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War of the SVODs World

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Well it’s happening. The SVOD wars have really kicked off.

Apple TV+ debuted in New Zealand on 1 November with 14 original shows. Very much a tortoise approach from Apple, and you don’t have to pay for it for a year if you’ve bought an Apple product recently. Otherwise you’re up for $8.99/month.

Disney+ meanwhile will be off like a hare at the starting gates, launching more than 600 movies and shows from Day 1, being 12 November (19 Nov. in NZ). Expect every household in the country with kids to at least consider adding a subscription at $9.99/month.

NBCUniversal’s Peacock will soft launch in April 2020 with 15,000 hours of programming, while HBO Max comes online in May with more than 10,000 hours of programming.

Netflix is already feeling the heat.

FilmTake reports that Netflix lost subscribers for the first time in the U.S. since they started in 2011. It has likely reached saturation in the market, and we can expect to see the massive international growth of Netflix to slow or halt, or worse for them, decline.

We all thought Netflix was shaking the screen industry to its core, and it has. But it was primarily Google and Facebook that was impacting on New Zealand’s Free-to-Air market, taking advertising dollars away from TV screens.

The initial streaming entities in NZ did contribute to a decline in Free-to-Air viewership, but our Free-to-Air market was still holding up with significant numbers of New Zealanders continuing to watch mainstream TV. But is that going to be the case now with Disney+ and Apple+ in the market, together with Netflix, Amazon Prime, Neon, and Lightbox and with others to come?

You have to imagine that Neon and Lightbox are fretting about their continued existence, unless Neon has done a deal to retain HBO content and possibly keep HBO Max out of the NZ market. Spark-owned Lightbox will most likely be the first casualty unless their strategy has sport and other offerings in the wings. Spark has the All Blacks and cricket afterall. Unlike Peacock, who is mooted to pursue sport, news and live programming, Spark doesn’t have the programming and financial resources of NBC and Unversal to draw upon. It’s rumoured though that Lightbox is for sale. You’d need big cojones to step into that space , or cash+ and programming+. Streamers who don’t have studio majors and/or their parents as backers are really at a disadvantage. With Netflix now paying a premium to license shows because they are losing the content owned by their competitors, you can’t imagine our locally-owned streamers having deep enough pockets to play in the big leagues. And how much longer will our broadcasters be able to access the best of international product?

At TVNZ, Kevin Kendrick is focusing on more NZ content to differentiate its Free-to-Air and OnDemand brands and help to avoid the price wars on the international scene for programming. This is an area they are likely to be able to call their own, as we can’t expect the international SVODs to commission much here unless they are forced to as the Australians are seriously contemplating making them do. With reality TV to undoubtedly feature highly in the offering, is TVNZ really going to be able to keep NZ viewers in good numbers?

What about Three? Only the woman upstairs knows what’s going to happen there. The gossip: it’s going to be bought by… someone.

Kris Faafoi’s decision about what to do with the soon-to-be loss-making TVNZ and with public broadcasting becomes even more critical now.

And just as this is all happening, NZ On Air CEO Jane Wrightson resigns to become the new Retirement Commissioner.

Jane has done a fantastic job navigating NZ On Air through the tumultuous changes that have impacted on broadcasting in the 12 years she’s been at the helm. But has she been prescient?

In this now constantly changing screen industry world, we’ll undoubtedly find out if NZ On Air gets retired before Jane runs her course in her new job. We’ll certainly learn whether or not Netflix will survive. If you are a producer on a multi-year pay down schedule for the content you sold them, you are going to be hoping somebody will buy Netflix out rather than it going under. As of 30 September, Netflix reported US$12.43 billion in debt and they are adding to it to keep the originals and higher-priced acquisitions coming. That US$292 Netflix share price is definitely going to take a hit sooner rather than later.

In the meantime, hunker down and get binge watching. There’s going to be more than enough for everyone with one, two or three SVOD subscriptions… for a very long time.

Tui Ruwhiu
Executive Director

Eye On Asia

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I had the good fortune to attend the Busan International Film Festival (BIFF) for the official launch of the Alliance of Asia-Pacific Audiovisual Writers and Directors (AAPA) last week. Guild president Howard Taylor signed the MOU for DEGNZ’s participation in this alliance in Tokyo in May.

AAPA is dedicated to serving as an independent and impartial advocate on behalf of the audiovisual creators community in the Asia-Pacific region and seeking to strengthen copyright protection.

