Executive Trends: Mipcom 2018: Flexibility is the Name of the Game

The Mipcom 2018 conference and trade market held this month in Cannes --including MIP Junior and other related activities-- has been remarkably active, at the same time suggesting new trends that will probably be followed by the audiovisual content delivery business, be it through broadcast television, pay television or digital platforms.

(Private Advisor, October 2018 Issue) The level of activity has been particularly high: most of the exhibitors have had an agenda filled with meetings and deals; many and diverse announcements have taken place. ‘There is no sense of security regarding the future, but the feeling of being part of an ebullient market has been stronger than the deception due to lukewarm results among some of the participants’ reported a frequent Mipcom participant. Financial issues have been relevant, especially in Latin America. While most of that region is going through deep political and economic changes, there are some cases to highlight: Chile (see below), Colombia, Mexico and Argentina, which has gained floor notoriety this year due to the devaluation of its currency, slashing production costs within that nation.

One of the issues to underscore is that the production of original content keeps growing. But, at the same time, the financing of this content --originally thought to be solved by advertising on broadcast media but subscriptions on pay television and video streaming-- is now at a point where large audiences appear having exhausted their purchasing power with Netflix and Amazon, while others (close to 45% of the total in the United States, according to Parrot Analytics; variable but yet substantial percentages in most other markets) reject having to pay for online services. This appears to be setting a cap for SVOD services and opens more widely the door to AVOD (Advertised Video On Demand).

On the other hand, a market structure change promotes the existence of small production outlets --more flexible at adapting their output to local and foreign requirements-- and complicates life for larger companies. The difference between working primarily for large local markets, such as Brazil, Mexico and U.S. Hispanic in the Americas, and rolling out a product that will be commercially valuable in other countries, is growing. Some of the largest producers believe that producing for the international markets reduces the local audience potential and, therefore, advertising income. Argentina is also suffering this disruption regarding content features, but to a smaller extent because its domestic market is smaller. “Un Gallo Para Esculapio”, a recent hit drama set in the underworld, will be remade in Mexico by BTF Media. In Chile, leading broadcaster Mega is increasing its local drama production, from 780 to 1000+ episodes a year, as a way to retain its ratings (and advertising billings) advantage, and partnered up to sell them abroad. ‘It is the only way we can compete directly with OTTs’, said Patricio Hernández, CEO.

Another interesting feature is that several large production companies, such us Endemol Shine, Fremantle, Banijay and ITV, are devoting more attention to drama, to speed up their international activities, instead of the lighter genres that helped them gain notoriety in the past decade. Each of them has showcased between 5 to 8 new dramas series at Cannes. This does not mean that cooking and reality shows will disappear, it’s just the feeling that drama travels better across boundaries after you have fulfilled the basic “companion television” (low cost entertainment for daytime slots) needs at most countries.

Some industry pros foresee a future with about eight major companies leading the digital pack, several of them related to telcos (but some of them cable MSO’s) due to the need to control the delivery means, mainly fiberoptics networks, undersea cable, wireless transmissions and the rest of the infrastructure needed for this job. These companies are now acquiring production outlets --such as AT&T purchasing Warner Media-- and are planning to act as ‘curators’ and distributors to the independent SVOD services that are willing to compete against Netflix, Amazon, Disney and the other major streaming services around the world. To the consumers, this will presumable simplify the choice and avoid the need to subscribe to a number of streaming services in order to satisfy their appetite for content other than what the mainstream media outlets usually offer. According to research, most SVOD users hate the idea of having to adhere to multiple services in order to reach the content variety they seek.

In Argentina, telco Telecom --which recently absorbed local cable MSO Cablevisión-- has announced it will co-produce ten shows in 2019 through its Flow VOD division, with Pol-Ka, Channel eltrece, Turner, A&E, AMC, Underground, Disney and Mediapro as partners. Viewers watching linear channels currently account for 50% of visits, VOD for the other half. Regarding VOD inventory, original co-productions account for 25% of viewership; some 11,000 hours of content are already available to more than 1.5 million users.