For Broadcast May 28, 2015

The rise of the online platforms has muddied the commissioning waters for indies, but there are opportunities if producers can find the right strategy to work with them, says Kate Bulkley

It’s the devil and it’s the saviour; a great new opportunity for your next project or a massive threat to the long-term health of your company. Working with the new generation of online platforms such as Netflix, Amazon, Hulu and BBC iPlayer can cut both ways. Sometimes, it seems like it’s the best and the worst thing an independent producer can do – as Jimmy Mulville and Jon Thoday’s vocal exasperation over the digital rights situation at the proposed online BBC3 has demonstrated.

A strategy that could become the lucrative middle ground is still emerging and indies have different takes on how this can be best achieved. The question of whether to take that online commission or just stick to the tried-and-trusted funding methods of the past was answered a couple of years ago.

Netflix et al have money and ambition and they are here to stay, so ignoring them is not really an option. And with the real prospect that BBC3 may become online-only, figuring out how to work in the digital-first commissioning environment is becoming key to the future. A lot depends on what kind of leverage an indie can bring to the online party.

Negotiating rights

If you are Left Bank Pictures, with a hit-list a mile long and an owner called Sony, when Netflix comes calling the conversation is one that’s more peer-to-peer, with big, upfront budgets and a lot of creative freedom.

However, when you are a smaller indie, the conversation is somewhat skewed in favour of the online giant. “We’ve never been able to unlock secondary rights with Netflix,” says Lemonade Money creative director Faraz Osman. “We are not at the size where we can get secondary rights and it’s complicated because we do a lot of Digital rights VoD platforms music programming, which makes the rights more complex.”

In the year of YouTube’s 10th anniversary, the online TV space is much more positive than it was even a couple of years ago. Netflix and Amazon are commissioning dramas, and increasingly other genres, on a regular basis. Just this month, Netflix revealed it is widening its commissioning brief in the UK, looking beyond long-running slick US shows in the mould of House Of Cards and Orange Is The New Black.

Alastair Fothergill’s Silverback Films has won a commission from Netflix for an ambitious documentary project, Our Planet, a follow-up series to the BBC’s Planet Earth. Fothergill declined to be interviewed, but what’s known is that the project will feature the latest camera technologies, such as 4K, which Netflix is promoting as a point of difference from most traditional television broadcasts.

Clearly, understanding how to operate with these digital players and achieve the best financial deal is still a work in progress. And the market is mature enough that some producers now make big distinctions between the online players as their different business models become clearer over time.

As one big producer put it: “The likes of Netflix in particular are trying to snaffle the value chain,” by buying global rights to the programmes it commissions – and thereby potentially limiting the ultimate value of a show.

According to this producer, Netflix is “preying on” indies by trying to find “the number” that will take a particular project off the table. The problem is that while getting a big one-off cheque can look attractive to indies trying to get a programme off the ground, it could earn them less than if they had used the usual distribution route and exploited the first, second and third windows around the world. “Working with Netflix is definitely not, in most cases, in the producer’s best interest, economically speaking,” said one producer.

Another major UK company turned Netflix down after learning that not only did it want VoD rights after a single TX, but that it wanted to be listed as a producer and brand the show as a ‘Netflix Original’ to take control and credit in awards season.

Yet others are quite happy to team up with Netflix, even if it means not holding on to any secondary rights. Last year, Left Bank negotiated a 20-hour commission – reportedly worth £100m – for The Crown, written by Peter Morgan. “Netflix offered a very good budget to us to make a great show,” says Left Bank managing director Andy Harries. “There was no doubt what Netflix could deliver. We had watched House Of Cards and Orange Is The New Black and we knew what it does and what it was interested in. What we were pitching fell very much into that category of quality, top-end drama.”

And there was an added allure to working with Netflix. “Having a global audience immediately was interesting,” says Harries. “We felt we were ahead of the curve and, of course, it helped that Netflix was willing to commission two seasons, 20 hours, all at once. That’s a big ask for any broadcaster, whether HBO, Showtime, the BBC or ITV. It’s a big ask for Netflix too, but it’s also much more in tune with the way it orders and presents material.”

