Episode 5 - Pact's Chief Executive John McVay OBE & Realscreen Publisher Claire Macdonald |...

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Telecast, the TV industry news review.

Hi, I'm Justin Crosby and welcome to this week's Telecast. On this week's show, John McVeigh OBE, chief executive of Pact, the UK's trade association for film, TV, animation, children's and digital production companies, joins me alongside Claire McDonald, VP of Brunico Communications and publisher of Realscreen. Peter White from Deadline updates us from LA as the lockdown eases in Hollywood, and K7 Media's Gertz Lesis brings us up to date on AVOD, TiVo, SVOD, everything VOD as he predicts a bloodbath in the market. It's all coming up on this week's Telecast. So my guests on this week's show are from opposite sides of the pond and are both hugely influential in enabling the production and distribution of TV shows internationally, particularly in the world's biggest TV market in the USA. So welcome to Telecast, Claire McDonald and John McVeigh.

How you doing? Good, thank you Justin. I'm great, Justin, thanks for having me on the show.

John, we'll start with you if we may. So you lead Pact, the organization that represents the interests of UK TV producers both domestically and internationally. Tell us about the current state of the TV production sector in the UK.

Well, like everywhere else, quiet at the moment. Normally this would be coming to peak activity, lots of shows starting up, both domestic and international, in the UK, but we're way short of that right now. Following the instructions from our government to socially distance, that impacted on production, which meant that many productions had to stop, be suspended, or indeed some places could close down completely. So the first wave of this was dealing with all that, and recently what we've been working more on is what's called the recovery, looking at how we get back into production, doing that safely, and addressing a lot of the issues that we face in terms of how we do that, how our businesses operate in the new world, but also that means in terms of additional burdens on production costs, etc. So for the past 10 weeks, it's not really stopped in terms of our work, but a lot of our members have furloughed staff and are mostly focusing on R&D right now, which I think is the right thing to do. Obviously the UK TV production sector, much like any other production sector around the world, is made up of micro indies, like small one-man bands or two-man bands, and the industry really relies on freelancers as well.

But moving up to these super indies, who's been hardest hit, do you think?

Well, I think everyone's been hit. I mean, the UK lockdown happened literally before many shows got into production, so that was maybe serendipity, but I think everyone's faced loss of revenue, additional costs for locking down productions or suspending productions, obviously the emotional cost of following staff, all of that, let alone the cost of themselves having to leave their offices, work remotely. So I think when it comes to cost, there's a range of things; it's not just cash. Maybe if there's a two-person company who didn't have big premises, were working remotely anyway, it might have been a bit easier on them compared to someone where you've got several hundred people based in your London headquarters and you've got to manage all the processes of who's getting furloughed and who isn't. So I think it's not always about money; it's about a whole range of other burdens this has placed on how your business would normally operate. And of course the UK is one of the most efficient and productive TV markets in the world.

And we'll come on to talk in a little while, I think, about restarting production and how that's going forward and what your role has been in aiding that. Before we do that, you recently secured a landmark agreement for UK indies with the BBC. Can you tell us a little bit about that?

Yes, well this was a very protracted negotiation. Basically, the BBC sought to provide more of the programs that it commissions from independent producers for free for the British license fee payer. That's the right response when you're facing a lot of the international exports seeing the UK as the second most important market outside the US. They've got a lot of competition, and of course as consumers we want to watch a box set; we don't want to be restricted. So it was quite right in terms of their intention and their analysis. The only problem was they didn't want to pay for any of that. Given how we finance in the UK, where we deficit finance, we package up secondary rights, we sell them into different parts of the market both domestically and internationally, and then we use that to finance the shows we make for the BBC. So our worry was if we didn't get compensated for that enhanced use, and that meant that we couldn't raise the same money in the secondary markets, then we wouldn't be able to close the finance or make the shows to the quality we need to make not just domestically but clearly internationally. So to say we were at loggerheads on this issue would be putting it mildly. So it's been a very long negotiation. When you think it only covers one clause in the entire commissioning agreement, and normally we can do a whole commissioning agreement in about six months, this took over 18 months to get resolved. And we managed to come up with a new structure where the BBC does pay for that additional use and they compensate for producers both by cash but also by their license period reducing. The more packages they pick up, the less they get overall. So it's basically about a use package. So if they use it more, the time they have to use it decreases. And we also reset their share of our net revenues, so they reduce their share, which makes us quite attractive for deficit financing because if I go to a distributor now, there's less payaways to other parties including the BBC. And we hope the structure will be put in place. Of course with COVID, we've yet to see how the world's going to look, but we hope that the structure will not only compensate producers for more use of the programs but also make sure that independent British producers remain attractive for third-party financing as well.

