Industry Report: Animation
Cartoon Checkpoint 2007
by Gerardo Michelin
- On June 5 Cartoon Checkpoint, an event organized by CARTOON with the support of the MEDIA Programme and Bayerische Staatskanzlei, was held for the second consecutive year in Freising, Germany, with the aim of anticipating and analyzing new sector trends and the challenges they pose.
The event, celebrated as a prelude to Cartoon Master Finance, brought together some 30 producers, broadcasters and new media representatives, as well as analysts and consultants, from the UK, Germany, France, Spain, Italy, Belgium, Switzerland and Hungary.
During the event, participants exchanged ideas on how to boost sector growth and adapt to the new audiovisual map that has emerged following the appearance of new media operators (on VOD, mobile phones, internet, IPTV, etc.) and the change in the audience viewing habits.
This year, Cartoon Checkpoint had a significant number of representatives from these new broadcasting windows. The growing demand for and from these new platforms was discussed at the first Cartoon Checkpoint in November, 2006, leading the organization to increase the presence of new media in its three annual events: Cartoon Movie, Cartoon Forum and Cartoon Masters.
A PERMANENT CHANGE
Since the consolidation of digital technology, the audiovisual sector is undergoing a period of change that is drastically changing viewers' habits, and with it the predominant business model of recent decades.
This new dynamic is based on the so-called media convergence, which has had an impact on media demand, making it more nomadic, jostling the habitual standard of territoriality.
Not only has content supply multiplied, but now viewers want more interactivity with creators, producers and broadcasters.
The search for the new terms of trade in the digital world is being propelled by these changes, as well as by the entrance of new players, primarily from the technology-driven sector (telcos and mobile operators). These players who invest heavily in networks, need to quickly gain ground and attract an audience on their new services in order to make their investments profitable.
While much has been talked about the future model of the audiovisual business, visibility on the future rules of the game remains unclear and most participants agreed it was a transitional period. However, all the new operators agreed they needed content and were looking for partnerships with producers and broadcasters, offering to both visibility and greater exposure of their programmes. The business models remain unsettled but negotiable.
A presentation at Cartoon Checkpoint by Senior Analyst at Screen Digest Vincent Létang served as a catalyst for this debate. Létang’s presentation addressed the upcoming challenges the European audiovisual industry faces as based on a study by DG Information Society & Media of the European Commission.
The study identified a number of factors hindering or potentially hampering the digital exploitation and distribution of European audiovisual works. The obstacles were grouped in five different categories: technology issues, copyright issues, digital piracy issues, legal and regulatory issues and competition issues. The study concluded, however, that none of these factors are strong enough to block the development of digital distribution markets in Europe, with digital content expected to multiply by four in the next five years.
The study also concluded that European markets are not at the forefront of digital content distribution, lagging behind more advanced markets such as Japan and Korea in mobile content distribution and mobile TV, and behind the US in broadband content distribution. Nevertheless, the authors of the study estimate that Europe will catch up on broadband penetration and content businesses by 2010.
While Létang believes that Europe has indeed witnessed an impressive array of new media developments in terms of supply, as well as demand, over the past 18 months, he argues that significant differences throughout Europe will remain.
MANY CHALLENGES, LITTLE CERTAINTY
The animation industry has not been oblivious to this transformation. In fact, given its unique characteristics (target, universality, use of technology, adaptability to different formats, etc), many experts consider animation to be one of the most attractive genres for the new distribution platforms that are emerging.
Some of the producers' questions at the Freising conference included: Will the new broadcasting windows strengthen animation producers' business? Will the distribution pie remain the same or be further split? How will content in the new media be paid for and by whom?
In addition to a common concern about the business models of the “next generation”, producers' other concerns ranged from subjects as diverse as sources of financing, revenues and the challenge of creativity in new media to new opportunities and the role of games in the sector.
Some of the main ideas addressed by the producers were:
- As financing from traditional players is becoming less, producers must diversify their sources of financing and seek new and additional revenues from the new players in the audiovisual market. They should therefore make an effort to embrace new windows and ensure that their products are shown on as many platforms as possible.
