In 2013, Walt Disney owned ESPN made over $6 billion in affiliate fees. Those fees were generated directly from broadcasters who purchased the rights to redistribute ESPN’s content. In the United Kingdom, household content subscription fees make up a huge 40% of the total earnings from all television broadcasts, with the remainder coming from advertising revenue and a mandatory fees paid to the government owned BBC. Similar models can be found throughout the world, where a clear trend is noticeable – content owners are the real winners in broadcasting, and stand to make millions with new models of distribution.
Free-to-air terrestrial broadcasts are on their way out. Subscription services that use cable, satellite, and IP technologies, have become the content platforms of choice for both broadcasters and consumers. The reasons are simple. Consumers have more control over what they pay for and what they want to watch, while broadcasters have the advantage of being able to distribute custom content packages and individual purchases, through services like PPV and online streaming. Behind the scenes, content rights owners are able to better leverage their assets by reaching more viewers who otherwise might not have been exposed to the content.
Digital distribution is a huge market, and one that is highly favorable for content owners. As a product, digital content is highly lucrative. Production costs are low, as are distribution costs. A producer can essentially create one digital copy, which is then mass produced on hardware, or transferred by IP technology. Cinemas are a great example of how content owners and studios have reduced their distribution costs, to maximize the profit that is made from their content. 35mm film has essentially been phased out, with the format only being utilized for specialty events or heritage content. Digital is now the standard in the three major film markets, the United Kingdom, the United States, and China. Films are distributed on encrypted and licensed USB pen drives, which are fundamentally no different to the consumer devices that are used by millions around the world. With streaming services like Hulu, Amazon, and Netflix, the savings are even higher, because content is distributed via secure IP networks, without the need for content owners to produce physical media. Consumers receive content faster and more conveniently, while everyone from content owners to broadcasters are able to reduce their cost overheads.
How does this translate to increased revenue and larger profits?
Content owners will need effective management when selling distribution rights. Platforms will need to be considered for their value and total consumer exposure. Content developers should leverage all of the platforms that are available to them, including cable and satellite subscription platforms, which are still valuable. However, it can easily be argued that total digital distribution is the future of content delivery. Broadcasting is no longer a static, programmed endeavor, and the content owners that recognize the importance of digital delivery will be those that profit the most from their rights in the coming decades.