By Bo Stehmeier, President, Red Arrow Studios International

Is distribution dead? That’s the rather dramatic question that has been doing the rounds recently, and thankfully it’s a question with a simple answer: no. As long as creators of content want to spend most of their time creating rather than selling, and as long as there is more than one distribution pipe to the world’s entertainment consumers, distribution is going nowhere.

However, the role distribution is playing in the TV ecosystem IS changing. If you think distribution is only about selling rights then you’re wrong, as the old business model is getting a significant and transformative overhaul. We are in an evolutionary phase, and the end is not yet in sight.

For a long time, the standard sales model has been that distributors turn rights into money, and are usually the last to put cash into a project, and the first to take it out again. Whilst far from dead, this business model isn’t as resilient as it used to be. An increase in competition has forced distributors to advance money more aggressively and earlier against rights to help secure them.

But there has also been a disruptive ‘Big Bang’ of change which has come about due to a number of significant, inter-connected developments, notably pressure on the advertising market – and so the budgets of commissioning broadcasters; consolidation in the industry; and the arrival of the SVOD FAANGS. The B2C content ecosystem has become much less reliable for production financing than it used to be, and so producers are increasingly turning to distributors to fill the gap.

But we do much more than that. Alongside financing firepower, we also bring a wealth of invaluable expertise and contacts gathered and honed from years of understanding the needs of the market and its global nuances. The knowledge of the distributor, and an entrenched awareness of buyer and commissioner needs, is key to unlocking the potential of IP.

The industry is also facing an additional challenge in that content markets that were once developing, such as Asia, Latin America or CEE, have now become mature. Importing into these is getting harder as they have found their own voice in content and have established their own funding entities – making foreign imports less appealing. Therefore, finding a partner who is globally experienced but locally connected is a smart move.

It doesn’t mean that there are no margins to be made in those markets in this new landscape – you only need look at the booming business of formats and remakes. Consumers can’t seem to get enough of locally produced content. And as local production businesses have become more skilled and confident, even non-English speaking countries have become keen to finance English-speaking productions locally, in the hope of securing better sales globally.

Local content may be the top prize for many broadcasters, but they still need to rely on foreign content to fill the gaps; and foreign content doesn’t just mean from the other side of the world – it can include shows from a neighbouring region, such as Korean drama in Asia, Nollywood in Africa, and Scandi Noir in Europe.

All of this means that content creators and broadcasters still need an expert on hand – whether to help them create a business model, bring them international ideas for their local market, or provide good old-fashioned foreign content solutions.

It is through this kind of über-connecting of entertainment businesses that distributors are finding their renaissance. We might subsume some of the existing business models like agencies, producers and publishers, but at our core we are rights specialists that tap into immediate opportunities on a truly global scale. At Red Arrow Studios, we have taken a holistic approach to developing rights and IP. Henrik Pabst, President of Red Arrow Studios International,* not only oversees the TV distribution business, and our film distribution business Gravitas Ventures, but also take a global, group-wide view of Scripted strategy across Red Arrow Studios. This kind of integration is vital to ensure that we have the strength and vision to take ambitious bets on projects that we believe in, and ensure all of our businesses are working together for the good of great content.

So, what’s next? The good news is that production financing is now more diverse than ever, with many more doors to knock on, but every source comes with slightly different priorities: some want returns; some, exposure; and some want ratings. It can be a bewildering minefield for a producer. There are margins around IP to be found everywhere and it is the forward-thinking distributors that pull all these business models together, offering a holistic service to the industry.

The new generation of distributor offers speed to opportunity in areas the creative and business community might not be able to find, or at times even think of. These days you always need a rights specialist in the middle of any business model, be it soft money, bankers, packagers, or branded funding. Creativity is, of course, at the core of what the industry and our consumers want, but the global economy necessitates experts who are able to help get the deal over the line – and fast, whilst maintaining a focus on the financier’s priorities.

Everybody wants to jump on board content that works best for them or which offers a vehicle for them to conduct more business. Even traditionally corporate companies or previously ‘unsexy’ consumer goods sectors such as hardware brands are looking to become more audiovisual. And it is distributors that are connecting them, offering business planning to help them invest and manage their long-term return on their investment?

Distributors are increasingly not only connecting like-minded creatives with businesses, but also businesses with consumers, and even consumers with creatives and brands – and it is in those areas that our distribution business is exploding.

If you are a distributor who is fixed into a business model of old, selling rights from one part of the globe to another, or if you lack an inspired senior team to steer you into the future, then yes things could look bleak. Especially at a time where IP investors such as FAANGS and cable operators are hoarding rights and production is king.

But if we truly believe that production is king then packaging at a global level is King Kong! Red Arrow Studios International has been embracing this future. We have developed our sales teams to become packagers/traders in their market; they invest where they see the best margin and decide on the best route to market for any piece of content. They also build the digital infrastructure, so they can release the content as cost-effectively and thoroughly as possible, including directly to the consumer through our sister company Gravitas Ventures. Our business is also working with skilled, senior people to drive these initiatives, including Carlo Dusi – EVP Commercial Strategy, Scripted and Alex Fraser – SVP Acquisitions. And if distributors don’t have the right talent on their payroll they need to crew up with true experts in order to have a seat at the table in this new global economy.

In short, distributors are in the business of selling skill, speed, connectivity and celebrating entrepreneurialism. Exciting times ahead for those who love this business – and don’t let anybody tell you differently.

*Note: Bo Stehmeier was promoted to President of Red Arrow Studios International in January 2019

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