Already we are benefitting from belonging to this Alliance with considerable support coming from Writers & Directors Worldwide (W & DW) and the International Federation of Societies of Authors and Composers (CISAC), under whose umbrellas the Alliance sits.

Present at BIFF were two guild members with their films: David Stubbs with his feature Daffodils, and Sam Kelly with Savage, which had its world premiere in Busan. It has been a while since a New Zealand feature was selected for BIFF, so it’s quite a coup to have two here. Congratulations to David and Sam for their achievements in getting their features into what is arguably still the most prestigious film festival in Asia.

While there, I took the opportunity to look at the feature film projects being pitched from around the Asian region, both by young emerging filmmakers and those more established. It was interesting to note the similarities and differences between what is happening across Asia and in New Zealand.

One of the first things that struck me was that like many aspiring New Zealand writer/directors, many Asian writer/directors expect to write a script from their treatment and have it move into production within one year. The average time for a film to move from initial idea to completion (if it does get made) in New Zealand and Australia is five to seven years. Case in point is Sam Kelly’s film Savage, which spent over six years in development. I asked Professor Darcy Parquet, who lectures in Korean film at the Busan Asian Film School, if in Asia it was unrealistic to expect such rapid progression. He agreed that it was.

Budgets also vary considerably. In speaking to one Japanese producer, I was told that indie film budgets in Japan typically sit in the range of US$30,000 – 300,000. Korea is a highly commercial market where indie films struggle as they do in Japan. Korean independent films have slightly higher indie budgets than Japan, but nowhere near the typical US$5 million budget a Korean commercial film gets. Elsewhere in Asia, indie film budgets seem to range from US$200,000 to US$600,000 – 750,000. An important consideration to remember is that there is not a lot of government support for film around Asia, unlike in New Zealand and Australia.

We are certainly not alone in wanting to tell dark dramas. In a number of pitches I heard, cancer and suicide featured frequently and there were quite a few tough films wanting to be told. This was balanced by genre or genre hybrid projects—a reflection I believe of the lower budgets, lack of government funding and a need to get returns for investors, as well as a desire to tell more genre stories.

Highly obvious at the Asian Film Market that sits alongside BIFF is the European presence. Many European organisations and producers are seeking to strengthen ties with Asia for co-production, which is the mainstay of the European film industry. There is also a fascination with Asia and its stories. Europeans, who are masters of co-production and have access to a variety of soft-funding sources, are searching out talented Asian filmmakers with strong stories to support. It’s such a pity that co-production in New Zealand and Australia is so limited by both attitudes and resources, as well as isolated by geographic distance. New Zealand has co-production agreements with South Korea, Singapore, China and Taiwan, but these are rarely used.

I’d have to say that I’ve never before met as many film festival programmers from other festivals before as I met here. That can probably be attributed to the fact that it’s a smaller market than others I’ve been lucky enough to attend. I think, however, that it’s another sign of the European interest in the region.

Streamers are having the same impact in Asia as is happening elsewhere, with the future of indie film still very uncertain. SVOD still hasn’t picked up the slack that DVDs used to bring in terms of revenue. That doesn’t seem to have slowed the Asian passion for indie features though. Everyone still seems to be rushing forward. But nobody it would seem is yet sure if it’s towards oblivion or a brighter future.

Tui Ruwhiu
Executive Director

 

Is It Time for TVNZ to Revert to Public Broadcasting?

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My op-ed this week is devoted to personal musings in the lead up to the NZ Screen Sector Strategy hui, and the changing nature of the screen industry as we know it.

Colin Peacock on the Radio New Zealand website wrote on the weekend about ‘Convergence’: what it is and what it has led to—telecommunications and broadcasting merging due to digital technology and the Internet.

One outcome of the convergence that’s happened here, which I wrote about last newsletter, was the TVNZ board reporting to Government that it will not be paying a dividend for the foreseeable future.

In the same RNZ convergence article, TVNZ CEO Kevin Kenrick is quoted as saying that TVNZ will refine the data from TVNZ OnDemand users to allow advertisers to tightly target ads to online viewers.

Following last year’s revamp of TVNZ OnDemand, RNZ also reported Kendrick as saying, “Consumers of online video are pretty clear they pay with their wallet, their data or their time. We’re in an ad-funded world.”

