The production of broadcasts and remuneration ofrights: a business perspective
A presentation by Godfrey McFall, Senior Associate, Oliver & Ohlbaum Associates WIPO Headquarters, May 25th 2009
An assessment of broadcasting’s contribution to copyright
An assessment of broadcasting’s contribution to copyright Who we are
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The leading independent adviser and expert on the opportunities and challenges facing the global media, entertainment and sports sectors in the 21st century.
Have advised over 200 corporations, investors and regulators from the UK, Europe, the Americas and emerging markets.
We advise clients from the following industries: TV and radio broadcasting Entertainment and content creation Sport Print and publishing Advertising and transaction based media Online and broadband (media and
distribution)
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Contents
Flow of funds in the European broadcasting market
The contribution of the five largest European markets
A UK case study
Summary points
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Contents
Flow of funds in the European broadcasting market
The contribution of the five largest European markets
A UK case study
Summary points
Flow of funds in the European broadcasting market Schematic flow of funds – direct and indirect copyright contribution
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RIGHTS SALES
OTHER ANCILLARY REVENUES
ADVERTISERS
CONSUMER PAYMENTS
SOURCES OF FUNDING
CONTENT CREATION
ADVERTISING SPEND
OTHER REVENUES
SUBSCRIPTIONFEES
LICENCE FEE
RADIO & TV BROADCASTING
BROADCAST INDUSTRY REVENUE
PROGRAMMING SPEND
BROADCAST INDUSTRY
EXPENDITURE
• Creation of original IP • Talent investment• Music creation and rights • Arts/photography• Acquisitions • Live events • Others (toys and games)
FLOW TO COPYRIGHT HOLDERS
TECHNOLOGICAL INVESTMENT
• Telecommunications • Platforms and distribution• Digital software • Consumer electronics
Flow of funds in the European broadcasting market Sizing the European content industry and flows to copyright industry
6Source: O&O Trends
Total industry worth over €86bn
€37.6bn (44%) of total revenues invested into content creation in 06/07
Content spend creates original IP and flows into copyright sectors identified on previous slide
LICENCE FEE
ADVERTISING
OTHER
PAY TV
BROADCASTER COSTS & PROFITS
TV SPEND
RADIO SPEND
86.3
European broadcasting flow of funds, 06/07
Flow of funds in the European broadcasting market Programming spend and constituent flows to copyright
7Source: O&O Trends
Total European content creation, 06/07
IN HOUSE
EXTERNAL
NEWS
FILM AND TV ACQUISITIONS
SPORTS RIGHTS
RADIO SPEND
DIRECT IP CREATION FLOWS TO COPYRIGHT
• PODCASTS• EXCLUSIVE ONLINE
CONTENT• COMEDY/DRAMA • CULTURAL DIVERSITY
• COLLECTION AGENCIES • TALENT • NEWS AGENCIES
• TRADEMARKS • MERCHANDISE
• CONTRIBUTES TO PRODUCTION FINANCE (PRE-SALE OF RIGHTS)
• TALENT (WRITERS, DIRECTORS)• COLLECTION AGENCIES • NON-DOMESTIC RADIO/TV• MOTION PICTURE
• ORIGINAL JOURNALISM • DOCUMENTARIES • CULTURAL DIVERSITY
• TALENT (WRITERS, CONTRIBUTORS)
• WIDER PRESS/NEWS AGENCIES
• PROGRAMME IDEA CREATION (BOTH INDEPENDENT AND IN HOUSE)
• CULTURALLY DIVERSE RANGE OF PROGRAMMING TOPICS
• NEW FOOTAGE/FILMING• ORIGINAL MUSIC SCORES
• COLLECTION AGENCIES • TALENT• ANCILLARY ACTIVITIES • ARCHIVE FOOTAGE
Flow of funds in the European broadcasting market Non-subscription funded broadcaster’s contribution to programming spend
8Source: O&O Trends
In all but two EU territories, non-subscription markets account for greater than 50% of all programming spend
In largest markets, non-subscription funded broadcasters represent between 65% and 87% of all content spend
Non-subscription funded broadcasters proportion of overall programming spend, 06/07
AVERAGE – 72%
Flow of funds in the European broadcasting market Non-subscription funded broadcaster’s contribution to original content creation
9Source: O&O Trends
Non-subscription funded broadcaster’s account for over 75% of all original content investment in all markets
In the majority of European countries, publicly funded broadcasters tend to invest more heavily in original content than their commercial counterparts
Non-subscription funded broadcasters proportion of overall origination spend, 06/07
COMMERCIALLY FUNDED
PUBLICLY FUNDED
HIGH RELATIVE PUBLIC INVESTMENT
HIGH RELATIVE COMNERCIAL INVESTMENT
AVERAGE – 91%
Flow of funds in the European broadcasting market Audiovisual sector’s contribution to EU economy
10*Audiovisual industry includes radio, TV, film and video; **Study includes national data from 15 European Union member states **2008 – indicative values Source: European Commission, Oliver & Ohlbaum Trends
Audiovisual sector still remains a critical contributor to the EU economy
