M+E Connections

The entertainment industry’s supply chain is designed to execute repeatable processes, but scaling remains challenging, according to RSG Media and invenioLSI, an independent SAP consultancy and implementation partner for public sector and services organizations in the media and entertainment (M&E) and other sectors.

Between synchronizing all the data points across the value chain during the entire lifecycle, automating hundreds of business processes around the thousands of transactions and processing the millions of transactions generated by a greenlighted concept, M&E organizations need integrated and scalable systems, powered by machine learning, to enable the financial processes critical to their viability.

Pointing to their extensive experience in the M&E industry, invenioLSI and RSG Media say they can help M&E organizations optimize their processes and enable growth, visibility and insights.

“In the last five years, the entertainment industry has experienced more transformative change than in the last 20 years,” James Maysonet, VP of global media and entertainment at invenioLSI, said April 14 during the webinar “How to unlock the value of your content financial supply chain and streamline your production finance process.”

He pointed to the mergers between Disney and Fox, CBS and Viacom, and Warner and AT&T and, more recently, AT&T selling WarnerMedia to Discovery as examples of major M&E industry changes. The FTC also recently approved the Amazon acquisition of MGM, he added.

“To add to the pressure, there are streaming channels on every corner,” he said, pointing as examples to Amazon, Apple TV Plus, Disney Plus, HBO Plus, Hulu, Netflix, CBS All Access/Paramount Plus and YouTube TV.

“This is now the modern golden age” of intellectual property,” he said. “But I’m sure for those managing the content financial supply chain, it feels more like the age of confusion. Content financing is becoming the central topic of interest as the landscape changes to favor more streaming content while marginalizing exhibitors, cable and television models.”

However, he added, the question for many M&E companies is: “How do we manage the financial nuances of direct-to-streaming theatrical releases, television and home entertainment releases with the encroaching winds of change?”

“The entire process in the content financial chain is under severe pressure,” he said, quoting Schuyler Moore, a partner at law firm Greenberg Glusker. “The studio model is gone. Whoever controls distribution controls the keys to the kingdom. They get the money directly from the consumers and decides who else gets how much money and there’s a lot of discretion in the allocation.”

During the webinar, invenioLSI and RSG Media showed how organizations can leverage their technologies to overcome these challenges.

RSG’s Role

For more than 37 years, RSG Media has “worked with the world’s largest media and entertainment companies to build intelligent inventory management solutions,” according to Shiv Sehgal, EVP of audience analytics at RSG Media.

“We believe in using both … art and science to deliver radical insights and deeper connections to drive the evolution of the media ecosystem,” he said.

“We drive client revenue and profits through rights, audiences and advertising across platforms using deep analytics, artificial intelligence, enterprise systems and our expert advisory services. Our different platforms touch all elements of the content lifecycle. Our RSG rights platform manages the acquisition and exploitation of content rights.”

The financial components of the business include “acquisition finance, distribution finance, which also includes royalties participations, talent and guild payments and, of course, scheduling, both linear and non-linear,” he said.

RSG’s audience platform “helps grow the audiences for those acquired rights, both through innovative scheduling strategies and our optimized promo planning and scheduling platform,” he noted.

“Our advertising platform helps monetize that audience and our advisory service business ensures our clients have a partner to meet their needs of today and tomorrow,” he explained.

“Through our long history and experience, we’ve worked with many media and entertainment companies, starting with the cable and broadcast space, and moving from cable and broadcast to … sports leagues [and] also working with the MVPDs, working with our over-the-top and studio players, and we have quite an extensive working relationship across the media supply chain.”

The company’s “mission is to decode data for radical insights to drive content, audiences and revenue,” he told viewers.

How do M&E companies measure the return on their content investment? “The calculus is not too complicated assuming you have the data,” Sehgal said.

“To exploit content and make a profit on linear and even ad-supported platforms, the return and ad revenue should be greater than the cost to produce,” he explained. “To exploit content on subscription platforms using behavioral insights, the goal is to grow the overall subscriber base.”

RSG uses “proprietary behavioral insights to identify which content has the potential to attract new subscribers and also simultaneously minimize churn,” he said.

“We then look at the financials to see if we are getting a net positive from linear,” transactional video on demand (TVOD), advertising-based video on demand (AVOD), subscription video on demand (SVOD) “across every platform and also including some other revenue streams and … something where we are unique at RSG, including merchandising licensing revenue streams,” he told viewers.

