Scott Kirkpatrick about release strategies, rights management and the future of the M&E industry
In the fifth chapter of his book ‘Introduction to Media Distribution’ Scott Kirkpatrick explains how media devalues over time as it moves from exploitation window to exploitation window. He goes on to describe how this is the foundation for distributors to devise the best title-by-title release strategy and ensure the strongest profit margin. Intrigued by this and other insights we called Scott Kirkpatrick at the NENT Studios UK office in Los Angeles, where he shapes the distribution strategy as the Senior Vice President overseeing North & South American sales and business development.
When does it all begin, the rights life cycle of a media property and the windowing strategies to monetize it?
Scott K.: “It all begins when whatever party decides to invest in the content to make it work. Even when it is still nothing more than an idea. And whoever is investing in it, will try to exploit it with the windows they get the most value from. Take The Handmaid’s Tale. Hulu ordered the series. Hulu is an SVOD platform in the US, so they didn’t care about any other rights than SVOD, except to block those. Hulu made a deal with MGM International, who acquired all the rights. So MGM International could take a more strategic approach. They had to wait until The Handmaid’s Tale premiered on Hulu. Then they could have started with an SVOD release window at the highest level and then trickle down. Instead they went for the major television channels first. They thought, if this series is getting all the publicity in the US, we will max out a deal with our French channels at a premium price point and they will get a select window of, say, 12 months of broadcast, limited to three runs. After that it can shift to Salto or some local SVOD, for instance.”
Is that where premium content typically starts its life?
Scott K.: “More often than not, companies that pay a lump sum of money to acquire all digital rights on a title, will try out a TVOD window first. And after some time — probably looking at an Excel sheet with a list of 50 or 100 titles — they will say: These ones did terrible so let’s move them to another window at a lower price point. Those ones did okay, so why don’t we squeeze them a little bit and see if they can last a couple of months longer. Maybe we can put some more promotions and marketing dollars towards them because there is no window where those titles will make more money than on a premium window behind a paywall. That is the kind of workflow they will use.”
“You can now see the most efficient and truest windowing strategies developing fast.”
How has the pandemic impacted the windowing strategies?
Scott K.: “You can now see the most efficient and truest windowing strategies developing fast. Feature movies typically premiere in theatres, but that has become problematic with social distancing. Instead, the major movies are going out on digital platforms in an elevated transactional slot first, and then they start shifting downwards. Even a movie from Disney will first be on a major slot at a premium TVOD price on Amazon for a number of weeks before it is going to shift to the Disney+ SVOD platform and the Disney broadcast channels, to move on to an ad-supported window and digital devices for kids.”
Dealing with complexity and making fast decisions … Enter Artificial Intelligence and Machine Learning?
Scott K.: “Yes, that is definitely where we’re headed, but it still requires a human brain to figure it all out and to plan it. Did you know that Apollo 13 — a movie from 1995 with Tom Hanks — is still behind a TVOD window on Amazon? There are movies that already shift to SVOD after a year. The reasoning is as follows: The kind of audience that might go for a historical bio picture like Apollo 13 is an older generation, who are still in a mindset of paying for the content, so this title can still squeeze out value in this premium window. Those other movies might skew a younger generation that would never log in and pay for a movie for one night. They expect it for free. It requires a human brain to fathom that. But with machine learning, is it possible to get there in the future? If we can make self-driving cars we can automate windowing.”
And the art of negotiating windows will always be human?
Scott K.: “Let’s take a theatrical film before the pandemic. The theatrical distribution company would have a conversation with Netflix or Amazon or any number of other companies about when they want their term to start. Netflix would be trying for a strategic start date as close as possible to the theatrical release. At the price point Netflix is willing to pay, the distribution company might hold on to a theatrical window for four weeks before Netflix can start. As a television distributor I might hold on to a distribution window of 8 weeks or 3 months on NRK in Norway or BBC in the UK before I would let Netflix start their term. So it’s about how much each party is willing to pay and how much I am willing to work with the broadcaster to get their window open. It takes a human to navigate that.”
«… like Google Maps, telling you to take the most time-efficient route …»
Any kind of algorithm would have to be based on common practices?
Scott K.: “It is true that the windows I am talking about are starting to kind of self-regulate. In today’s market a 4-week theatrical window and a 90-day television window are starting to become the norm. This is not written in stone, it’s just that when you walk into the room there is that mutual understanding that this is a fair zone to land in.
I do believe that eventually content will kind of automatically be put out there and a computer algorithm may indicate the likely windowing course, kind of like Google Maps telling you to take the most time-efficient route. But you will always be able to take a left turn at any point and go off route.”
How much do you rely on rights management systems to keep the overview of the rights you have available?
Scott K.: “Rights management is extremely complex. The promise of rights management systems is that they will scan all contracts, read all the data and automatically create a rights management portfolio for you, so you’ll have a very clear snapshot of everything. But there are always grey zones and red flags and question marks, because every company writes their contracts differently, and there are subtle differences in the language they use to define something.
