MIPCOM: Drama Boom Drives Up Costs, (Financial) Creativity

Bull S01E01 Still - Publicity - H 2016
David M. Russell/CBS

Bull S01E01 Still - Publicity - H 2016

"Creativity in finance structuring is becoming as important as creativity itself,” says an exec as TV producers struggle to meet global demand for big-budget series.

The international TV business used to be so simple.

A U.S. network would make a show, bankrolling it against the world's largest television market, and when it was done, bring it to the international television market MIPCOM in Cannes to sell around the world.

The best series would make millions in profits from sales to Germany, France and the U.K., among others. Even the stinkers would usually come out with a nice top-off to their domestic business.

But as TV producers and broadcasters return home from this year from MIPCOM, which wraps up Thursday, it's clear things have changed.

An unprecedented boom in demand for television drama worldwide — driven both by traditional networks and online services including Netflix and Amazon — has led to an explosion in production, with upwards of 400 scripted shows set to come out this year from the U.S. alone.

For the biggest, and best, shows, the money is better than ever. A upcoming study by analysts IHS Markit, whose findings were released in summary form this week, showed that broadcasters and online streaming platforms worldwide shelled out a record $83 billion for programming last year. Netflix and Amazon alone have more than doubled their annual programming budgets over the last three years, with Netflix spending $4.9 billion on original and acquired shows last year and Amazon $2.67 billion.

“The levels of investment we are seeing from Netflix and Amazon are only topped by Disney (at $11.84 billion) and NBC ($10.27 billion),” said Tim Westcott, senior principal analyst at IHS Technology.

But increased demand has meant increased cost as the best talent, fielding multiple offers, up their quotes.

“Right now as we go into development season, we're seeing writers being offered incredibly lucrative deals,” said Stuart Baxter, president of eOne Television International, whose MIPCOM slate this year includes freshman series Designated Survivor and Conviction from ABC and returning global mega hit The Walking Dead. “What this means is that the big U.S. shows are getting more and more expensive to produce. If you get $2 million an episode from international sales these days — which used to be considered a big deal — it won't even cover the deficit on most shows. The risks are growing.”

“There's a lot of drama being produced but not all of it is being monetized equally,” noted Armando Nunez, president and CEO at CBS Global Distribution Group, whose shows, particularly long-running procedurals such as NCIS or new entrants including MacGyver and Bull, are among the most successful on the global marketplace. “There are quite a few series that will end up with big deficits.”

At the moment, Nunez says the increase in demand — especially from new digital and online platforms — is keeping the boom going. “I don't see [a crash] coming yet,” he said. “You can see from the market at MIPCOM this year that there's a vibrancy, a demand for all types of genres.”

But as production costs continue to rise, producers are having to become more creative to get their shows made. Increasingly, international television is beginning to resemble the indie film business. Producers are coming to MIPCOM with scripts and talent “packages” looking for partners to pre-buy their as-yet-unmade series.

"If you always stick to the traditional production model, it is difficult [to deficit finance]," said Ira Levy, president and ‎executive producer at Breakthrough Films & Television, which was selling Anne of Green Gables, its PBS miniseries starring Martin Sheen, at MIPCOM.

The financing models for the new shows on offer at MIPCOM are as varied and complex as the some of the series' plotlines. Entertinament One's Ransom, for example, a crime procedural about a hostage negotiation team, was co-commissioned by networks in Germany (RTL), France (TF1) and Canada (Corus) before getting a U.S. network on board in the form of CBS, which will likely air the show in an off-season slot in the summer. RTL and TF1 are developing more procedurals, using the same business model, with NBCUniversal.

HBO has partnered with European pay players Sky and France's Canal Plus on The Young Pope, a Vatican-set drama from Oscar winner Paolo Sorrentino starring Jude Law, which has already been renewed for a second season ahead of its European bow later this year.

Amazon and Netflix are increasingly partnering on international shows, taking global rights on locally made series, as Netflix did with German spy drama The Same Sky (which premiered at MIPCOM), and El Chema, the Mexican crime drama from Telemundo inspired by real-life drug kingpin Joaquin "El Chapo" Guzman. Amazon recently came on board to greenlight a second season of critically acclaimed German series Deutschland 83, taking first-window online rights for the Cold War-set drama in Germany with production costs offset with an array of international deals, including with SundanceTV in the U.S. and Canal Plus in France.

"Creativity in finance structuring is becoming as important as creativity itself,” said Charlotte Walls of Catalyst Global Media, a Brit-based production and financing group.

Producers and networks from around the world continue to warn of “Peak TV,” the fear that the supply of great TV series has already outstripped demand and that the drama bubble is about to burst. That crash may still be coming, but as another MIPCOM wraps up, the global TV market is looking bigger, and more lucrative, than ever before.

Etan Vlessing and Rhonda Richford contributed to this report.