Focusing on SVOD specifically, he said: “Right now, everyone is launching streaming services. Media companies are pouring billions of dollars into these services. Not only are they putting all their linear content up on the streamers. They’re doubling down, spending huge sums on original content.”

“Let’s just take WandaVision” as an example, he said. “WandaVision costs $25 million per episode – double the cost of a Game of Thrones episode. There are movies that cost less than that.”

“This last year, Disney, Warner, Discovery, NBC Universal, Paramount Global all spent fortunes – a combined $80.5 billion – on content, which if you compare that with the national GDPs would make them the 65^th largest country, right behind Sri Lanka,” he said. “But the thing is, these SVOD platforms are losing money” although the companies “still make plenty from linear television.”

That brings us back to Maysonet’s point about distribution. “From where we sit, it’s the customer that holds the keys to the kingdom. They get to say what they want and how they want it, and our combined jobs is to make sure we deliver to them profitably and also support the operations simply,” Sehgal said.

“In this golden age of content comes the golden opportunity for unique windowing strategies,” Sehgal noted. “It seems most media companies have a shotgun approach to monetizing their newly minted expensive programming. And streaming now is accounting for over half – 51.5 percent – of all original series in the U.S., a monumental jump from the 12.9 percent in 2016.”

Although the monetization opportunities are “moving towards non-traditional platforms, what’s clear is we don’t know what’s going to work,” he said. “So we take a more is more approach. When I recently spoke with a major studio executive, he was very clear that in this golden age of content, the industry lacks the tools to develop an asset-level monetization strategy – quite simply, a unique monetization plan for each and every individual asset.”

As a result, “this, I believe, is the moment for finance to be a hero, and combining RSG and invenioLSI’s toolsets is positioned to do more with less,” offering a “timely content financial solution,” he added.

Content Financials

InvenioLSI developed Content Financials on SAP technology. “It’s designed specially to manage the processes from green light through amortization,” Maysonet said.

“The demand for content has increased exponentially for streaming, episodic and theatrical content,” he said, explaining: “Consumers have become more accustomed to home streaming but demand is up across all of the models and it’s made the green light budgeting process more complicated. These teams need to identify the best fit model for content to be approved while minimizing financial risk. What content should be budgeted for theatrical versus direct-to-stream drives ultimate revenue, above the line contracts and investments. So a tool that’s accurate, fast and scales is of paramount importance in the reduction of time to go to production. Every green light drives budgets and deals.

“Those deals drive contracts and incentives. Those contracts drive production and those incentives drive financial commitments and tax management. Production requires purchase orders and the chain continues through management and content lifecycle and post production deals streaming distribution and rights and royalties management and beyond.”

As it stands now, “most of these workflows are managed by separate systems and require individual manual inputs,” he said. “And that’s a critical flaw that prevents scaling. The tools that manage financing, budgeting and production are in dire need of advancement and integration as many of these tools and the processes they support are antiquated, single purpose, not easily available/accessible and lack the capability to manage the demands of today.”

An End-to-End Solution

“When it comes to enterprise rights and royalties management the RSG rights platform is our end-to-end content lifecycle management solution,” according to Sehgal. “Our RSG rights platform unleashes the value and allows media companies to leverage all of your media to the maximum usage across your rights positions, screens and platforms. RSG rights can bring proven value and return on investment for your businesses, including TV programming – again, linear and non-linear – licensing, domestically and internationally and even emerging and not yet established platforms.”

By using RSG rights, “our clients will be able to: one, better monetize content across platforms; second, manage its content inventory through inception through the long tail, give users visibility into available rights and financials through our sub-ledger… [and] identify underutilized content acquisition, scheduling and licensing quickly and easily…. Utilizing intelligent workflows, RSG rights presents actual information to the right people at the right time across divisions.”

He added: “Each and every module that we have is dedicated to a certain group within the media value chain. With RSG rights, executives can reduce risk, minimize cost, manage cash flow, better manage relationships to licensees and expose underutilization of IP assets.”

Calling SAP the “financial system of record” for Hollywood studios, Maysonet said Content Financials is a “proprietary extension in SAP, and RSG’s technology is a great augmentation to both.”

The companies went on to provide a video demonstration of their solution in which it was described as “highly customizable to individual company requirements” and can also “enhance and streamline your business.”

To view the presentation, click here.