With no profits in sight and the Government forgiving TVNZ its requirement as a state-owned company to deliver a dividend, is it time to turn TVNZ back into a public broadcaster and forget about advertising as the main revenue stream?

If convergence is the reality, how about converging ONE, TVNZ 2, DUKE, TVNZ OnDemand and Radio NZ into a new media powerhouse for public broadcasting? Let’s call it Aotearoa Media Powerhouse – Digital (AMP-D) for ease.

The commitment by Kendrick to a significant increase in local content, the mix between local and international shifting markedly towards local, and investment in an online future while making that content available across more devices would make absolute sense for AMP-D. This would parallel the efforts the BBC and the Australian Broadcasting Corporation (ABC) are making to survive.

Granted, TVNZ would be moving from a business that cost close to $300 million to run in 2018—essentially what they earn from advertising—to a public broadcaster that has to find other ways to earn revenue.

How about an AMP-D Studios along the lines of BBC Studios, whose remit is to produce and market programmes not only for the BBC, but for other broadcasters on the open market at home and internationally, returning profits back to the BBC. AMP-D Studios would give the commercially inclined at TVNZ a new playground to play in.

Perhaps the greatest benefit to AMP-D is we’d get away from this navel-gazing that differentiates New Zealand content for local audiences, which is fragmenting away before our eyes. AMP-D Studios and independents could produce programming that is—to steal something else from the BBC—distinctive (in our case NZ), world-class content. Why couldn’t AMP-D Studios generate shows like The Killing, The Bridge and Borgen, produced by Danish public broadcaster DR, which sold all around the world? There’d have to be a cap to how much of the public purse AMP-D Studios could get, though.

AMP-D could also generate news and current affairs nationally in a revenue generating service to commercial media companies, much as the NZ Press Association and the worldwide video news service Visnews did previously. This would allow the commercials to put their own spin on the content without the major cost of resourcing.

AMP-D OnDemand could have two operational tiers: Subscriber Video On Demand (SVOD) that’s ad-free and costs a monthly fee, and Ad-Supported Video On Demand (AVOD) that carries advertising in a free-to-air service. Hulu already operates this hybrid system.

In such a new environment, it would make sense for NZ On Air and the NZ Film Commission to ‘converge’. Let’s call this the Aotearoa Media Fund (AMF). AMF could manage the discretionary funding allotted to it to spend between broadcast, digital audio-visual content for the Internet, film and radio.

To really power AMP-D up, AMF could be required to stop funding content on the commercial platforms, dedicate its funding to AMP-D and meet its requirement to deliver great New Zealand content that is valued and enjoyed by many New Zealand audiences on multiple public broadcasting platforms. A cap in funding for internal production for both screen and radio content could be levelled to ensure independent production companies could operate in the new environment.

AMP-D could benefit local feature films by being required to carry all films funded by AMF, guaranteeing free-to air play to New Zealand audiences for every NZ film, which doesn’t happen now. The best films would get significant marketing and promotion. The not-so-good would get buried in AMP-D OnDemand—the same for not-so-great content on Netflix—where they’d sit for those still interested enough to search them out. (Smart Kiwi producers could take a page out of Norwegian producer Anders Tange’s book on how to build an audience independently of a streamer as he did for his Viking comedy Norsemen on Netflix.)

It’s almost certain that there would be an increased cost to establishing and running AMP-D that would take a long time to mitigate if ever, even with the efficiencies of a combined entity. That would be the cost of continued existence.

But perhaps it might be useful to compare New Zealand content and its industry to the kakapo — an endangered species that’s potentially headed towards extinction if we don’t do something paradigm-shifting to save it.

“What about us?”, the commercial platforms here would scream?

Frankly, it’s a fight for survival and we have to ensure first and foremost that our content and our platforms survive and flourish in the brave new world that’s upon us. Sorry, you commercial guys, you’re going to have to sort it for yourselves. Or maybe ‘converge’.  And if they withered and died, maybe it would all be for the better for AMP-D. After all, it would still have to face Netflix, Amazon Prime, Disney +, HBO +, Hulu and others. Heck, AMP-D might even have to team up with the public broadcasters in Australia, Canada, the UK, the U.S. and elsewhere to live to fight another day. Such collaborations are already happening in Europe.

