Behind the Sale of Movie and TV Series Rights

As I navigate through the sixth month of the year being located in the tropics 02 factors have been on my mind. First the weather hasn't given us a real reason to believe we are in the 'Rainy Season' yet and secondly, the changing trends in the SVOD industry.

Statista a research firm placed the global net subscriber base of SVOD in FY'22 at approximately 612 million. However, in FY'23 Netflix has reported a global subscriber base of 232.5 million with a projection to reach 782 million by FY'26.

SVOD offerings have somehow become a global culture. However, due to trends like customer churn, low profit margins and the increasing number of different players getting into the industry, I might be tempted to say that the market is becoming saturated, and the industry protagonists are all scrabbling to maintain the same customers in a tight market niche.

Will this be a showstopper for incumbents or will the industry fight back and come out with innovative models which will assure the constant revenue they need to bank-roll the production of more captivating, relevant and entertaining content for their global consumers?

The Total Addressable Market for SVOD

Streaming video on demand [SVOD] has become a global phenomenon and an integral part of the digital age. It's no wonder that industry giants are all flocking into markets with a significant adoption of the internet and smartphone.

An example of this, is Netflix's push into regions like India, Kenya and Nigeria testing out mobile only subscription tier for as little as $4.

While I believe upon its full implementation this is going to make firm headlines and yield fruits, it becomes necessary to look at the global Total Addressable Market for SVOD offerings.

No internet no streaming, right?? Okay- The global net subscriber base for SVOD products as per statista research, was 612 million in FY'22.

As of April FY'23 the global internet user base is estimated at 5.18 billion. Making approximately 64.6% of the world's population which is synonymous to two thirds of the people living on earth.

A simple arithmetic place the total addressable market for SVOD to be a little under 4.6 billion people. Sounds interesting for a world with a current global GDP per capita of approximately $12,235.

Exploring the Opportunity from Within

During the change of leadership at Netflix earlier this year [January], I made an evaluation of the anticipated steps to be put in motion by the new leadership.

No matter how hard I tried, it all came down to the 'usual suspects' [not Keyser Soze from the '95 hit 'Usual Suspects']

a) 'Mitigate customer churn'

b) Ensure revenue growth through expanding the subscription base

What a task? Is this even sufficient to project a positive revenue growth in the long term I pondered?

Then suddenly, a familiar Buddhist quote 'Peace comes from within do not seek it without' . Relating to this, my first question was that leadership can depend on their existing consumer base to generate the kind of revenue that will keep the shareholders happy for a very long time.

The unanswered question lies in context. How many people worldwide have actually enjoyed the quality and quantity of content produced by global SVOD giants.?

The answer is simple approximately 612 million people are subscribed to at least one of an SVOD offering. Basing this analysis on the global number of internet users who are all potential consumers of SVOD offerings, the market is still ripe for expansion. As mentioned earlier the total addressable market for SVOD offerings stands at ~4.6 billion people.

So, What Do You Suggest?

A predominant source of revenue for movie production houses and SVOD giants lies in selling the rights of intellectual property of their movies.

It's estimated that rights to movies cost approximately 2%-3% of the production value of the asset.

In February 2023, Disney announced it exploring the sale of movie and TV series rights to its rivals as a move to curb growing losses associated to its streaming service [Disney+]. Is this going to be a trend we'll see in the industry as a step focused on maintaining cash-flow and revenue in general?

Netflix has a solid movie library and every year billions of dollars are written off as depreciation cost on their assets. With a global customer base of more that 200 million and an addressable market of a little under 4.6 billion people who are yet to enjoy the content of the streaming giant, unprecedented business models that will see the democratization of movie rights to its subscriber base might do the trick to hamper the impact of low revenue streams and customer churn.

Putting Netflix into perspective, relevant questions that we are forced to answer will revolve around the following points;

1) Will it be a business model disruption should Netflix sell movie content rights at an annual rate of $100 [with a minimum of 10 movies per purchase?] to its interested customers?

2) How savvy are Netflix customers and potential movie rights buyers to cloud video platform technology?

3) Do they have an existing internet audience, or they are going to rely on best practices to utilize Netflix premium content to attract part of the 4.6 Billion internet users who are not yet subscribers to any of the global SVOD services?

No matter the answers to the above-mentioned questions, a corporation like Netflix 'might' find a low-hanging fruit opportunity to generate alternative revenue to the tune of $1 Billion annually from its internal customers.

However, to explore this business model will mean having SVOD giants ready to trigger a global movement which will result in the proliferation and democratization of temporal ownership of premium movies and TV series rights and therefore align itself with objectives that include but not limited to wealth creation and the reduction of inequalities as stipulated by the United Nations Sustainable Development Goals.

Existing Technology to Make Things Happen

As mentioned in the previous section, a successful implementation of the sale of movie rights to consumers for eventual monetization should include the use of cloud video platforms to manage and distribute the video content across different channels to reach the intended audience.

A very interesting channel will be websites, here the platform's video player will be embedded, and the audience will be charged either on a monthly or a pay per view basis. Free tiers can be included depending on the business model of the entrepreneur in question.

Cloud video platforms and a website-based Video on Demand service, promises an interesting return on investment for the yearly $1000 movie rights purchase from an SVOD giant service provider like Netflix.

Making these rights available to 1 million existing customers on the platform will spell an annual revenue stream of $1 billion.

What we Should Consider...

To conclude, we should consider the fact that while the world is evolving digitally at a fast pace, there is a proportion of the global population who are yet to experience the beauty of innovative offerings that the technological advancement of the age has provided.

Large corporates while making efforts to keep on delivering their products and services in alignment to the promises they've made to the global population and consumer base, they can create a mutually beneficial environment should they consider looking into the inner strengths of their organizations.

This will likely go a long way in not only guaranteeing the very survival of their business models and create alternative revenue streams to fund innovation, growth and most importantly keeping a smile on the faces of shareholders but also create alliances which will impact the world positively by ensuring citizens from all over the world have access to innovative offerings and global trends like streaming video on demand.