Indicative values of growth suggest audiovisual sector holding up better than other industries faced with digitisation of media consumption
Gross Value Add (GVA) by EU copyright industry sectors as a % of total GDP, 2000 & 2008 estimate**
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Contents
Flow of funds in the European broadcasting market
The contribution of the five largest European markets
A UK case study
Summary points
The contribution of the five largest European markets In terms of revenue
12Source: O&O Trends
Total broadcasting revenue (radio and TV) by country size, 06/07
RADIO
NON-PAY TV
PAY TV
• Big Five – 72% of revenues
• Non-pay – 2/3 of big five revenues
The contribution of the five largest European markets In terms of investment in content
13Source: O&O Trends
Total programming spend by market and broadcaster type, 06/07
PUBLICLYFUNDED
COMMERCIALLYFUNDED
PAY TV
RADIO
% PROG SPEND OF NON-SUB FUNDED BROADCASTERS 70% 87% 65% 74% 67%
• Big Five – ¾ of all programming spend
• Non-pay – 87% of spend in Germany
The contribution of the five largest European markets In terms of investment in original IP
14*Radio excluded Source: O&O Trends
Total originations spend by country and broadcaster type*, 06/07
PUBLICLYFUNDED
COMMERCIALLYFUNDED
PAY TV
% PROG SPEND OF NON-SUB FUNDED BROADCASTERS
98% 92% 78% 92% 90%
• Big five - >€14bn investment in original IP
• Non-pay accounts for over 90% of this investment
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Contents
Flow of funds in the European broadcasting market
The contribution of the five largest European markets
A UK case study
Summary points
A UK case study Total TV and radio market revenues 2002-2007
16Note: CPI CAGR of 3.2%; GDP CAGR of 5.4% Source: O&O Trends, Ofcom, RAB, Zenith, BBC Annual reports
Market growth just below GDP growth driven by subscription revenues
Burgeoning pay TV market – 55% of homes in 2008
Decline in advertising in ‘real terms’
Licence fee revenue has grown at around GDP
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TV & Radio industry revenues (nominal), 2002-2007
SUBSCRIPTION REVENUE
ADVERTISING REVENUE
REVENUE FROM PUBLIC FUNDS
Compound Annual Growth Rate (CAGR)
02-07 %
5.2
8.4
2.6
5.1
A UK case study Broadcasting contribution to copyright collection agencies increasing
17*Note: excluding online revenue Source: PRS for Music, O&O Analysis
Growth in the UK broadcasting market has translated into a rise in the total value of collections made by the PRS for music from 2002 to 2008
Broadcasting and online contribution copyright agency grown at CAGR of 10%
Broadcasting now single biggest contributor to revenues
Performing Rights Society (PRS) for Music revenues by sector, 2003-2008
BROADCASTING & ONLINE
MECHANICAL
BROADCASTING CONTRIBUTION*
24% 24% 24% 24% 25% 26%
INTERNATIONAL
PUBLIC PERFORMANCE
A UK case study Programming investment in the face of advertising declines
18*Includes spin off channels; values Source: O&O Trends, Ofcom
Despite pressure on commercial terrestrial players, investment in programming has remained steady
Real advertising decline of 1.3% while programming spend grew at CAGR of 1.7%
Competitive dynamics in UK market have ensured a sustained level of investment in programming
Commercial terrestrial programming spend versus revenues (real), 02-07CAGR 02-07
%
(1.3)
1.7
ADVERTISING
PROGRAMMING SPEND
A UK case study Critical role of terrestrial broadcasters in original content creation
19*Excludes regional spend; includes terrestrial spin off spend Source: O&O Trends
Terrestrial broadcasters play a critical role in investment in original intellectual property and cultural diversity
Account for 95% of total spend
Thematic programming spend dominated by acquisitions and sports rights so contribution to original content creation relatively small
Total originations spend by broadcaster type, 2004 – 2007*
PUBLICLYFUNDED
COMMERCIALLYFUNDED
THEMATIC PAY CHANNELS
% PROG SPEND OF TERRESTRIAL BROADCASTERS
96% 96% 95% 95%
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Contents
Flow of funds in the European broadcasting market
The contribution of the five largest European markets
A UK case study
Summary points
An assessment of broadcasting’s contribution to copyright Summary
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EU broadcasting contribution to core copyright of over €30bn
Public and commercial broadcasters invest significantly more in original radio & TV IP and related copyright sectors than subscription funded counterparts
Additional investment in partial and interdependent copyright industries
Big five markets account for disproportionately high share of original IP generation in EU
Smaller markets remain crucial for cultural diversity and it is the non-pay broadcasters driving creativity in these markets