I’m happy for anyone to shoot holes in my postulations above. I’ve only spent a couple of hours daydreaming, not weeks and months devising a strategy. The intent is to get you to do more thinking about our industry with the screen sector strategy upon us. We can now imagine our own futures and let Government know.

We are going to be sending out the list of questions I wrote about in the last blog to everyone on our database. We want your thoughts about the direction the New Zealand’s screen industry should go. So please take the time to ponder, write to and or tell the Screen Sector Strategy NZ and DEGNZ your opinions. We’ll make sure we collate them and submit them from the Guild along with our thinking, so that we all have a say.

Tui Ruwhiu
Executive Director

Where to From Here?

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The Screen Sector Strategy has announced the dates of its intended hui in 3 locales to gather industry input into a strategy document for the New Zealand Screen Industry. This will be taken to Government in the first half of 2020.

This is an important opportunity for every individual to give their ten cents worth on how they would like to see the direction of the screen industry go.

The DEGNZ board has put together a list of questions for members to help stimulate your ideas. You can find the Guild questionnaire available here to download. Please do send your responses back to us at admin@degnz.co.nz with ‘Questionnaire’ in the subject line.

Below are some recent developments that could contribute to your thinking.

The Spinoff reported in an article on Saturday that for the foreseeable future, TVNZ will not report a dividend to government—essentially, TVNZ’s profitability is way down and is likely to remain so. The impact of Google and Facebook on onscreen advertising revenues is a major factor in this, as well as the advent of Subscription Video on Demand (SVOD) services such as Netflix and the fragmentation of the media market.

In the same article, The Spinoff reported an unprecedented call-out by NZ On Air to all the major news providers to attend a meeting to discuss the long term sustainability of journalism.

Across the ditch in Australia, the Australian Competition and Consumer Commission’s Final Report into Digital Platforms addresses this topic amongst others. Key findings include:

  • The availability of a wide range of high-quality news and journalism provides significant benefits to Australian society and is important for the healthy functioning of democracy.
  • News and journalism risk under-provision for a number of reasons, including the general inability of commercial news media businesses to capture the broader social benefits of journalism.
  • Media businesses, particularly traditional print (now print/online) publishers, have experienced a significant fall in advertising revenue as advertisers follow audiences who have migrated online to access news and other content. This has coincided with strong growth in online advertising, which now accounts for half of all advertising expenditure. Google and Facebook together account for nearly two-thirds of online advertising expenditure.

These aren’t earth-shattering revelations, but clearly highlight the fundamentals of what we all are wrestling with and that are driving TVNZ, Mediaworks, Fairfax, and NZME amongst others to the wall.

The Australians have also called for a levy on streamers to fund local content, the need to maintain broadcast TV quotas, and an end to cuts for screen funding bodies and public broadcasters as previously written about in the Guild blog here.

Funding cuts have impacted heavily on Screen Australia and the Australian Broadcasting Corporation. In New Zealand in comparison, our funding bodies (NZFC, NZ On Air) have had relatively static funding for years, with more and more calls upon it.

As many of you will now be aware, there is international production work to be shot in New Zealand coming out of our ears. We are already seeing a shortage of experienced personnel and crew rates and other production costs are rising while New Zealand budgets stay the same. The question of how local production can survive and thrive in the face of the onslaught of offshore work arriving is vexing a number of us.

We are at a crucial time for both the local and international screen industries. There are seismic shifts still to come as Disney, WarnerMedia, Apple and other streaming services come online and continue to shake broadcast and theatrical to their foundations.

The Screen Sector Strategy work now underway needs to be completed quickly and effectively if we are to have a sustainable industry in New Zealand that benefits from international production and contributes to the development of local screen content and Kiwi screen IP.

Please share your thoughts on where to from here with us at the Guild, at the Screen Sector Strategy hui and with submissions, so that a well thought out strategy is distilled that will work for us all.

Tui Ruwhiu
Executive Director

Are We Missing the Streamer Boat?

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It’s hard not to bang on about streaming services when they are continuing to upend the screen industry as we know it.

Media intelligence service FilmTake recently reported that Disney, WarnerMedia, and Apple are expected to spend between US$8 million to $20 million per episode on new drama series.

Amazon has supposedly set aside over a billion US dollars to bring a five-season Lord of the Rings series to Amazon Prime.

There are other epics planning to cash-in on the void left after the conclusion of Game of Thrones include WarnerMedia’s Dune series, Showtime’s Halo, and Apple’s fantasy series See.