Whether the UK terms of trade has really been a model for many other countries around the world, and Pact has been a key player in securing that, so it's great to hear that this new agreement with the BBC has been finalized just actually before COVID hit, or actually in the opening weeks of the current crisis. So it's great that that has been agreed. There's so many other things that everybody's got to focus on now in terms of getting the business started again, and that brings us to your first story, which is about production starting back with new pan-industry guidance.

Yes, well this was really led quite rightly by our major broadcasters, because the commissioning producers are used to complying with editorial compliance issues, health and safety issues, diversity issues for our British commissioners. But the good thing about this one was the broadcasters involved us in the development of this guidance, so that gave us an opportunity to involve many of our members, for us to get a chance to look at the draft guidance before it got approved by government, to feedback on that. And ultimately it's high-level guidance; it basically says here are the public health principles which are effectively health and safety issues. And of course everyone in production anywhere in the world has to work with health and safety. If we're going to crash a car in the middle of Cardiff High Street, we have to make sure we're working safely, and as an industry we have very high standards for health and safety. But of course with COVID and the requirements placed on us for physical distancing (I don't like using the word social distancing; we're meant to be physically distant, but it doesn't say we have to be distant from our fellow human beings), the requirements are basically placed by government and the guidance complies with what the government requires currently. Of course we hope over the medium to longer term that will change. And the guidance is very high-level, so as a producer you will basically look at this guidance and then it's your responsibility to work out how do I create the production protocol for me to make this show underpinned with this guidance. So it's not prescriptive: 'Thou shalt do it this way, thou can't do it that way.' In terms of different genres, each production is unique. If you think about the issues around a drama that's all studio-based, versus someone doing a fixed-rig shoot in a hospital, they're very different environments, very different challenges. So what we didn't want was guidance that was too prescriptive, which prevented us from innovating, from working out the best editorial way to tell the stories, from working with directors to come up with a new way to shoot something. And I think that's good, and it gives everyone — crew, producers, presenters — it gives everyone hopefully more confidence that as an industry we take this very seriously and we can get everyone back to work as soon as we can, and get them back to working away where they're safe, healthy, and people can start earning again. I want to get as many people off furlough and back to work as possible. All producers want that for our creative industry. Sitting around not being creative is very hard. I mean, maybe if you worked on an assembly line for a car manufacturer, being furloughed for several months might not be too bad, but for creative people, it's a suffocation, as much as a job, it's a really difficult thing. So I don't think there's a magic bullet, I don't think it was a big switch where production is rapidly going to ramp up; I think it's going to take a bit of time.

Well, it's obviously been a real joint effort from key players in the industry to get this through in a fairly short order. I guess the first question I've got is: will it mean more cost? Does it mean a production is more expensive now, and are the broadcasters and the commissioners prepared to pay that? Has everybody bought into the fact that it's going to be more expensive and the buyers are happy to pay that?

Well, they're the burning questions. I mean, we've applied some analysis to a budget pre-COVID and then if you had to shoot it now utilizing the requirements, you're looking at anywhere between a 10 and 20% uplift. But of course now we are in a world of COVID and we have to adapt accordingly. What can we do to mitigate some of those costs? So can we film it a different way? I mean, the idea that you're doing multi-location foreign vacations right now is probably not on, so you may not be able to make it the way you did before. So are you going to use green screen? Are you going to reimagine how to do that? So there will be an increased cost; it's not going to be a hard number for everything. But clearly where the increased cost of complying to make something damages our producer's margin or makes it untenable, then the financiers, i.e. the British broadcasters, will have to cover that if they want programming. Because one of the other big problems we think we face in the UK is the potential for an asymmetrical recovery, because currently all the big platforms will self-insure, underwrite the costs, and probably underwrite the additional costs of working with guidance, which makes them really attractive for British producers. I really don't want that. I want to see the whole audio-visual economy recovering, which includes our domestic PSBs, and making sure that small factual programs are viable with some of the stories that we need to tell about our experience. We'll probably factual as much as they are scripted, and I think it's important we get back to our range of programming that we can make safely and at a price which makes it viable.

