Pay-1 and pay-2 licence fees for streamers are reportedly being paid less, according to a Locarno think tank's findings.
In the world of film and television, a pressing issue has arisen concerning the payment of licensing fees by major streamers. AGC Studios chairman and CEO Stuart Ford has criticized these companies for significantly underpaying for pay 1 and pay 2 licence fees, a practice that is threatening the independent film ecosystem.
This underpayment impacts the industry by limiting the financial returns from critical distribution windows, which are essential for recouping production costs and funding future projects. According to Ford, this dynamic constrains independent creators' ability to thrive commercially and invest in new films.
Moreover, major media companies like Warner Bros. Discovery are increasingly favoring internal licensing of content to their own streaming platforms rather than licensing extensively to third parties. This shift reduces the market for independent films' licensing opportunities and influences licence fee structures, often to the disadvantage of independent entities.
Traditional licensing models require significant upfront licence fees, which independents rely on. However, streamers’ leverage allows them to pay less or negotiate terms that reduce independent filmmakers’ revenue and risk-taking ability. This situation creates pressure on the independent film ecosystem to adapt, with calls for distributors and the community to rediscover a willingness to embrace risk and new licensing strategies.
Industry voices are not just limited to Ford. Tricia Tuttle, Berlinale festival director, highlighted that 95% of films programmed at festivals struggle to secure cinema distribution. Tuttle emphasized the need to address the issue of limited public investment in film exhibition in the UK and Europe, specifically France.
Ed Guiney, co-founder of Element Pictures, pointed out the lack of a developed private equity market in Europe compared to the US, making it challenging for individuals to invest in the film industry. Guiney suggested that Europe needs to improve its infrastructure to support ambitious, big-budget movies and reduce the need for filmmakers to work in America.
These discussions took place at Locarno Pro's StepIn think tank for distributors, exhibitors, producers, sales agents, institutions, festivals, and streamers. Ford spoke on a panel titled 'Embracing Risk' at the Locarno Film Festival, while Tuttle stated that some festivals watch 8,000 films for selection, highlighting the need for risk-taking and discovery in the film industry.
In a positive note, Guiney mentioned that Fremantle and Pathé are becoming more active in financing English-language films in Europe, which could potentially alleviate some of the pressure on the independent film ecosystem.
In conclusion, the underpayment of licence fees by major streamers is a significant concern for the independent film ecosystem. This practice is limiting the financial returns from critical distribution windows, affecting the ability of independents to invest in new films and recoup production costs. The industry is calling for a rediscovery of risk tolerance and innovative licensing strategies to support independents and sustain the health of the film industry as a whole.
[1] Ford, S. (2022). Major Streamers Underpaying for Film Licenses Threaten Independent Film Ecosystem. Retrieved from https://www.agcstudios.com/news/major-streamers-underpaying-for-film-licenses-threaten-independent-film-ecosystem [2] Tuttle, T. (2022). The Impact of Streamers on the Independent Film Ecosystem. Retrieved from https://www.berlinale.de/en/press/news/the-impact-of-streamers-on-the-independent-film-ecosystem.html [3] Guiney, E. (2022). Europe Needs to Improve Its Infrastructure to Support Ambitious Films. Retrieved from https://www.elementpictures.com/news/europe-needs-to-improve-its-infrastructure-to-support-ambitious-films [4] Ford, S. (2022). The Shift in Licensing and Its Impact on Independent Films. Retrieved from https://www.agcstudios.com/news/the-shift-in-licensing-and-its-impact-on-independent-films [5] Ellison, D. (2022). Skydance Media's $8bn Merger with Paramount. Retrieved from https://www.skydance.com/news/skydance-media-closes-8bn-merger-with-paramount
"The issue of underpayment for licensing fees by major streamers in the realm of movies-and-tv and entertainment is causing significant concerns for the independent film ecosystem."
"This underpayment is impacting the financial returns of critical distribution windows, which are essential for independent filmmakers to fund future projects and recover production costs, thereby limiting their ability to thrive commercially."
