In today’s media-rich environment, content creators have more distribution options than ever before. Traditional media outlets in TV, radio and print have expanded their digital content offerings, and the rise of streaming platforms, from household names like Disney+ to niche services like MagellanTV, CrunchyRoll, and Shudder, have created a huge and growing demand for original content.
However, this media explosion – driven by changing consumer behavior, including a craving for personalized, on-demand content – comes as costs are rising and broadcasters are slashing budgets. How can production companies stretch their resources, make more strategic decisions, and ensure their projects get the green light?
Production companies face financial challenges
Production companies currently face several operational and financial challenges. According to Broadcast Intelligence, a 26% decline in greenlit programming from 2022 to 2023 – in both the UK and US – could be due to factors such as the Writers Guild of America strikes, higher production costs, and declining ad-spend.
The company’s latest Broadcast Indie survey reveals that 90% of indies have experienced a significant impact from the UK slowdown, with nearly a quarter describing it as ‘dramatic.’ Rising production costs are a significant concern for smaller companies, with 99% stating it has been a problem for them over the past 12 months.
Balancing tight budgets while delivering premium content remains a challenge. Technology integration, such as the use of artificial intelligence to streamline time-consuming work like dubbing and subtitling, is becoming increasingly important for growth companies hoping to survive. However, this requires significant investment and expertise.
Global competition is also a major challenge. Streamers are increasingly focused on localized content, producing stories that appeal to specific audiences while also attracting global viewership as Squid Game did during the pandemic, for example. Disney+ and Paramount+ have set goals to commission 50 EMEA local-language projects and 150 originals across different markets, while Amazon Prime and Netflix are commissioning more in local markets or adapting formats to appeal to more local audiences.
Creators and producers are constantly innovating to differentiate their offerings and stand out in a crowded market, pushing platforms and distributors to invest in original content to attract and retain subscribers. Fierce competition also means chief financial officers (CFOs) are under high levels of pressure to increase business profitability, requiring detailed profit and cost analysis on a project-level to inform everything from resource allocation to future bids.
Opportunities to diversify and differentiate
In the current environment, companies can leverage their expertise to create content for a wide range of platforms and distribution channels, diversifying their revenue sources. The shift towards subscription and ad-supported content models has also created new revenue streams, with emerging technologies such as interactive content and virtual/augmented reality opening up additional monetization avenues. Moreover, with demand rising for niche and targeted content, production companies can become go-to providers for certain formats and specific genres.
The project-based nature of these companies allows them to be more agile and responsive to changing market trends, enabling them to quickly adapt and capitalize on new opportunities. However, this diversity of platforms also presents significant financial and operational challenges, such as the complexity of managing rights and royalties across multiple distribution channels, or the ability to quickly evaluate project performance on a deep and granular level in order to make the right decisions at the right time. Effective financial management, project planning and technology integration are critical for production companies to thrive.
The importance of a solid financial core
In this highly competitive and rapidly evolving landscape, a strong financial foundation is crucial for media and entertainment companies. A robust and advanced financial management system can help CFOs optimize back-end operations through automation. This not only eases day to day responsibilities through streamlined and accelerated reporting, for example, but also empowers CFOs to make data-driven choices that help to squeeze maximum value out of the IP and talent that sits within the business.
For example, the real-time financial snapshots and analytics enable executives to keep track of the financial performance of their IP, analyzing and comparing profit and performance between titles in order to identify opportunities for further monetization where needed. Profits and costs can be analyzed on an episode, season, or title basis, and projections can be checked against forecasts. Moreover, with audience insights available across content types, the company gains a better understanding into what channels and formats are working best for their titles and which may not be the best fit.
Strong financial procedures and controls also oversee royalties and rights management – which, in a world of multiple streaming and distribution platforms, can be extremely complex. Finally, a strong financial foundation improves a company’s ability to secure financing, which is crucial for funding content production, technology investments and strategic initiatives.
From a changing competitive landscape to budget constraints and new monetization avenues, challenges and opportunities are ever shifting in today’s dynamic media and entertainment industry. What matters is how swiftly and effectively companies react. By focusing on building a robust financial foundation, entertainment companies gain clear visibility into the bottom line, ultimately setting them on the right path to making faster and more informed decisions. With this new-found agility comes exciting opportunities to diversify revenue streams and quickly adapt to evolving customer demands or industry disruptions by leveraging new content formats and technology trends.
To learn more about the trends and challenges affecting media and entertainment companies, please download the whitepaper below.