Obviously we're talking specifically about the UK industry and UK producers. Have you any insight into what different countries' production communities are doing? Are they approaching this in a similar way, or have you had any discussions with any of your counterparts in other territories?

Most of the other territories are also competitors to us, so we're not sharing our thinking and they're not really sharing this. Clearly there are territories which have moved quite fast. France in particular have already introduced underwriting for production insurance for their scripted sector. Australia's looking at something, Canada is looking at something, America is looking at a bigger insurance underwriting scheme much like we are in the UK. Everyone, no one can get commercial insurance for pandemic-related and business disruption, so every country is going to have to do something. Those who get out the blocks quicker in terms of offering their domestic sector cover for either enhanced public support or public production insurance clearly are looking to steal a march, and we can't help that. The UK is a very competitive market; it's been a hard-fought place to be one of the world's leading audio-visual economies. And I'm certainly making a lot of representations to government that one of the consequences of the COVID pandemic shouldn't be to damage one of the most successful parts of our creative economy.

Yeah, absolutely. And that's obviously a long and hard-fought battle that Pact and UK producers have been having, so much success over the years. And it's obviously something we want to see get back to where it was as soon as possible. I mean, we saw recently Channel 4 has announced huge restrictions on their commissioning budgets, and so we're talking about production budgets naturally going to be higher, commissioning budgets getting lower. At the end of the day, the producers in the middle have got to make it work. They've got to solve these problems themselves. How are they going to do it?

Well, as I say, there'll be some ways of saving money. But the important thing is, you know, if Channel 4 doesn't have the same sort of money, ITV doesn't have the same sort of money, we've got to change their editorial specifications. You can't get the same for less, particularly if there is a burden from complying with the safe working. So that's going to have to be very careful discussions around what are they getting for their money. And if they're paying less, somehow there'll be less going on screen one way or another. Because what we can't have is producers' already thin margins effectively being destroyed, as you mentioned earlier. The terms of trade were significant because they gave producers back ends, they gave them a share of revenue from IP, and for many of our companies that's what's keeping them going. You know, production margins in the UK were already way too thin. It's a very competitive market, people compete on price and quality and creativity. But you can't end up with a situation where that competition for ideas is at the price of a business. That's not a good result for broadcasters, it's not good for the overall market. We want people to enter this market, to build businesses, to make great programs both domestically and internationally. That's good for everyone. So I think it's a very pertinent question. But certainly we've already had conversations with Channel 4 making clear that you will have to adjust your editorial ambitions if you don't have the money, because anything other than that will be completely unreasonable.

Yeah, yeah. So Claire, welcome to the show. Thanks for joining us. How things going over in Toronto and what's the latest goings on at Brunico and Realscreen?

So Realscreen is obviously a really well-known brand within the factual TV industry for your publications but also for your events, the summit obviously that happens at the end of January every year, and Realscreen West. Now Realscreen West isn't happening this year, right, and you've launched a new virtual event.

All right, well we look forward to seeing that when it comes around. And there's a lot of familiar elements of the usual Realscreen events that you've incorporated into Realscreen Life.

All right, fantastic. Well, that sounds great. Well, wishing you all the very best with that. Obviously the virtual event has become an industry norm now over the course of the last two months, so who knows, maybe these virtual events may become part of the new normal of the TV events business going forward. We may see a mix of virtual and real-world events going forward.

All right, okay, well let's keep our fingers crossed that as many of our real-world events happen as well. So on to your first story of the week: you've highlighted HGTV ordering its first self-shot show as your first story. Tell us a little bit about that.