Take AVOD and Free VOD. The difference is that Free VOD does not generate ad revenues.. Netflix, for instance, might want Free VOD so that they can give consumers three months of free trial. Does that conflict with AVOD? That is looked at on a case by case basis.
Also, if you take a contract from say 2010 and you run it through one of the scanners, you get this horrible output and you can’t make out whether the right is available or not.”
Because rights descriptions have evolved over the years?
Scott K.: “Ten years ago there was NVOD, RVOD, EVOD,… every letter under the sun in front of VOD. I couldn’t even tell you what half of them meant. At that time you could watch content on YouTube on your computer but not on your tablet, because that was considered a mobile device. Ultimately they decided: look, whether it’s on a phone, tablet, or computer, it’s streaming. Now, is that streaming right behind a paywall? Do viewers pay a monthly subscription or do you give free access in exchange for ad revenue? That is what it boils down to today. Rights are getting more organized and cleaned up.”
So with time, rights management systems may gain traction?
Scott K.: “I do believe that rights management systems will get way more robust, way more accurate. But for now, you still need to print out those rights management reports to figure out what companies have touched a certain title in the past. Then you have to read all those contracts, and identify what it is, where it is and how it’s still being used. Is it still active? Has it expired and if so, is it still being exploited? Because that happens, too. Sometimes they don’t take it down and you have to send them a note.”
So the need for a good system is there?
Scott K.: “Yes, but in the boardrooms the decision makers will always ask themselves: are we willing to take on this implementation workload now? Do we really need this new system and how is it actually going to solve the problems we currently have? The fact is that major studios have multiple versions of rights management systems. And a human cross-checks all of them. Small companies will stick to their Excel sheets for a while, because you need a critical mass of deals before your investment in a rights management system pays off.”
How do you keep track of underlying rights and retransmission rights?
Scott K.: “When we acquire a title from a producer they will provide us with all their paperwork stating it’s available, it’s cleared, all licenses are paid etcetera. We get a very accurate list of the music used. So when I broker a deal and I sell that title to Discovery or AMC, one of the items we deliver is music cue sheets. Every time they broadcast the title or part of it, it’s their responsibility as a broadcaster to relay that information to the appropriate organizations. The same with retransmission rights.
The broadcasters are supposed to report this and pay the beneficiaries a piece of the ad revenue. But there are also organizations that focus entirely on underlying rights and retransmission rights. They have very accurate scanning techniques with which they can keep track of what is being broadcast in the world, how many times and how much money each entity owes. It is their job to go collect that information and the money and then to give us our piece. They keep a percentage for themselves for the effort.”
«The old-school copyright mindset is on its way out.»
So copyrights will be dead easy to track?
Scott K.: “As we are filming digitally and delivering digitally to different outlets, I believe that the old-school copyright mindset is on its way out. If you get your digital file copyrighted with an organization, such as a copyright office, then forever in the history of that content you could keep tabs on where in the world each frame has been used, thanks to tight scanning techniques, facial recognition, blockchain etcetera, and you’d know what the revenue split is.
You would know the content has been scanned in Norway by that platform, that it has officially been released in Japan by this group, You would know which language tracks exist. And when any part of the content is used, the company that created it will get a piece of the ad revenue.
So rights owners won’t need to chase students who edit movie clips into cool videos and share them with their friends on YouTube where it gets monetized. Rights owners will automatically get a piece of that.”
And revenue calculations are a headache of the past?
.Scott K.: “Let’s say I acquire a hundred titles for the US, with all the digital rights, and I can do what I want with them. Given that there are about 20 top-notch digital outlets here in the States that can generate real cash, I want to have a contract with each of them. But each one requires its own specific metadata sheet. So I have to enter the same 100 titles 20 times in different layouts and each time the kind of digital delivery can be different. So I’ll do all that work and the titles will get out there and then each outlet will send me their own revenue report. For some I’ll have to log on and pull the data down myself, others will send me a pdf or Excel sheet and it will all be in different formats. I’ll have to compile all those reports into my own internal report and then I’ll have to report to all the producers. It’s an extremely burdensome paperwork process.”
Can’t all of that be simplified into a more systematic process?
Scott K: “Yes. Take Tubi TV, an AVOD in the US. If you want to know your revenue from Tubi TV for this quarter, you just log in, you put the dates in and you have it all there: the number of uses, the ad revenue per title and so on. The day after you put out a marketing campaign, you can check how well a title does. So that kind of automation exists. Tubi TV has extremely beautiful metrics on the content it manages. But as a distributor I still have to balance those metrics with the metrics of Roku, Amazon etcetera. It takes a human brain to analyse that and figure out why the title is trending well on this platform, but not on that one.”
What with the materials that need to be delivered. Are those workflows getting any easier?
Scott K.: “When I started out we were still delivering physical tapes. You would have your NTSC tapes that worked for North America, South America, Japan and South Korea – but that was about it. You often needed PAL and sometimes other weird old formats. You would send your tape to one client and then have that client forward it to the next. It was complex. But once we started to deliver things digitally and you had a uniform raw data file that any party anywhere in the world could alter and skew to their needs, it all became a lot simpler. Now you can just drag and drop, and it’s delivered, whether it’s theatrical or broadcast material.”
