“The major platforms have been buying like drunken sailors,” Stephen Kerr, president of Business Marketing Consultants, says
Increasing demand for exclusive programming has streaming services looking to acquire studio content libraries to fill the need.
Even as mega-streaming services like Netflix, Amazon and Disney+ are unveiling major plans to produce original content, experts say demand is high to acquire studio libraries in what one entertainment executive called a “battle royale” to catch and hold subscribers.
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“When you just think of a very simple kind of economic supply-and-demand perspective, there’s a demand out there now because of streamers,” Curtis Vega, head of the global media and communications sector for the corporate banking division of HSBC, told TheWrap. “Their finance is really either built by production, or it’s built by the library.”
Erick Opeka, chef strategy officer and president of Cinedigm Networks, said studios navigating the streaming wars are becoming more protective of their library content than in the past. The search for exclusivity makes that content even more valuable.
“The depth and availability of titles is reducing as they either enter into longer term, bigger deals with very big players, or reserve titles for their own streaming services,” Opeka said. “The idea of being able to get exclusivity and things like that is even less than it was before.”
Not only are some studios hoarding their library assets, in some cases they have bought back individual library assets previously sold to others for use on their own new streamers.
In 2015, “Friends,” owned by Warner Bros., had been licensed to Netflix for many years. In July 2019, however, WarnerMedia outbid Netflix for the rights to the show for five years for an estimated $500 million to run its streaming service HBO Max beginning in January 2021. In a similar deal, NBC’s “The Office” left Netflix to move to NBC’s Peacock streaming service on Jan. 1, 2021.
Potential value of studio libraries of various types has come into sharp focus in recent months. In late December, it was confirmed that MGM was exploring a sale with an asking price of a reported $5.5 billion, largely assumed to be banking on the value of a legacy library that includes the James Bond and Rocky franchises. A source close to MGM told TheWrap there’s not much recent movement on a sale, and MGM has refused comment on that potential.
In early January, an entirely different sort of library sale took place: Jeffrey Katzenberg’s failed Quibi, launched last April as short form “quick bites” content, sold its library content to Roku. Quibi, which had spent $1.75 billion on content creation, sold more than 75 original shows to Roku for a reported $100 million.
Also in January, Cinedigm, a producer and distributor of content focusing on digital cinema and video-streaming channels, acquired San Francisco-based independent film subscription service Fandor, bringing 4500-plus titles into the Cinedigm library. In December, Cinedigm also acquired thousands of classic, cult and foreign film titles from The Film Detective, an internet television service and vintage film archive. The company has added to its buying spree by acquiring the streaming service Screambox.
Recent content library acquisitions also were in play long before COVID-19 stay-at-home orders drove up the demand for streamed content. In December 2019, ViacomCBS paid $375 million for a 49% state in Miramax, saying the company planned to access Miramax’s 700-film library to generate new movie and TV projects. In 2018, Weinstein Co., reeling from sexual assault allegations against co-founder Harvey Weinstein, sold its assets to Lantern Capital Partners, including Weinstein Co.’s library of more than 270 films.
News of the potential MGM sale, as well as the Quibi and Fandor acquisitions, was breaking at roughly the same time Netflix announced an ambitious plan to release 70 original films in 2021, including star vehicles, such as the action-comedy thriller “Red Notice,” with a cast including Dwayne Johnson, Ryan Reynolds and Gal Gadot.
However, most experts say new original content does not replace the need for a streamer to also have library content, particularly for streaming services such as Apple TV+ and Amazon, which do not have vast content libraries to tap into like studio-owned Disney+ has in spades.
MGM declined to comment on the future of its library, which includes more than 4,000 films and more than 17,000 TV episodes. However, the studio was quick to provide an e-mailed list of its most valued assets, including the long-running Bond franchise, which MGM said has earned $16 billion to date (adjusted for inflation) and eight “Rocky” and “Creed” films, with a combined total earnings of $2.4 billion, also adjusted for inflation. The studio also has high-profile films in the works that will add to both franchises.
Stephen Kerr, president of Business Marketing Consultants (BMC), a subsidiary of Bel Age Medias investment bank catering to media, entertainment and tech, acknowledged that large studio libraries such as MGM’s are largely nonexistent for purchase anymore. He and others agree that it would be virtually impossible to create a library of equal value by the piecemeal licensing of various programs and movies.
However, Kerr is skeptical about MGM’s perceived value even in a competitive streaming world, saying that a lot of the value of MGM’s assets, as well as those for other libraries and individual movies and TV shows owned by studios, may have been stripped away by previous long term licensing deals.
“The major platforms have been buying like drunken sailors. But what’s left?” Kerr told TheWrap. “A lot of (studio content libraries) are empty shells, as far as rights go.” He added that some older titles, including Bond films of the 1960s and ’70s, have perhaps lost their original audience draw over time.
However, another leading financial strategic adviser to the entertainment industry, who asked to remain anonymous, called that notion “horse s—.”
“Every single library has pre-existing licenses around the world,” he said. “Just watch television — in any country you are going to see a bunch of stuff that’s been put there by a whole bunch of studios. Does that mean they have stripped away the value? No. They are managing their assets. Same with Disney or Fox. Anybody who does any deals with anybody has to deal with the existing world.”
The adviser, as well as several other executives in the entertainment financing business, said the key value of acquiring library content for a streamer or any other company is in the intellectual property, not the broadcast or exhibition rights.
“Those are two different topics,” the adviser said. “The most valuable thing you can get your hands on is proven IP…it’s the intellectual property rights that empower people to create brand new programming. Eventually, if you don’t innovate, the people who innovate are going to have newer, sexier stuff.”
Cinedigm’s Opeka agreed, saying a very small number of titles, especially the franchises, drives the majority of revenue.
“My perspective is, on any library, the 80-20 rule is really in effect,” he said.
“I do think the dirty little secret about a library is, like any distribution, it has a very long tail and at the longest end of the tail are a lot of titles that don’t generate a lot of revenue. At the top of the curve, there are a lot more titles that have evergreen appeal and franchise-ability.”