We will. And actually on last week's show, we were also talking about the golden age of unscripted. This could be the real opportunity for unscripted to pick up on the slack that drama production is going to bring about, particularly international drama production is going to be delayed for however long. So production companies and broadcasters that are agile and creative can really respond to this and take advantage.

No, absolutely. And let's hope we can all come together in New Orleans in January and talk about that, reflect on it, and see what it means for the next year of production. So John, your second story centers on production insurance. We touched on it a little bit earlier. What are the issues around production insurance and why is it such a roadblock to productions going forwards? Can you just talk us through the current issues and challenges?

Sure. Yes. I mean currently there's something like 500 claims going through insurance brokers right now for productions which were suspended or abandoned when the lockdown happened. And there is a long-running narrative in the British press about the theory of some very large commercial insurance companies weaseling out of various clauses where businesses thought they were covered for a pandemic or business interruption clause, and it turns out 'read the small print' or 'we didn't quite mean that.' So this is a really risky thing. If you're a Warner Bros, Netflix, you will largely self-insure your productions because the excesses you have for your global cover are so huge that you can go into production and if there's something called lockdown, it'll probably be painful but you'll be able to cover that. If you're a small British indie, and you go into production now, you cannot get cover for any pandemic-related lockdown, suspensions, or disruption to your production. And of course that's how we've always insured ourselves: we have a lead actor who takes ill and we have to suspend production until they recover, then we carry on filming. That would be covered by insurance. Not now it wouldn't be. So who's going to take on that risk? The broadcasters aren't going to underwrite that, or if they are, they will want so much control over the production that why would you be an independent producer? It might as well just be in-house production. So for independent producers who are small businesses and insure by production, we can't see how we can actually step out the door, even with safer working practices, if the government were to call another lockdown which wouldn't be in our control. We could be doing everything perfectly well, everyone could be healthy, but the government instructs us to lock down. No one will offer commercial insurance for that right now. So this is a major problem not just for our sector but for the entire UK economy. Governments intervene in areas where you can't get commercial insurance typically for terrorism, which is called Terrorism Re, or for flooding, which is called Flood Re. What's been talked about now between government and the commercial insurers is something called Pandemic Re, but that's going to take months to get developed and agreed because the size of the pot the government on the right will be astronomical compared to something for localized flooding or a terrorism attack. So for us as a sector, we're working up proposals to government to effectively act as a guarantor for any subsequent suspension costs or abandonment costs. I've been working with really smart people across the industry both in insurance and in production to try and develop a proposal we can take together to government. If we can get that through, we can start working, we can start taking people off furlough, we can get freelancers back to work so they're not on the taxpayer's payroll, and we can start getting insurance for the domestic broadcasters, getting IP back into the pipeline for exports, and start rebuilding our economy.

I find it, you know, I mean some people may find a way to do shared risk where they get financials to share in the risks, but I always worry under those non-legally binding ways of working that the producer is always going to take the hit. And that could mean you losing your business if there was a lockdown and you're suddenly liable for several hundred thousand pounds of costs. That's quite a sobering thought when you're thinking about stacked production. If something were to go wrong not because you've done anything wrong, that you would be liable for that. And that's going to be a big drag on the UK recovery if we don't get it right, because then all the US platforms will move quicker because they'll be able to not only cover the cost of the COVID costs but also cover the cost of the insurance issues, so they'll move quicker and get back into production.

Quicker which is fine but I'm not complaining about that. We can't see an asymmetrical recovery in the UK. The domestic sector has got to be able to compete and recover as quickly as inward investment. Yeah, you mentioned France being one of the first countries to start to resume production. How have they dealt with the insurance issue over there? They're basically getting a government guarantee for suspension and abandonment, right?

Right, okay. Well, this is a huge issue and presumably until this is fixed in the UK, as you said, nobody can really step out the door and make a TV program.

So it's really all about building that business confidence and removing the roadblocks to that recovery. Well, good luck with all of that, John, that's obviously fantastic work that you guys are doing. I'll come back on and let you know if we're successful.

Absolutely, I'll be on the phone or another Zoom. I won't let you forget that promise.

