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VOD Study English Version.Pptx New French and European film markets Digital: a new growth driver for intra-community circulation and export? March 2015 Contents ► Introduction ► Estimate of the potential international market for French films on digital video-on- demand platforms ► Economic sales models applied by rights holders ► Recommendations ► Appendices Page 2 © 2015 Property of Ernst & Young Advisory This presentation, solely intended for internal use, cannot be treated separately from the contextual elements on which it is based and the oral commentary which accompanies it. Objectives of the study Objectives Scope of the study ► Analysis of the user habits for VOD and SVOD UK services Germany Italy Spain ► Estimate of the size of the market attainable by Poland French-initiated films on VOD and SVOD platforms worldwide ► Overview of the sales models practiced by United States rights holders China Japan Africa ► Recommendations Brazil Selection of countries based on their importance for French film sales and the penetration of VOD/SVOD services Page 3 © 2015 Property of Ernst & Young Advisory This presentation, solely intended for internal use, cannot be treated separately from the contextual elements on which it is based and the oral commentary which accompanies it. Definitions used Subscription video-on-demand SVOD Transactional video-on-demand TVOD VOD Electronic Sell-Through EST “Over-The-Top” Method of content distribution OTT via fixed or mobile internet (VOD or SVOD) Page 4 © 2015 Property of Ernst & Young Advisory This presentation, solely intended for internal use, cannot be treated separately from the contextual elements on which it is based and the oral commentary which accompanies it. Methodology Market surveys Quantitative analysis Interviews • Estimates of market size based on consumer spend • Total number of films and • Georges Bermann – Partizan Films • United States: Digital Entertainment Group, number of French films on the • Vincent Grimond – Wild Bunch major VOD/SVOD platforms Home Entertainment Report 2014 • Alain Rocca – Universciné • Europe, Japan: European Audiovisual • In the United States: • Julien Neutres – CNC Netflix, Hulu, Amazon, Observatory, European Video Yearbook • Jérôme Chung – Under the Milky Way 2014 Comcast Xfinity • In the UK: Netflix, • Pierre-Alexandre Labelle – Under the • China: iResearch, China Online Video Milky Way (United States) Report 2014 Amazon • Karim Ayari – Watchever (Germany) • Brazil: Dataxis Report on VOD, May 2013 • Emilie Boucheteil – French Embassy • Estimate of the market share of French cinema by (Germany) region • Peiyi Jiang – Best TV (China) • UniFrance study: 2013 results by region • Brigitte Veyne – French Embassy (China) • Noriko Tezuka – Unifrance (Japan) • Audrey Guibert – French Embassy (Brazil) Evaluation of export markets and Analysis of markets and growth trends models for export Estimate of the potential market for French films on VOD/SVOD platforms in 2020 Page 5 © 2015 Property of Ernst & Young Advisory This presentation, solely intended for internal use, cannot be treated separately from the contextual elements on which it is based and the oral commentary which accompanies it. Contents ► Introduction ► Estimate of the potential international market for French films on digital video-on- demand platforms ► Economic sales models applied by rights holders ► Recommendations ► Appendices Page 6 © 2015 Propriété d'Ernst & Young Advisory Cette présentation, à votre seul usage interne, est indissociable des éléments de contexte qui ont permis de l’établir and des commentaires oraux qui l’accompagnent. A dual “bottom-up” and “top-down” approach to the American market to verify the method and scale Bottom-up Top-down 1 1 Revenue from Identification of VOD, SVOD major platforms markets 2 Budget invested in 2 programming Estimate of the share of French 3 Budget invested in films films Extension of the top-down approach to other regions 3 4 Estimate of the Market share of potential market French films for French films 5 Estimate of potential French 4 film market Estimate of growth in the market 6 Estimate potential attainable by 2020 market growth Estimate of the potential market for French films on VOD/ SVOD platforms in the United States 2014-2020 Page 7 © 2015 Propriété d'Ernst & Young Advisory Cette présentation, à votre seul usage interne, est indissociable des éléments de contexte qui ont permis de l’établir and des commentaires oraux qui l’accompagnent. Outline hypotheses Analysis of consumer spending, excluding revenues from digital advertising Estimate of growth by zone, based on market surveys and performance over the past three years Estimate of spending involving the purchase of content through the analysis of the economic models of several VOD