66% of TV investment needs to be with independent producers who get the rights back after 36 months in the cases of an exclusive deal, rising to 75% for feature film with rights reverting to the producer after 12 months. The EPC believes this could serve as a model for a pan-EU regulatory framework.
Beyond Europe, the worldwide response to the code — which was shared some 100,000 times on social networks when it first launched — has revealed that European producers are not alone in the challenges they face when working with the global platforms. “We were contacted by people in Canada, the US, Sundance, Chile, not just Europe,” says Lebret. “It’s not only a problem for independent producers in the EU, but an industrial problem worldwide.”
European Producers Club code of fair practices
Fair and proportionate remuneration to cover reasonable producer fees, overhead fees, a contingency reserve and additional revenue linked to viewing results.
If an independent company creates or co-develops an IP, it should be allowed to retain rights to it and to develop future derivative works.
Greater transparency around viewing figures, giving producers more access to data on how their productions perform.
When a production accesses state support and tax incentives via an independent producer, this should be reflected in a share of ownership and control of the rights.