Okay, so Claire, your second story is around Leonardo DiCaprio producing a feature doc. Tell us about that.

No, absolutely. I think that obviously the scripted industry is going to be on hold for a little bit longer than unscripted, so perhaps we might see more and more of these passion projects from really well-known Hollywood actors who want to tell unscripted stories. So that's really interesting. Well, we'll keep our eyes out for more of those.

So now it's time for Hero of the Week. This week, John, you're going to go first. Who's the person that has inspired you, or something personal that gets your accolade of Hero of the Week?

Hero of the Week? Good weather. Ah, excellent sunshine and lockdown is way better than rain in lockdown. During this past 10 weeks we've had maybe one week where it rained the whole week, and that was way more stressful for everyone. But a little bit of sunshine, a little bit of hope, a little bit of outdoors. So I would say good weather is a big hero during lockdown.

You're absolutely right. I've said that myself to many people — if this were the normal London springtime weather, it would be a much more miserable place. But we've been blessed by the weather gods. At least, Claire, who's your Hero of the Week?

Absolutely. I think we can all support that very much. And for those who want to know more about the foundation, there's a link in the podcast description to the foundation website, so please go and check it out.

To find out who or what you're going to be telling to get in the bin...

Well, permanently in the bin — there's many ups to the situation. I don't have the commute that I generally have, I don't spend a whole ton of money on gas, I don't have to pay for parking. But I really really miss the camaraderie of being in an office with my colleagues. It's one of those situations where the grass is always greener. Yeah.

Absolutely. I think that's something we're hearing from a lot of people on the show. You take it for granted — the amazing people you work with in a personal capacity in an office, even the guy you pass in the store every day or go for your morning coffee. All these regular things you don't think twice about, you realize how important that human connection is. When we're all forced into lockdown, it brings that home. So I think I'm with you on that one — it can get in my bin as well.

All right, Claire, fantastic. Thank you so much for being on the show this week. Really appreciate your time. I'm sure you're incredibly busy at the moment. Thanks again for coming on, and we look forward to seeing you soon.

So John, coming back to you: who or what are you throwing in the bin this week?

I seek the home office migration consultation. I think it's badly timed and it's not consistent with public sentiment right now. I mean, we will end up with something that'll control the British borders better — that is our manifesto undertaking and I respect the government's commitment to do that, that's what they're elected to do. And I'm a Democrat. However, in terms of timing, and particularly the impact on carers or health workers going forward, I think it's a crass moment to open up that consultation and look to do anything which wouldn't be chiming with the sentiment of the British population, which is by and large seeing these people as heroes, not migrants. So I despair at that. I hoped that this brutal experience for everyone might have brought a bit more political wisdom and insight.

Yeah, it's almost a weekly thing when we start to talk about how governments are handling communication issues mainly around these various issues. And you're right, the timing of that... I've got another minute. Okay, this is the first ever double bin.

So I've got a double burn. The double bin is still there.

Ah yes, what does that mean?

That's our ideology, not a practical instruction.

No, no, exactly. Brilliant. Okay, John, thanks so much for your time. It's obviously a busy time for you at the moment, in the middle of negotiations to get the wheels of the UK production industry going again. Thanks again for taking the time on the show. We'll no doubt see you in person hopefully soon. Andrew, take care. Thanks a lot, best machine.

So it's that time in the show where we head over to Hollywood and chat with Deadline's Peter White. Hi Peter, how are you?

Hi Justin, I'm good, I'm good. Are you? Yeah, very good. The lockdown's easing, I hear, in L.A. Yeah, we're all heading to the beach. Well, that's certainly the plan at least. And it's still the upfronts, or the upfronts that aren't up front I suppose. But I hear there's some news from CBS.