Disney+ is also producing a Star Wars series, Mandalorian, which is costing $15 million per episode.

And these are just the TV blockbusters.

The Financial Times reported that in Europe, Netflix will make 221 projects in 2019, including 153 originals.

Netflix has launched its first European production hub in Madrid, targeting Spanish-language production and drama series, which have been a priority and a large source of success for the U.S. streaming giant.

In July of this year, it also announced that it is creating a dedicated production hub, featuring 14 sound stages, workshops and office space, at Shepperton Studios in the United Kingdom.

In the last year alone, over 25,000 cast, crew and extras have worked on almost 40 Netflix originals and co-productions across Britain.

New Zealand is certainly not missing out on service production for streamers as witnessed most recently by the noise about the Lord of The Rings TV Series potentially being shot here for Amazon. Netflix has already been here with Letter For the King and is currently shooting another.

But are we missing the boat with local IP to satisfy the booming global appetite for content, particularly drama?

Yes, local producers do continue to sell their NZ ON Air and TMP funded content internationally, but that’s been the case for many years now.

NZ formats for the international market have made headway, as most recently attested to by Filthy Productions’ sale of Filthy Rich to the Fox Network.

It’s easy to forget that Rob Tapert has been making TV shows here for the international market for over 25 years—everything from Hercules and Xena to Spartacus and Ash vs Evil Dead.

But there’s nothing new in all this, as it was happening prior to the advent of Subscription Video On Demand (SVOD) services like Netflix and Amazon.

While NZ On Air continues to do the best it can with limited funds for local drama, it’s essentially locked into a myopic approach by its adherence to the Broadcasting Act, and it doesn’t look like it will change that anytime soon.

But there is a little light at the end of the tunnel.

Screentime has forged into Scandi Noir with its Danish coproduction Straight Forward, now on TVNZ OnDemand, and its soon to be released copro The Gulf, with Paula Boock and Donna Malane’s Lippy Pictures and a German partner.

And we have seen one Netflix Original in Auckland-based Razor Films’ Dark Tourist, while See-Saw Films and Jump TV are into their second series of The New Legends of Monkey for the ABC, TVNZ and Netflix. Almost going unnoticed is Pango Production’s 2018 production All Or Nothing: New Zealand All Blacks for Amazon Prime.

But really! Can we survive the onslaught of service production work from streamers in New Zealand and get our own IP out there in more than an occasional way?

There are a number of factors holding us back and one of them is writers. We don’t have enough skilled writers with the experience required to get internationally-focused shows across the line. The NZFC/NZ On Air Raupapa Whakaari Series Drama Lab initiative is seeking to address this by bringing in international-calibre mentors to work on local show ideas with teams here. Hopefully this will bear fruit.

Another is lack of funding. NZ On Air production funding caps out at $6 million, and you can’t access the NZ Screen Production Grant and NZ On Air Funding for the same project. When even middle-of-the-road Aussie shows are being made for the international market at AUD $1.5 to 2 million or more per episode for 6 to 10 eps, you can see the problem. But before you get to production you have to go through development, and the cost for that is going to be anywhere between $300,000 to $500,000. Again, there’s not the funding here for that. Raupapa Whakaari’s matched funding is limited to NZ$50,000 per year.

You might well ask why do we need to create our own IP anyway, and not just be service providers for international productions?

For directors and editors there’s going to be more work on local shows than international ones. The post production is generally not done here for international shows, and there’s only a very small pool of Kiwi directors with the credits to get themselves hired on international productions. That will expand slowly over time, but local shows hire locals, and we are increasing the numbers of Kiwi directors working on NZ On Air dramas.

In the end though, it’s our distinctiveness as Kiwis with Kiwi stories to tell and landscapes to show that provides cut through in the international market. I’m paraphrasing Paula Boock of Lippy Pictures who participated on our Screenlink panel this week along with Mark McNeill of Razor Films and Steven Zanoski of Filthy Productions to discuss ‘Screen Content for the Global Market’. Locally owned IP also brings revenues back to New Zealand when it’s successful, long after production has finished.

I don’t think we are going to miss the boat entirely when it comes to creating our own shows for the streaming giants. But it does sometimes seem like we are standing at the end of the pier watching the ship sailing away and wondering how the hell we are going to get onboard.

Tui Ruwhiu
Executive Director