copywritten for Sohonet
Chuck Parker, CEO, Sohonet – looks ahead to 2021 and
the top trends the Film, TV and Ad industry should expect to see. Blog 1 in
this series zones in on the continued investment in episodic content, and how
C19 has given virtual production a material boost in financial viability.
Content has always been king but it has never been more important to own a larger, higher quality and exclusive library than your competitors than it is this year. As content providers have doubled down on direct to consumer strategies, it is episodic content that continues to surge in volume. In contrast to single features, episodic productions provide a sustained wave of fresh content with which to engage subscribers for longer, generating higher perceived subscriber value.
Market leader Netflix, which ended 2020 with over 195
million paid customers worldwide, spent $17.3 billion on content last year –
two and a half times more than Amazon Studios. By 2028, analyst BMO Capital
Markets predicts Netflix will spend $26 billion per year on content. Amazon and
Netflix have to spend considerably more on originals than rivals, in part
because companies like Disney, NBCUniversal, CBSViacom and Warner Media Group
have deep content catalogues they can pull from to enrich their services.
Nonetheless, Disney+ and HBO Max have also unveiled huge investments at their
investor days in their episodic slates building on franchises from Marvel, Star
Wars, Pixar and DC.
In early 2020, there were analyst concerns that the lengthy
lull in content production would negatively affect streaming business models in
2021. Netflix, however, said it still expects to launch more originals in each
quarter of 2021 than in 2020. And with 73% of its subscribers coming from North
America, Netflix has to pursue growth overseas with local content commissioned
to attract customers in territories like India, Brazil and Spain.
As a result, the 2015 industry average of 1,400 annual TV
and film productions (with material budgets) will soar well beyond 2,000 a year
as competition intensifies. Even at such stratospheric multi-billion content
budgets, each provider is aiming to strip costs out of production and still
retain top tier value on screen. In parallel, the biggest challenge beyond the
health and safety constraints of the pandemic are the real estate constraints
created by the surge in volume of productions, which is driving more and more
productions to shoot their content “off-lot” in empty warehouses and other
large structures.
Virtual production offers an answer
Combining live-action footage with computer graphics in real
time was still relatively nascent for TV and film production when Covid-19
crashed into our industry, but the key benefit of reducing the need to travel
for on location shooting has given virtual production a material boost in
financial viability. While the pandemic persists, virtual stages are both a
means to continue production safely and to reduce the cost of on location work
(ie associated travel and accommodation costs). If the practical effects
delivered via virtual production can reduce the overall VFX budget for
productions as promised, then this trend will accelerate rapidly.
The upfront capital cost of the technology remains expensive
and the techniques are not yet embedded throughout the workflow, so expect
growth to be gradual in 2021. When LucasFilm and Disney made The
Mandalorian Season 1, each 40-minute episode reportedly cost $15m – the
same as the per-episode budget of Game of Thrones’ finale. From their
investor day, we learned that Disney’s long-term goal in pioneering virtual
production at scale is to produce episodic series with all the production value
of its blockbuster features with a step order reduction in costs and a
faster turnaround.
The underlying technology, such as fine pixel-pitch LEDs and
hyper-performance graphics cards, will advance in performance and reduce in
price as the industry scales up (aided by Moore’s Law), making virtual
production more accessible. The surge of real estate investment for
purpose-built production studios will certainly give it a boost as well.
Directors and actors will gain creatively by being able to work in real-time
with CG assets on set. Practical effects – like miniature models and explosions
– will increasingly be done more efficiently in software on the virtual
production stage. Greater use of the techniques and technologies will lead to
better results and more streamlined production.
This has implications for the VFX industry and in particular
for the titans of the sector. We will see VFX houses rapidly pivot to offer
workflows and talent which marry virtual production with practical effects and
the specialist creation of creatures and digital humans. It is not a given that
those companies which were powerhouses prior to the pandemic will win this
work. The VFX sector has suffered disproportionately during the halting of
production; revenue streams were stunted; thousands of staff laid off. The
winners in the race to virtual production will be the businesses that can
perform at scale with the available capital to invest in the resources required
to support this industry pivot while re-invigorating their core VFX business.
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