You're right, quote-unquote upfronts. We would have been in New York in May to talk about all of this, but now they're stretching them out for a couple of weeks. Yeah, CBS was this week, a big statement in terms of their full schedule. Or as Kelly, their chief programming guy, called it, quote-unquote 'for depending on when they can launch the number of these shows.' So they announced some new things: The Equalizer with Queen Latifah, a new Chuck Lorre comedy called 'Be Positive,' and something for mid-season, a Silence of the Lambs sequel 'Clarice.' But what's interesting is there's no set return for production yet. They're sticking these shows into the full schedule, which might mean shorter runs or things produced closer to TX. That seems to be the idea. They're trying to plough ahead with new shows at least. In any other year, this schedule would have been considered quite conservative, but this year it feels different, a little bit risky because there's no real sight as to when these shows will go up and running.

Yeah, it's a bit of a gamble. They could find out something completely different from what they've published right now. They've got a few options. Kelly was keen to stress that they have stuff in the pipeline. They're owned by ViacomCBS now, so whether that's taking some stuff from its cable channels to fill holes — there's a second season of 'Blood & Treasure' that could slot in. But they're banking on these being ready. They have a few months to figure it out.

What else did we learn from the CBS upfront? There was a lot of talk about whether reality shows like Love Island and Big Brother can air this summer. They're still optimistic that they can turn around quickly. Survivor and The Amazing Race are different cases given they shoot internationally, but it raises a question about what CBS is going to do with reality. Sharon Vuong left for NBC earlier this month. Kelly said they're reevaluating that role, whether it means bringing in a new external candidate or changing the function completely. CBS does slightly less reality than other networks, but it's an area where international producers do good business with the American networks — things like 'Undercover Boss' from Studio Lambert. So they're having a think, which will have ramification internationally.

Yeah, and I'm sure in the short term there's going to be a bit of a rush on unscripted while scripted production slows down. It looks like Apple has started to make some big content plays. Apple launched a few months ago and we haven't heard too much since 'The Morning Show,' but this week felt really interesting. They did one massive movie deal, buying the rights to a Tom Hanks film called 'Greyhound' for about $70 million, a World War II battleship drama that was going to be released theatrically. They also bought a blue-chip doc series from the guys behind 'The Millionaires.' That one's about a government scam. They've got Sofia Coppola making 'Edith Wharton's The Custom of the Country.' They did a first-look deal with Ridley Scott's Scott Free Productions. All in the last week or two. It feels like they're moving into stage two. That'll be interesting to see if they can keep up momentum. They put out a tiny sense of data — 'Defending Jacob' looked like it was the second biggest show after 'The Morning Show.' Apple doesn't send out ratings, but that fact is interesting. 'The Beastie Boys Doc' was number one in my house, but it does feel like Apple is gearing up.

A business like Apple, cash rich in these times, there'll be opportunities coming their way both in content and companies. I see Steve Coogan has a classic reboot in development.

I love this story. I was doing an interview with the guys behind 'Snowpiercer,' a company called Tomorrow Studios. They mentioned that Steve Coogan and Hart Hanson, the creator of 'Bones,' are going to write a new adaptation of 'The Persuaders.' Coogan is admired for that. There was talk a few years ago he was going to star in it with Ben Stiller, but now it looks like he's going to write an American TV version. That'll be fascinating. The original with Roger Moore and Tony Curtis — perfect for co-production between Britain and America, working for a shady billionaire. Steve Coogan coming off the back of 'The Trip' and Hart Hanson hasn't done anything since 'Bones.' We'll watch that one.

Definitely. Any opportunity to hear Steve Coogan's Roger Moore impression again — I'm a big fan. Exactly, Peter, thanks as ever for your time this week. Stay safe in L.A., enjoy the loosening of lockdown, and we look forward to catching up with you next week.

Thanks, Justin, see you then.

So it's that time in the show when we get to join K7 Media's Giles Leases. This week we're discussing SVOD, AVOD, TVOD, everything VOD. Obviously a time of huge disruption within broadcasting and digital. We had Olivier Gurl from Pluto TV on last week's show — it was really interesting to hear about the AVOD model that Pluto is having success with. Which models are going to work? SVOD, AVOD, TVOD?

