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Marc du Pontavice • Xilam

by 

Edited by Cartoon, the European Association of Animation Film Cartoon Master Barcelona, Spain, June 2006

Marc du Pontavice is President and CEO of Xilam Animation and Vice President of the SPFA (Union of French Animation Producers).

How do you define a strategy to finance an animation programme?

To define a strategy you need to answer the question: what master you want to serve? You need to define if the show will be acquired by a broadcaster, a commissioner or a toy company. You need to decide who is going to guide and finance the show and adapt the business model accordingly. Financing strategy is very dependent on the target you are working for.

(The article continues below - Commercial information)

What would be the financing strategy for pre-school shows?

Pre-school shows are typically for television. The business model cannot be based on TV revenues, because there might be an advertising black hole. There are differences between territories, but in most countries ratings will start at 4 years old.
The business model is also very dependent on merchandising potential. Before 5 years old, there is a parental prescription. A kid of 5 years old takes the control of the remote control. The parents are loosing control on what the kids are watching. Until then the parents are the prescriptors. The money that they are willing to spend is bigger for programmes they have chosen. For the same reasons, pre-school programmes are much more driven by domestic markets. Cultural barriers starts after 10 years old. Until then every kid love the same. Pre-school is often driven by the publishing, because the parents are very sensitive to this aspect (books, comics…).
Because of the merchandising aspect, the market is dominated by the Anglo-Saxon industry that has fabulous expertise when it comes in writing, creating and marketing for that age.
It is not necessary to spend a fortune in producing a pre-school show. Firstly because there are less revenues coming from TV that can justify a big budget. Second you have these domestic limits and the programmes do not have huge potential internationally. Third because spectacle is an option. Kids between 2 to 5 do not need huge backgrounds and action. Pay TV is more likely to be the one who is going to spend money in TV revenues.
In terms of financing, going pre-school means that:

  • you have to identify a merchandising potential;
  • you better be linked to an Anglo-Saxon partner or broadcaster;

What would be the financing strategy for shows addressed to kids between 6 and 11 years old?

The situation is the opposite compared to pre-school shows. You can have a very strong TV revenue, because advertising is king in this age. You have audience measurements and audience ratings. There is no parental prescription.
Producers can spend more money in the shows. It is indeed required because kids are the more and more demanding in terms of the spectacle you can provide. Innovation is critical. Kids want new programmes.
Merchandising and home video can drive money, but the market is very competitive. The market is dominated by US programmes and there is practically no space for independent programmes.
You have to make a choice between a story which is driven by characters and a story which is driven by merchandising.
In the merchandising-driven shows, you will serve the purpose of the toy company and you will get fewer revenues from the TV.
Anyway it is much more difficult to create merchandising products for the 6-11 years old target. There is also a crisis of toys. After 6 years old, boys and girls are attracted by other entertainments: video games and Internet.
In the character-driven shows the merchandising becomes a consequence, will come after the ratings. It is an illusion to believe that you can build a show that is going to serve both purposes: building characters and building toy potential.
The television will help you to make the show a brand that will attract a lot of advertising through the ratings. Broadcasters know that by building a character and a story, they will bring a brand and a current success.
Financing strategies mean first exploring the business model that is driven by the programme.

What are the advantages and disadvantages of co-productions compared to pre-sales?

Co-productions offer several advantages. It is easier for financing purposes, but it is much more complex for producing. You have to spend a lot of time in compromising, and it is very difficult to maintain the integrity of your show. The advance of co-production is that it brings cash up front. The partner in another country will pay some production costs using his cash.
Another big advantage of co-production, especially with broadcasters, is commitment. A broadcaster is much more committed when he is co-producing a show than when he is acquiring it. The broadcaster is more concerned by the success or the failure of the programme.
The third advantage is minimisation of risks because you have much more pre-financing.
The disadvantage it that there is a dispersion of the production expenses and you loose a significant part of your creative control. From a business model point of view, the biggest disadvantage is the dispersion of the assets and profitability and you loose the distribution control because you are going to share the territories among the partners.
There are symmetric disadvantages as far as pre-sales are concerned. The first being cash delay because most of the cash arrive on delivery. You need a good back loan to pre-finance the production expenses.
You have a weaker commitment from the client. It is less “their” thing. Broadcasters acquire more that they co-produce. The risk is important because most business models based on pre-sales, provides a gap financing. If you want to retain a lot of the assets of the show, you should provide a solution for the gap financing of your show. This makes your risk more important. The advantage of this model is that you retain the control of the creative aspect. You control the assets if the show became a success.
The strategy will depend on the size and the track records of the production company. From a broadcasting point of view, the big difference between a pre-sales and a co-production model is the control on the final product. The broadcaster will enter in co-production to be sure that the show is precisely what he wants. He will control every step of production, from script to design and editing.

Which is the right balance between subsidy and market funds?

You do not have the best of both worlds. The more subsidies you get, the more you will get away from the market rules. I believe the shows must be driven by the markets, being pre-sales, video, merchandising… Pre-financing should come from the market at least for 2/3 of your budget. If the subsidies are higher that 1/3, there will be an impact on the quality or on the market value of the show. Subsidies are always conditioned upon spending money on certain Regions, on certain conditions and do restrict your creative freedom. The more regional it is, the more it restricts possibility of choosing your talents.

Is the realm of Free TV over?

The market is very much changing nowadays. Until 5 years ago, putting together financing for an animation show was pretty much gaining two or three different major free TV from different territories. It was in a certain degree the realm of co-production and compromise. Nowadays the “village” becomes more global and the market and the shows are influenced by the 4 global networks, Disney, Cartoon Network, Nickelodeon and Jetrix.
Producers still need the money from the free TV, although the broadcasters are less compatible between them. In the UK for example there is no way to produce a show both with BBC and with Nickelodeon.

How do you build your budget?

You do not build a business model from a budget. You build a budget from a business model.
There is no relation between big budgets and ratings. Generally you need a big budget to produce a programme with an international appeal. When is comes to short or medium term and domestic market, there is no need to spend too much money.

What would be your ideal financing scheme?

Subsidy should count for 30% of the budget. It might be a combination of tax credits and soft loans.
A commissioning from free TV of about 25%.
A pan European deal of about 20%, 25%.
Various pre-sales or gap financing to retain the assets of 20%.
What about adult series and adult animation?

There are only exceptions in adult series. There are no rules, no models or routines to follow. Adult means prime time and animation in prime time is incredibly risky. First you loose all female audience. Women are not interested in animation.
The big mistake in adult animation is that producers think that animation should be trash, vulgar and provocative. If you want to go prime time, there is no way you can produce a show with these elements. If you want to go for adults, you better go for some federative audience.

What will be the market for Internet and mobile phones?

Internet is just a complementary medium. It is not essential to the show itself, Internet brings another way to expose your show. If you are talking about specific programmes created for Internet or mobile phone, you are talking about exclusivity. The big money is linked to exclusivity. Otherwise there is only a share of revenues. When it comes to specific shows that are made for mobile phones or for Internet, and there is a sort of exclusivity, in some years there will be a significant market.

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