Funding models

For smaller indies, the online experience is about being a producer for hire, and the budgets have a margin that keeps the business growing rather than having secondary rights to exploit in other markets. A significant proportion of Lemonade Money’s business is for brands like Nandos and Red Bull, which commission for the online environment, as well as Vevo, a music video hosting service that is part-owned by Google.

“Being a producer for hire has worked for us, but we are looking to develop a more IP-owning business model,” says Osman. “The other problem is that we’ve created content for the BBC and Channel 4, but getting into the secondary rights sale business with our type of music-led programming can be more of a headache than the minimal value of those rights.”

Other smaller producers are benefitting from the growing interest in short-form from both the BBC and Channel 4 and, more recently, longerform content too. Charlie Lynn is a 23-year-old producer working on his second documentary film, Fear Itself, which will debut on iPlayer. For his first, Beyond Clueless, he raised £12,000 on crowdfunding site Kickstarter, and then he and his two partners had to self-release the film, taking it to indie film festivals over a period of three years, and eventually selling secondary rights to Netflix.

It was a long and not particularly profi table venture, so he is thrilled to be getting a one-off fee from the BBC to make his new film, which is scheduled for release later this year.

“I imagine I would come away with the same amount of money as I did from Beyond Clueless, but that will be across six months of working, rather than three years after the fact,” says Lynn. “The downside is not owning it in perpetuity like we did with my first film, but that was the trade-off: to sacrifice that for the immediate accessibility of the audience and getting paid.”

Even for the larger indies, negotiating with Netflix or Amazon can be testing. These companies can offer a hand to producers, but it can often be an upper hand, which puts indies into a ‘take the money you can see’ position, foregoing potentially bigger money that might be made using the traditional distribution model.

Harries admits that the Netflix deal for The Crown caused Sony a certain amount of angst before the contract was signed. Sony, which would have distributed the show in territories outside of the UK if it had been made for a UK broadcaster, had to “take a view” about selling all the rights to Netflix.

“Do you plunge money to the bottom line straight away, or do you gamble that it will return more money over time?” reflects Harries. “We had to weigh it all up and there is no clear answer. If you hold back territories, how long will it take you to get the cheques in? We sat around the table and formed a collegiate view on it.” Simon Vaughan, chief executive of producer/financier Lookout Point, maker of Parade’s End and Combat Hospital, had his baptism into the world of digital when Amazon picked up Ripper Street after the BBC had decided that it did not merit a third series, despite an average audience of 5 million. Amazon stepped in and, together with Vaughan and BBC Worldwide, created a deal in which the BBC in the UK got a terrestrial window six months after Amazon Prime subscribers. BBC Worldwide, meanwhile, can sell the new series in territories where the Amazon Prime service has not yet been rolled out.

Working relationships

“Getting 5 million on the BBC is respectable, but it was not a massmarket show and it divides people because it is quite gory,” says Vaughan. “But it makes sense for Amazon, which was willing to be flexible with the broadcast partners as well.”

Last week, Amazon ordered two more seasons after the third became the most-watched show on Amazon Prime Instant Video in the UK.

Vaughan believes there will be a lot more deals where an SVoD player works with a terrestrial broadcaster, and he is keen to see how series three of Ripper Street does when it airs on BBC1. “Amazon did an incredible marketing campaign on series three and although there is a lot of jockeying for position at the moment, there is a dynamic emerging here that can benefit everybody,” said Vaughan.

“Forward-thinking networks are going to take the view that SVoD services like Amazon can be initial marketing mechanisms, like a movie’s theatrical release, and might create a bigger value for a programme. As things shake down, broadcasters will have more opportunities for these kind of arrangements.”

The most successful partnerships between online commissioners and indies will find a balance between the size of the creative budget and the back-end rights deals. And as the number of VoD and SVoD services increases – players like Google, with its subscription YouTube plans, Apple and even Facebook and Twitter are all exploring commissioning – there will be players that are more willing to work with indies and broadcasters on new terms.

Certainly, indies both large and small see the new digital platforms as offering potential for more commissions. “The market is expanding and along with it, the desire for more international programming,” says Harris. That’s got to be a good thing.