That's a great question, Justin. It's such a paradox with all the doom and gloom many businesses are experiencing that we continue to witness a new streamer with major ambitions launching literally every month. With HBO Max next week and Peacock in mid-July, the overall feeling is almost like they're panicking to miss out on what they all believe is this super attractive streaming space, which is so far lacking what each of these contenders believes is their unique offering. Well, bless them. But when it comes to different business models, subscription-based streamers may sound like bulletproof frontrunners from impressive stats throughout the pandemic — growing subscribers and streaming hours, and forecasts of SVOD revenue growth globally by more than 80% in five years, with some markets like the UK projected to double revenues. We also hear about TVOD, transactional services, as a possible threat to movie theaters as they have gained attraction during lockdown. But what surprises me most is that no one is really talking about ad-supported VOD services, which at the beginning of this year sounded like everyone's favorite in terms of growth potential. I get that it's unpopular to back them when advertising is down, but I think it's unfair. With all this hype around SVOD, it seems we are ignoring that there will come a moment when we feel the consequences of halting productions for months. People will gradually return to normal routines, with priorities shifting away from screens and streaming hours per subscriber likely decreasing. But most importantly, it will take time for households to hit the bottom economically, and that's when they will rethink whether they need three, four, or five subscriptions. People will make simple choices: any service can be labeled either 'must have' or 'nice to have.' Many of the 'nice to have' ones will suffer. 'Must have' is something that has reached utility status, as essential as water or electricity. Globally, that's Netflix. Look at social networks — people talk about staying home, having wine, and watching Netflix, just like 20 years ago they talked about going to the movies. Netflix is plain and simple. Disney is possibly the only other contender for similar status, because the brand is immensely strong. But Amazon is confusing — a supermarket trying to play high-end. Every other service will have its loyal fan base, but people won't care about 10,000 more hours of programming. There will be a bloodbath sooner or later. That's the price for taking so long to adapt to the new digital reality. When it comes to budget cuts, ad-supported VODs are more likely to stay untouched. So answering your question about the safest VOD business model in the short to medium term — a mixed tier service with a basic free ad-supported offering and a premium subscription or pay-per-view on top is the safest bet.

So it sounds like you're slightly advocating AVOD over the other services?

That's true. I really see the mid- to long-term future of AVOD as very bright. First, we are used to looking at streaming from a Western point of view, but markets like Central Europe or Russia don't have a tradition of paying for TV. Many people grew up watching everything for free. That's why piracy is high there — it's a protest against something that feels strange. Similar in many Asian markets where purchasing power is low. Subscription services see the business opportunity there because of scale, but average revenue per user is very low. And consumers naturally go for free services. IFix for example reported doubling consumption within five months of adding their AVOD tier. Also in developed markets, research shows tolerance towards advertising is returning, especially among younger people who grew up with ad-supported YouTube. But we're talking about individualized, smart advertising, not long commercial breaks. Another factor: advertising usually bounces back faster than purchasing power. While households still make tough cutbacks, brands will have to start spending again as every crisis is an opportunity. They'll need to be seen and heard. Even bleeding brands will have to invest in marketing to avoid losing market share. At that point, AVOD might be in a stronger position than traditional television because it can more accurately quantify audiences through data, creating better ROI and accountability for advertisers.

So AVOD's future looks bright. Do you see any other VOD strategies emerging or additional opportunities?

One interesting trend is growing clusters around specific languages rather than regions. For example, Shahid, a Middle Eastern streamer with ambitions to be a leading service for Arabic content, or a Chinese-language short-form original programming streamer that just launched targeting young urban professionals in Singapore, Malaysia, Taiwan, and Hong Kong. Discovery is working with a Polish partner to launch a service offering Polish programming, including originals, not only in Poland but internationally. Another aspect of video consumption that lockdown has highlighted as underserved is human connection. Viewers expect a sense of community with social features to keep them interested and encourage in-app spending.

That's really interesting. What sort of timeline for a bloodbath among these VOD services? When do you see it really starting to kick in?

A lot depends on how long this current period lasts. I would give a two to four year lifespan for some of the streamers.

Well, it's going to be really interesting to watch. There are going to be many changes in the traditional linear broadcasting landscape as well. So fascinating to watch. Let's keep our eye on AVOD and TVOD and anti-VOD. All right, thanks Giles ever so much for joining us, and we look forward to catching up with you next week.

Absolutely, take care.

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