and SVOD platforms: ~ 50% Estimate of the share of film, based on the analysis of models of VOD platforms (~ 50%) and SVOD ( ~ 20%) Estimate of the market share of French films from the average market share of French cinema in theaters by region between 2010 and 2013*: between 0.6% and 5.5% Source(s): * based on UniFrance Film’s 2013 Report Page 8 © 2015 Propriété d'Ernst & Young Advisory Cette présentation, à votre seul usage interne, est indissociable des éléments de contexte qui ont permis de l’établir and des commentaires oraux qui l’accompagnent. The potential market for French films on VOD and SVOD platforms in target territories estimated at €41.5 million in 2020 Estimate of the potential market for French films on VOD and SVOD platforms in 2020, in millions of € Scenario 1: conservative growth hypothesis & average market share of French cinema 2010-2013 €41.5m Estimated US market 2014: €12m Total EU selected 9.3 countries: €17.1m 5.0 1.1 1.1 0.6 Total non-EU selected countries: €24.4m 15.5 3.5 2.9 2.5 Total Germany UK Italy Poland Spain US Brazil Japan China Av market share 2010-2013 of French cinema in 5.5% 2.2% 5.1% 5.1% 4.6% 1.4% 1.7% 1.5% 0.6% theaters * Sources: EY analysis, UniFrance Film's 2013 Report* Page 9 © 2015 Propriété d'Ernst & Young Advisory Cette présentation, à votre seul usage interne, est indissociable des éléments de contexte qui ont permis de l’établir and des commentaires oraux qui l’accompagnent. In 2020, the potential international market for French films on VOD and SVOD platforms could account for around 14% of theatrical receipts Comparison between the potential market on VOD/SVOD platforms and export receipts from French cinema in these countries in millions potential market for French films in 2020 Average annual receipts (box-office) for French films from 2010 - 2013 393 298 107.0 61.3 51 41.5 30 26 28 23 15.5 14 9.3 8 11 5 1.1 0.6 1.1 2.5 3.5 2.9 UK Germany Italy Spain Poland US China Brazil Japan Total France in 2013 Share of digital/gross 14% 16% theatrical receipts Source(s): UniFrance Films, 2010-2013 Reports; EY estimate based on CNC estimate: VOD Observatory; CNC 2010-2013 Reports Page 10 © 2015 Propriété d'Ernst & Young Advisory Cette présentation, à votre seul usage interne, est indissociable des éléments de contexte qui ont permis de l’établir and des commentaires oraux qui l’accompagnent. According to the most optimistic scenario for the penetration of French cinema in these territories, the potential market could reach €75 million in 2020 Estimate of the potential market for French films on VOD and SVOD platforms in 2020, in millions of € Scenario 2: Top-end hypothesis of the share of French cinema (2012) in millions Share of digital/gross 25% theatrical receipts 75 Total EU selection: €35m 19 11 2 2 Total non-EU selection: 1 €40m 26 6 4 4 Total Germany UK Poland Italy Spain US Brazil China Japan Source: EY analysis Page 11 © 2015 Propriété d'Ernst & Young Advisory Cette présentation, à votre seul usage interne, est indissociable des éléments de contexte qui ont permis de l’établir and des commentaires oraux qui l’accompagnent. Contents ► Introduction ► Estimate of the potential international market for French films on digital video-on- demand platforms ► Economic sales models applied by rights holders ► Recommendations ► Appendices Page 12 © 2015 Propriété d'Ernst & Young Advisory Cette présentation, à votre seul usage interne, est indissociable des éléments de contexte qui ont permis de l’établir and des commentaires oraux qui l’accompagnent. Value chain of video-on-demand services on the export market Rights holders Exporters Distributors Distributors Platforms International sales agents Local Kinology, distributors Films Producers Fox, Sony Distribution VOD/SVOD Lionsgate, IFC platforms Vertically- Films, VOD Vertically- integrated Radius, aggregators integrated Netflix, studios: Magnolia, Under the studios Amazon, Gaumont, DistribFilms Milky Way, Gaumont, iTunes, Pathé, Universciné, Pathé, Wild Hulu, EuropaCorp, Film Buff, Bunch Google Studiocanal, GoDigital, TV Operators Wild Bunch Cinedigm Page 13 © 2015 Propriété d'Ernst & Young Advisory Cette présentation, à votre seul usage interne, est indissociable des éléments de contexte qui ont permis de l’établir and des commentaires oraux qui l’accompagnent. Overview of the sales models used by rights holders 1 2 3 Indirect sales via a distributor Sales via an aggregator Direct sales ► Dominant practice ► Increasingly common practice ► Minority practice ► All-rights sale to a distributor: giving ► Example platforms: Under The Milky ► The most accessible platforms for value to VOD as part of the overall MG Way (146 films distributed in the US/ direct sales: iTunes, Hulu, Filmin, ► Ex: IFC, Kino Lorber, Cohen Canada since 2011),
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