“The world of media distribution is carved up by language.”
Will languages always be a major hurdle for international distribution?
Scott K.: “This world is carved up by language. You either have the language assets or you don’t. I have always been a major proponent of dubbed tracks and subtitle files. These elements are very valuable. You can travel freely across the European Union so it makes sense for the viewer to always have a list of languages to choose from, as subs or dubs. That is where Amazon and Netflix are getting to. You can get Netflix anywhere in the world, except for digitally problematic countries such as North Korea. I have Netflix on my phone and as I enter another country I can continue to watch the content in my own language. Netflix wants to give the consumer that seamless feel.”
How do you see the media landscape evolving?
Scott K.: “For the next ten years to come, there will probably still be lot of different players. National broadcasters, for instance, will be around for some time yet, maybe focusing on a niche such as news or sports. They hold value because they are a representation of their country. They are part of their country’s identity. There will always be a BBC or a CBC Canada because wherever you go you want that voice from home. We are all autotuned that way.”
Which players will prevail in the end?
Scott K.: “Honestly, I think that eventually, we are headed towards a situation where the global digital platform companies take total control. When I was a kid, the Walmarts and the Targets were becoming the go-to places to shop because you could get anything you wanted there and because they were so big they could command extraordinarily low prices. So it became impossible for mom-and-pop stores to maintain competition on mass bulk purchasing items. Now we’re seeing the same phenomenon in digital. Amazon is the most incredible example of this. Amazon started off as an online bookstore in the nineties. They are using their media distribution just to grow their overall business. The same thing with Apple TV. They are using media just to grow the sales of computers and phones. At the end of the day Apple is a hardware store. So you are going to have those ginormous companies with valuations exceeding a trillion dollars that will become dominant portions of the economy. Within that you are going to see individual channels and individual stores.
Around the 1990s in the States we had that explosion of cable channels. Anybody with money wanted to get into the cable game. The same now with SVODs. These giant companies will come in, scoop up tons of those SVODs and that will become their offering.”
«A global name will have its fingers in a lot of different cookie jars.»
It’s all about scale?
Scott K.: “It’s all about how to get the biggest share of the market place. Amazon does it by saying: sign up for Prime and you get amazing content and free shipping and they don’t care if you return it because they are getting a piece of every single item that gets sold, even when the consumer returns it. That’s the deal. The day Amazon starts to buy out companies like Paramount we’re heading to that universal dominance where you have a global massive name that has its fingers in a lot of different cookie jars, media being one of them. And yes they provide great media content to make money from it, but it is just one business sector for them and the purpose of that business sector is to get consumers into their sphere of influence so we do the bulk of our business through it. The same for Disney+ and Apple. Netflix doesn’t offer that, yet.”
Media companies are pumping enormous sums of money into content. How long can this go on?
Scott K.: “I have asked that same question at NATPE last year, so way before the pandemic: how is this sustainable? At that time NENT’s Viaplay, a Scandinavian SVOD, were releasing 20 to 30 original scripted series every year. You have to create content to maintain viewers and it has to be good. For about 9 dollars Netflix gives you access to multimillion dollar per hour television series. Simply because that has become the viewer’s expectation. So if you want to grab a portion of that audience you’re spending enormous amounts of cash to compete and there is no guarantee you will even get a market share out of it. You may release a new series on your subscription service and for about a month you may get that nice little bump in your subscriptions. But as soon as the first season of that series ends, subscribers go away and hopefully they will come back 9 months later for the second season. Can you maintain your audience that way?
You need very deep pockets?
A company like Apple can say: here is a billion dollars in cash, go make some content, let’s see if it works. Few companies can create content at that premium level at those premium price points. Can Netflix be sustainable over years and years? Or will they ultimately only be an offering on Apple, Amazon, Alibaba or some entity that doesn’t yet exist but is being cooked up in somebody’s garage? Who knows?”
Thank you Scott.
About Scott Kirkpatrick
Scott Kirkpatrick is the Senior Vice President of North and South American sales for NENT Studios UK, a London-based production, development and distribution company that manages over 1,000 media properties including Channel 4’s Shameless, BBC’s Jenna Coleman hit The Cry and ITV’s Doc Martin. Previously, Kirkpatrick served as Executive Director of distribution for MarVista Entertainment, a Los Angeles-based production and distribution company that produces original TV movies and has managed international TV deals on major franchises, including Mighty Morphin Power Rangers. Before shifting to the distribution side of the industry, Kirkpatrick worked behind the scenes on major studio productions, including Talladega Nights: The Ballad of Ricky Bobby. Kirkpatrick has produced and directed TV series and feature films including Eye for an Eye and Roadside Massacre, and is the author of the books Writing for the Green Light: How to Make Your Script the One Hollywood Notices and Introduction to Media Distribution: Film, Television and New Media the latter of which has been used as a course textbook at several elite film schools including the University of Southern California and Savannah College of Art and Design. He lives in Los Angeles with his wife and two children.