Industry Report: Financing
Investing in New Media: A Producer’s Strategy
by Cartoon, the European Association of Animation Film
11/03/2008 - Roch Lener has been President of Millimages since 1992. Millimages has become one of the leading European animation companies. Millimages is a fully integrated company handling its own distribution, merchandising and video publishing. Listed on the Paris stock market Millimages also expanded its services into audiovisual production and film distribution with the acquisition in 2002 of Gedeon Programmes, one of Europe’s leading factual producers, and the acquisition in May 2004 of Bac Films, a flagship theatrical film distribution company.
What have been Millimages’ projects in the new media?
Often the success of a production company stems from a single success. Two examples allow the placing of Millimages’ activities in the sector of production and exploitation of the programmes of Internet. The first project is Happy Tree Friends, for which Millimages bought the rights to distribution in France. We acquired these rights with guaranteed minima of 450.000 €. The series producer’s return on his property was good. At the start Happy Tree Friends was a series by a producer who created products a little «trash» for the web. Thanks to the popularity of the series the producer was able to profit on the property via the video, derivative rights, and by creating a series for television (26x13 minutes). This is an example of a product owing its development to the new platforms. It must be understood that this is a series that could not be broadcast in the children’s slots of a major TV network. It is a series that could only find an outlet uniquely on Internet.
The other example is Les Lascars (in English Round Da Way), a series of 30 one-minute episodes. This is a funny series for adolescents and adults. On the level of editorial content there are several rather strong elements. The series deals with an urban and suburban culture, cosmopolitan, multiracial and multicultural, in a tone of self- derision. The young people of the suburbs experience this series as the sharp edge of their own identity. Thanks to its humour and self-mockery the series is very federative. The series was broadcast in 2000 on Canal+ in the later part of the evening, with a modest success.
With the arrival of the Internet, this programme turned up on a dozen pirate sites around France where one could watch all the episodes. There was a multiplication of blogs and the notoriety of the series grew exponentially. There were 10 million downloads, pirate versions by fans exist in a multitude of languages. With the mobile telephone, we gave these rights to Orange and SFR and very quickly the series became n° 1. On Orange, 700.000 episodes have been viewed since 2005. The series is n°1 on Youtube. The paradox is that, although n° 1 on the mobile telephone sites the series Les Lascars brought in only 34 € in 2005, 10 .000 € in 2006 and 15.000 € in 2007! We have earned practically nothing. The company Underphone, which was the programme aggregator for Orange, was sold for 60 million €. So there are businesses valued at amazing sums, on the basis of providing content they have not paid for! At the moment the swing is on the side of these companies and must inevitably return to the production side.
However, without Internet and mobile telephony the series would have remained anonymous. Piracy does not have only negative consequences. Thanks to the popularity gained on Internet (piracy included) we have been able to convince new partners to invest in a further series of 30 new episodes. We have also worked for 3 years on the scenario of a full-length film for which we found financial partners (France 2 Cinema; Canal+; the advance on receipts from the CNC; and studio 37, Orange’s feature-length production subsidiary). This last partner is very important because it permits a very high-profile promotion of the programme.
What is the economic model for traditional operators and new entrants for the exploitation of programmes on the new platforms?
No one has yet found a stable economic model, everyone is learning. We have various actors with divergent interests. The TV networks want to keep their audiences via the new platforms. They do not have substantial budgets for massive investment in the new media and cannot pay for the content. The telcos companies invest massively in technology within a strategy of advanced technology and market conquest. They seek a relatively abundant content, therefore it is little or badly remunerated. There are sites for so-called «video sharing» in the style of Dailymotion, Myspace or Youtube who distribute all the programmes they can find without any real economic equilibrium. The cost of the bandwidth of Dailymotion is 4 times higher than their advertising revenue. The site costs 1 million € per month. The site value is in the potential revenues it could generate.
One can hope that the television networks will manage to keep their viewers and their advertising revenues to pay for the programmes. In the same way one can hope the telcos become selective in the content they distribute and are able to remunerate it correctly. It is also probable that the video-sharing platforms will manage to generate profits.
If all this becomes concrete, the producer’s trade will become a fantastic profession. Until now, we were in a situation of monopsony: few buyers for many producers. Tomorrow, if all these balances stabilize, we will find ourselves again in a market situation: programmes can be sold to TV networks, to telecom operators, and exploited in VOD, and in revenue-sharing on video platforms. All these operations will pay less, but the possibilities of viewing-related payment will augment.
How will producers finance their series?
The economic model for financing a series will no longer be the same. I think we will be in a market which will have similarities with the housing market. A housing project is set up in a fairly standard manner: 15% of owned capital, from 20% to 30% of pre-sales and the remainder from financing organizations that intervene to provide gap financing.
Cartoon Master Freising, Germany, June 2007