OTT’s impact on Canada’s video production ecosystem

Over-the-top (OTT) content providers are boosting the global video production market, including TV production and acquisition expenditures in Canada, according to data gathered by The Boston Consulting Group (BCG).

The last few years have often been referred to as a golden age for television, a statement that is confirmed by BCG’s report titled The Future of Television: The Impact of OTT on Video Production Around the World. The report quotes a Canadian executive who assures that “the ecosystem has never been better for content production.”

Subscription-supported services such as Netflix and Amazon as well as online video platforms like YouTube have been steadily fuelling growth in several markets. In fact, the data gathered by BCG demonstrates that markets around the world “are at least as healthy as—and in many cases, healthier than—they were five years ago, before global and local OTT players emerged as a major force.”

In Canada, OTT content spending grew at a compound annual growth rate (CAGR) of 48% between 2011 and 2015. This is almost ten times the CAGR of traditional TV during the same period.


Source: The Future of Television: The Impact of OTT on Video Production Around the World, BCG

This steady growth in content spending is explained by the fact that there are now more exporting opportunities, especially for English-speaking markets. English content productions travel well across borders, making it easier to achieve economies of scale. As we can read in the report:

Domestic producers in, for example, Canada and the UK are benefiting from the trend of content globalization that OTT has enhanced. In fact, foreign distribution has been a key lever of growth in Canada and the UK, enabling domestic creators to further monetize their libraries by selling content abroad in first- and second-run windows.

As a point of fact, data gathered by BCG shows that front-end investment from international distributors is the area where Canadian TV production financing grew the most between 2011 and 2015.


Source: The Future of Television: The Impact of OTT on Video Production Around the World, BCG

While this doesn’t mean global OTT players produce a high volume of domestic titles —after all, Netflix’s share of domestic content in Canada is only 16%—they do remain a key source of growth since the titles acquired are usually high-priced, big-ticket content destined for international distribution.

The growing value of top-tier content

The vast majority of content production experts interviewed by BCG agreed that “OTT had a generally positive impact on production dollars,” but it’s important to note that some content benefited more from this situation than others.

There has been an increasing demand for top quality, professionally produced content, with two categories performing significantly well: serialized drama and children’s programming. It therefore comes as no surprise that Deutsche Bank, in a note to investors, estimated that these are the two categories for which Netflix has created the most original content.


Source: This chart shows which genres Netflix is pouring its resources into, Business Insider

Why is there such a focus on kids’ programming? There are many possible reasons such as to secure a future audience or to attract parents who prefer an ad-free environment for their little ones. But another reason might simply be that children’s content travels very well across borders and languages. Quoted in BCG’s report, a children’s content producer in Canada explains:

I was going to retire five years ago, but OTT has unlocked so many new monetization windows for me—domestically and internationally—that I am making multiple times what I used to on most of my productions. The reason is simple: when we make a piece of animation in English and dub it in Spanish, it is Spanish to Spanish children.

While top content thrives, the mid-level quality content market is collapsing. This finding has been confirmed by a new study from Deutsche Bank that underlines the growing value of “killers” over “fillers.” As the bank explains: “The risks of being on the wrong end of this; the filler content, which props up the TV schedules and pads out the cable/satellite bundle, is greater-than-ever […] TV channel launches are slowing globally meaning less airtime to fill with programming.”

This might be bad news for some, but Martin Kon, partner and managing director at BCG in New York, who is a native Canadian and active in its media and communications sector, believes it really is an opportunity for Canada’s producers and creators. They can take advantage of this situation to produce and export relevant, high quality content. “In this golden age of TV, supply is unconstrained and consumers have more choices. So it’s more important than ever to produce top quality content.”

Martin Kon therefore believes the question we need to ask ourselves isn’t “how to keep OTT players like Netflix out” but rather “how to export top quality content.”

A driving force behind domestic content: pro-am and amateur creators

Finally, it’s impossible to think of global OTT players without raising the question of their effect on local culture and the production of domestic content. While trying to answer this question, the authors of BCG’s report uncovered an interesting fact.

In what Martin Kon describes as an “ah-ha” moment, they found that professional-amateur (pro-am) and amateur content creators are a driving force behind the production of domestic content. This finding is based on a survey of 600 millennials in 50 countries who were asked questions about how they interact with content.

These millennials, aged 19 to 30, watched quite a lot more locally focused documentaries, talk shows and cultural programs created by amateurs, such as YouTubers, than works with a local focus created by traditional professionals.


Source: The Future of Television: The Impact of OTT on Video Production Around the World, BCG

When looking at the potential impact of globalized OTT programming on local culture, “the output of a billion content creators—representing all manner of backgrounds, societies, cultures, and points of view in a way that was unimaginable 20 years ago—cannot be ignored,” states the report.

Posted in: Industry Transformations

Tags: cancon, export, millennials, netflix, ott



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