Movie acquisitions for US TV channels are steady but the picture will soon get more complex as studio output deals come up for renewal and SVoD players step up.
For studios and independent distributors the US television picture is constantly changing, as the programming strategies of broadcasters, basic cable channels and pay-television networks evolve and appetites for theatrical features fluctuate.
Recently, sellers report, overall demand for movie rights has remained fairly steady, with basic cable networks taking up the slack left by broadcasters, and fledgling subscription video on demand (SVoD) services showing new interest. Over the next few years, however, the picture could change more than it has in decades, with the rise of new rights buyers leading to the creation of new deal models.
‘There’s a lot more viable interest in licensing our films because of the SVoD players in the market’
Gina Brogi, Twentieth Century Fox Television Distribution
The US broadcast networks, which in the 1990s would regularly pay impressive sums — $50m or more in some instances — for rights to the biggest theatrical blockbusters, are now highly selective and more frugal buyers. The wide availability of movies in windows that come before the traditional network window — which starts 24-30 months after a film’s theatrical release — has devalued features for broadcasters and the rise of reality programming has given the networks a cheaper way to fill their schedules.
When they do buy movies, the networks now tend to favour safe genres such as comedy or action and to hold out for deals that differ from the traditional model of three runs over a period of three to five years for a typical licence fee of 15% of a film’s domestic box office take.
“It’s not that we’re opposed to movies, it’s just finding the right fit and the right timing,” says Lisa Vebber, SVP of scheduling for NBC, whose recent buys have included Bridesmaids and Little Fockers from its sister company Universal.
While demand for movies from broadcasters has declined, demand from basic cable networks has risen sharply.
Advertising-supported general entertainment networks such as TBS, TNT, AMC, USA Network, ABC Family and FX buy films — in the network window and typically for 10%-12% of domestic theatrical gross — in small packages but in large numbers. Last year, for example, FX bought network window premiere rights to 28 of the top 50 box office performers.
For cable channels, theatrical movies can both reinforce a brand and help lead viewers to original series programming.
“Movies are an incredibly important part of our network as we continue to build out our original content,” says Michael Riley, president of ABC Family, whose recent buys have included Alice In Wonderland, both parts of Harry Potter And The Deathly Hallows and Pirates Of the Caribbean: On Stranger Tides. “They’re wonderful platforms from which to launch original content.”
For studios, the basic cable market offers the opportunity to create multiple sub-windows — films can be licensed to different networks by the year or even the month — among a wide range of buyers.
“General entertainment networks skewed towards men love action comedies,” says John Weiser, president, distribution Sony Pictures Television, “but they will work with other films too, to broaden their demographic appeal.”
‘Movies are wonderful platforms from which to launch original content’
Michael Riley, ABC Family
The market is also important for independent distributors offering more specialised films. Basic cable, says Roadside Attractions co-president Howard Cohen, is “a robust market, as long as you’re getting to the right buyer and the movie has some profile.” Roadside’s Winter’s Bone was recently sold to female-skewing basic network Lifetime and Chris Rock-hosted documentary Good Hair found a home with BET, which caters primarily to an African-American audience.
Premium pay-TV networks have always been big movie buyers, through studio output deals and package or one-off acquisitions from independents. But their appetites could now be in question, thanks primarily to a strategic shift towards original series programming.
According to estimates from research company SNL Kagan, aggregate spending by pay networks on theatrical movies, which dropped in 2007 and 2008, has recently been increasing, to $1.87bn in 2010 and $1.96bn in 2011. However the proportion of the networks’ total programme budgets spent on theatricals has been steadily decreasing, from 67% in 2006 to 61.2% in 2011.
CBS Corporation-owned pay network Showtime first showed a propensity for cutting back on movie spending three years ago, when it did not renew output deals with Paramount, Lionsgate and MGM, which responded by launching Epix, their own joint-venture pay movie network.
Last year, Showtime lost the output of leading independent Summit, leaving the network with only the outputs of DreamWorks, the Weinstein Company and CBS Films.
HBO has maintained its output deals with 20th Century Fox, Universal and sibling studio Warner Bros. And while it last year ended its deal with DreamWorks Animation it also took on the Summit output for 2013-17.
‘Movies continue to be a big part of the schedule’
Richard Plepler, HBO
HBO co-president Richard Plepler confirms that original programming, which now takes up around 30% of the network’s schedule, “is more and more defining the HBO brand”. He adds, though, that movies “continue to be a big part of both the viewership and the schedule”.
The Starz pay network, which has output deals with Sony and Disney, is also using more original programming, though it still devotes the vast majority of its schedule, even in primetime, to movies.
“Over time that primetime ratio will move more towards originals,” concedes Stephan Shelanski, EVP of programming for Starz Entertainment. But, he adds, “across all day parts and all our channels we’re still predominantly movies. It’s not even in our plan to change that balance.”
Executive avowals notwithstanding, the real size of the pay networks’ movie appetites will only be revealed when current studio output deals, most of which expire in 2015, 2016 or 2017, come up for renewal.
Even if the networks opt to renew all their output arrangements, the terms of the deals could change. Price is, of course, always up for negotiation (current studio deals are reckoned to be worth an average of about $200m a year) but in this round of talks studios and networks might also find themselves bargaining over issues including windows (currently the first pay window opens between eight and 15 months after a film’s theatrical release) and perhaps even exclusivity.
The SVoD dimension
It may also be in those negotiations that the effect of new competition for movie rights will become clear.
The highest profile new buyer to emerge so far has been Netflix. The internet subscription service entered the pay-TV space in 2008 through an arrangement with Starz and followed up by signing pay-window output deals with Relativity Media, FilmDistrict and DreamWorks Animation.
Some pay-TV players suggest that after losing its Starz deal and suffering a stock price fall-off last year, Netflix, which has recently become active in acquiring and producing series programming, is now taking a more measured approach to movie rights.
Even if that is so, a number of other SVoD services — among them Amazon Prime Instant Video, Comcast’s Streampix, Hulu Plus, Walmart’s Vudu and Dish Network’s Blockbuster — are now poised to follow Netflix’s lead.
‘We have to adapt our deals to allow us to take our services through new technologies’
Stephan Shelanski, Starz Entertainment
For the moment, the new services are mostly competing in the basic cable and later windows for library product. “We’ve seen a lot of interest in our library windows,” reports Gina Brogi, EVP of worldwide pay TV and SVoD at Twentieth Century Fox Television Distribution. “There’s a lot more viable interest in licensing our films because of these players in the market.”
But by the time the next round of output deal talks begins one or more of the new SVoD players may be ready to step up and compete with traditional pay networks for studio slates. And that should make the US television picture more complex for both buyers and sellers of movie rights.
In the next round of negotiations, suggests Starz’s Shelanski, both sides will need to adjust to the new realities of the marketplace.
“We have to adapt our deals to allow us the flexibility of taking our services through new technologies that were never conceived of when we did our first output deals,” Shelanski says. “And on the flip side the studios want to be able to exploit their product in ways that 10 or 15 years ago were not even available.”