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Calculus Capital | how streaming revolutionised screen industry finance


In 2013, Netflix decided to take a punt on a remake of a forgotten nineties BBC political drama as its first piece of original, premium content. One television journalist described the decision as “probably the biggest gamble in its 14-year history”.


The gamble paid off. House of Cards won Emmy and Golden Globe awards and was a hit with viewers, boosting monthly subscriptions and, crucially, improving retention. There was now a reason for viewers to stick around after devouring all of the licenced content and using up their free trials. Netflix had original content worth paying for.

It was the strongest possible confirmation to company executives that producing original content – both television and film – would be the core of the firm’s future strategy.

In the six years since, Netflix has gone from rivalling Blockbuster video rentals to a well-oiled content mass production line, with pockets as deep as the largest filmstudios. Take Martin Scorsese’s upcoming mob movie The Irishman, produced for Netflix. The film has budget of $200m – easily ranking it among the most expensive movies ever made.

Of the company’s $13bn content budget, 85% of it went towards original content last year. The strategy has certainly been good for the share price: since 2013 its market capitalisation has surged from $5.7bn to $151bn.

Competitors, both in streaming and in traditional TV and film, are flushing the market with cash in a battle for viewers. Amazon Prime is expected to spend in the region of $6bn on original content this year. It will spend $250m of that on just one show, its spin-off ‘Lord of the Rings’ series.

Hot off the success of historical drama Chernobyl, Sky announced its plans to double investment in original programming to £1bn a year. And it is no coincidence that the recent final season of Game of Thrones, flagship series of ‘conventional’ US network HBO, was the most expensive ever made. Viewers are willing to pay, but they expect nothing less than the highest-quality production values.

Others are joining the market such as Apple TV+ and Disney+ the BBC and ITV are launching a collaborative effort, while AT&T-owned WarnerMedia, Viacom, Quibi, Vudu and even Snapchat are moving, or have already moved, to streaming original content as well.

All of this effort is going towards meeting the seemingly insatiable audience demand for more content. In July of last year the total number of UK subscribers to the three most popular online streaming services in the UK – Netflix, Amazon and Sky’s Now TV – surpassed the number of subscribers to paid-TV packages, with 15.4m compared to 15.1m. And that is despite the fact that many paid TV services in the UK are seeing subscriptions go up too, albeit at a slower rate.

What is extraordinary is that much of the content on Netflix, Amazon and to a lesser extent Now TV is inaccessible for those with paid-TV packages. Viewers are not simply substituting one for the other, they are supplementing.

Some of the new entrants – particularly Warner Bros and Disney who own vast back catalogues – will almost certainly look to flex their licencing muscles and tie their intellectual property to their own streaming services in the future. The result will likely be less licenced content on the likes of Netflix and Amazon Prime, intensifying the urgency for them to create their own original content.

The result of all these converging pressures has been far more premium content with high production values being greenlit to hit our screens. Bigger budgets, both in terms of the number of programmes commissioned and in terms of the money available for making them, have become the norm.

Producers and writers have arguably never had a greater chance of seeing their projects brought to screens, and they have a larger pool of suitors with deeper pockets vying for their intellectual property than ever before.

While consumers may be willing to part with more of their income for premium content, they also have to part with their time. Given that the average Briton already spends about 10 years of their life watching television, where are we finding the time to watch more?

The answer lies in your pocket. Phones, tablets, laptops, even work computers. In the time it takes to unlock a phone, a person can go from sitting on a bus or a train to resuming iPlayer or Netflix on their mobile device. Time that was once latent has been burst open with the accessibility of media platforms. Someone with a 30-minute train commute can watch a whole hour of extra TV with zero change to their schedule every single day. That could easily mean watching a new series every fortnight, with so many now uploaded in full ‘bingeable’ form.

Also fascinating is the fact that despite some fears in the film community that streaming could replace cinemagoing, UK box office receipts reached £1.27bn last year, the second-highest take on record. The Irishman even looks set for a box office run prior to its release on Netflix, hinting that the interests of streaming platforms and cinema could well coalesce in a way beneficial to both.

Audiences have never been more eager to watch, and networks and distributors have never been more willing to spend. Streaming services have revolutionised the way we watch content. Now they are revolutionising its production, and by extension, its funding.

Calculus Capital’s new fund, the UK Creative Content EIS Fund, is designed to deliver independent equity finance to screen content companies here that are well placed to capitalise on this amazing opportunity.


Click here for more information on Calculus Capital

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