Business Models: Major Streaming Platforms and Production Companies
In the last five years we have seen the production of audiovisual pieces grow increasingly dependent on OTT platforms, which are hosting a large amount of content generated by production companies, television channels, and the platforms themselves.
In this new market system, various actors play their roles and make it viable. However, is it a functional model in the long run? What are its strengths and weaknesses? And is the production boom in decline? In this post we will take a look at these questions.
- How Did This Business Model Come About?
- Production: Strategies and Criteria
- Current Status of the Major Platforms
1. How Did This Business Model Come About?
Although in Spain some companies had already been producing a large amount of content for some time, it was around 2018 that platforms began to develop strongly in the face of a new market landscape: a growing demand for content. The big business opportunity had arrived.
This new situation not only affected the way the industry operated, but also brought about a change of mentality inspired by the infinite possibilities that the system presented. To continue producing, one had to look beyond their own screens and see the opportunities worldwide.
Suddenly, something obvious was conceived (okay, maybe not that obvious in 2018). Platforms were going to allow any product to have real possibilities of being seen by the entire planet. In the same way, it allowed you, as a viewer, to be able to consume foreign content that you might not have had access to before.
Production companies and streaming services realised this. Consequently, the dynamics of change began, based on their ability to mass-produce to meet this vast demand.
2. Production: Strategies and Criteria
With the aim (and almost the obligation) of preserving this rhythm of production and making it sustainable over time, the first fundamental rule of production is to have a deep knowledge of the viewer. In each of the series that are produced, good audience figures are key. To do this, platforms ask themselves: what is the profile of our subscribers or viewers, what do they prefer to watch, and how can we attract more? These reflections have matured the market.
However, in the eyes of an international producer like Ignacio Corrales (Buendía Estudios, Atresmedia), with so many years of experience in the sector, what he considers to have really changed in the industry is not so much the content — which he observes to be essentially the same ― it is the distribution.
According to him, its redesign has revolutionised the business; accelerating it, making productions possible that have no territorial limits and the opportunity to be seen anywhere. What remains the same is the essence of the business: owning and selling rights. Corrales points out that the trend of buying lots of originals “is not sustainable and never has been!”
That’s why he says that nowadays, buying rights, acquisitions, and not so much the original, has once again become the norm. Corrales admits that buying rights means you have to produce it yourself, then go out and sell it from territory to territory. All of this requires an investment, an important financial lung that not all companies have.
3. Current Status of the Major Platforms
In this fast-paced system, it was only a matter of time before content would start to be overproduced. With this, among other cost-cutting actions, comes the cancellation of some projects.
The big platforms are adjusting to the changes in the financial market. They have seen that they aren’t being profitable, so now they are more cautious about whether they invest. Mergers are taking place between them, and as we have said, this pushes the business model towards the purchase of rights, rather than the purchase of originals.
Corrales points out that this is a natural restructuring, which goes hand in hand with its maturation process. For the coming years, he doesn’t foresee an extreme downturn in the market, but rather a certain adjustment in the number of productions and a lower than expected scope of expectations.
In Spain specifically, companies that are least likely to be affected are the major drivers (both platforms and free-to-air TV channels). Other streaming platforms with more influence abroad are the ones likely to see their output decline.
However, if we look back no more than three years ago, these streaming platforms were not even established in the country. With this observation Corrales reminds us that the overall vision of the audiovisual industry is still forward-looking, working to keep growing, and that whatever the dominant business model is, the sector has the tools to adapt to it.
If you want to hear more about how the market works, watch Ignacio Corrales’ masterclass in our accelerator for projects in development: Series Hub. To watch it in full, remember that it is available for Full Access users in our exclusive training community.