- In addition to financing, the sector also faces a creative challenge: rather than re-purposing productions created for television, productions must be conceived specifically for multiple platforms and screens and embrace new, shorter formats with a different narrative content.
- The shift from advertising money from TV to the internet may in the medium term help producers finance their programmes while viewing remains free for the public.
- Winning models are believed to be S-VOD (on subscription) as a slow builder of revenue maker whilst free VOD, based on free advertising will not be paid by the public.
- Some producers believe special attention should be paid to games, as the public is ready to pay for that.
- The opening of new windows can help generate new revenues by extending their back catalogues’ lifetime. The Zooloo Kids experience was highlighted and some producers explained that they will continue to share rights with broadcasters for premium programmes and negotiate separately for their ‘long tail’ programmes on all the other media.
- A producer explained how extensive and illegal display of one of his old series on the internet had resulted in such an immense interest that the series is now being produced as a feature film.
- The declining DVD market still remains attractive for animation. Piracy, one of this sector's biggest problems, has not affected animation to the degree that it has other audiovisual genres.
- Thanks to new technologies, many businesses are likely to invest in their own content creation, a trend that could imply new opportunities for producers.
- There is concern over the possibility of sector dominance by players such as Google or Youtube in the future audiovisual layout.
A MULTI-PLATFORM FUTURE
Broadcasters expressed concerns that appeared somewhat less in number and urgency than those voiced by the producers. The broadcasters who attended the work session basically described how they are going online for their non-linear offers (VOD, catch-up TV…) and underlined the new interactive services (on the web…) they provide for the now fragmented audience and to which extent they are successful.
Amid increasing competition, broadcasters have to optimize resources and try to create cross-platform synergies.
They also expressed a necessity to be present on all platforms, and thus, an interest in developing or acquiring brands that are easily recognized by the public and that can be shown simultaneously on various windows.
Broadcasters also showed an interest in acquiring the exclusive copyrights for all the windows in order to achieve maximum profitability once the product obtains visibility.
Regarding the commercial relationship with producers in the next business model, broadcasters agreed that this has yet to be clearly defined, and outlined several possible formulas: co-production, global or per-window negotiation, pay-per-download, etc. They also underpinned the rights clearance problems.
In spite of an interest in researching new ways to sell content, some broadcasters believe the sector is undergoing a transition period and prefer to stick with more traditional models for the time being, such as generating stable audience share to sell advertising space.
The session also addressed the models currently used by major European public broadcasting channels for children such as CBeebies, Ki-Ka, France 3 or RAI, which were all present at the event. The role that the public channels should fulfill in the sector continues to be cause for debate as for many funding programmes through advertising is not an option.
NEW BROADCASTERS, NEW MONEY?
As new players in the audiovisual sector, the new media representatives highlighted their need to create an ample, attractive offering to be able to compete with the larger, well-known brands. They consider the relationship with producers and broadcasters as key to achieving this goal.
All evidence suggests that the telcos are heading this renovation process, and many experts believe they are fulfilling an essential role in defining the new media arena.
While some representatives from mobile companies provided a positive reading of the situation, they admit that it is too early to consider an upgrade in content supply with the current SMS and ring tone business still strong despite initial signs of decline.
The participants did not reach a unanimous conclusion on the format for small screen content, but the general suggestion was to avoid episodes that are either too short or too long. They also highlighted Flash as an adequate technique to create animation for mobiles.
Also a topic of discussion was VOD, which many believe will some day replace DVDs. Bearing this in mind, animation producers were told to pay special attention to this platform.
Regarding downloading content through the internet, the point was made that people are not accustomed to paying for these services, considering for example free phenomena such as YouTube, which still does not have a clear business model.
Responding to whether new media are considering taking on the traditional model of advertising, the participants agreed that before using advertising you need a steady subscriber base. They also noted that it is still unclear how advertising can be introduced, and the difficulty in understanding the new consumer habits that are developing with the arrival of new media.
This meeting was a first step to open discussions between traditional and new players in the animation landscape. It is an important milestone as it will help defining the content and outlines of the new relationships between these actors.