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Editorial Coverage: While big streaming companies battle it out
for supremacy, the real winners of an epic battled dubbed the
“streaming wars” may have already emerged: the production companies
that stand to profit in a big way from the exploding demand for
SVoD content.
As digital streaming steadily eclipses all other forms of
in-home entertainment delivery, an entertainment war has erupted
among leading subscription video on demand (SVoD) providers. These
streaming wars have opened the gate for newer production companies
to step up and cash in by funneling fresh content to hungry SVoDs.
The battle has already resulted in some big winners, including
film-production companies, such as Wonderfilm Media
Corporation (TSX.V: WNDR) (OTCQB: WDRFF) (WDRFF
profile), that are lining up to satisfy the voracious
content appetite of these SVoD giants. As on-demand media streaming
continues to rival — and in some cases supplant — every other form
of entertainment delivery, major streaming service providers such
as Apple Inc. (NASDAQ: AAPL), Netflix Inc.
(NASDAQ: NFLX), The Walt Disney Company (NYSE:
DIS) and Amazon.com Inc. (NASDAQ: AMZN)
are also duking it out for dominance.
- Leading streaming service providers are spending billions on
content annually.
- With approximately 100 films already streaming on the Netflix
platform, Wonderfilm is well-positioned to profit upon the
cash-strewn battlefield of the streaming wars.
- WNDR differentiates itself by eliminating the downside risk of
filmmaking through setting up each film as a single-purpose entity
packaged for upfront sale.
To view an infographic of this editorial, click here.
Another Entertainment Revolution
The widespread advent of the VCR in the 1970s gave birth to a
revolutionary concept: Consumers could take control over their
entertainment and watch what they wanted, when they wanted, within
the comfort of their own homes. It wasn’t long before millions of households in the United States possessed
these high-tech devices.
Fast forward more than 40 years, and VCRs have now become the
antiquated stuff of garage sales and thrift shops. But that concept
of controlling one’s own entertainment is alive and thriving — and
fueling this major entertainment conflict the media has dubbed the
streaming wars. The dominance of content streaming and the race to
capture — and keep — VOD consumers unquestionably marks the
entertainment revolution of this generation.
Younger Ponies Are Joining the Race
To pull ahead of the herd, the biggest SVoD providers are laying
out big bucks to forge exclusive content deals, by both
commissioning new content and securing existing content. These
providers are also striving to bring leading producers and
filmmakers into their paddocks. The demand for content in this
streaming race is far exceeding the supply, which has given newer
players such as Wonderfilm Media
Corporation (TSX.V: WNDR) (OTCQB: WDRFF) a prime
opportunity to step in and claim their share of the field.
Wonderfilm is a leading publicly traded entertainment company
backed by four Hollywood producers who have, collectively,
generated more than $1 billion in revenues from hit films.
Wonderfilm’s primary business is the production of high-quality
feature films and episodic television, and the company provides a
continuous annual production slate of approximately $58 million in
projects to ensure continuing deployment of capital and specialized
industry expertise throughout the packaging, production and
collection phases.
With approximately 100 of the 250 films it owns already
streaming on the Netflix platform, Wonderfilm is well-positioned to
profit upon the cash-strewn battlefield of the streaming wars. In
2019, Wonderfilm also entered into an agreement with one of the
largest streaming platforms in the world to add its entire
catalogue to the platform during the latter half of 2019.
In addition to offering up its existing film library for
streaming on major platforms, Wonderfilm is also primed to produce
original content commissioned by SVoDs.
Outside-the-Box Business Model
Wonderfilm was formed to bring together top filmmakers to
produce major motion pictures using a unique risk-averse business
model. The company differentiates itself by eliminating the
downside risk of filmmaking through setting up each film as a
single-purpose entity packaged for upfront sale before any money is
spent. Productions are structured to minimize risk by matching
budget to available funds. Films are sold based on script, writer
and cast for each separate production, and once a film is sold, the
company uses the proceeds as one of its tools to finance
production. Additionally, Wonderfilm capitalizes on tax credits
provided by the chosen state in which a film is shot, and these
credits are used as an asset to bank against for an upfront loan to
complete the financing.
This unique production structure enables Wonderfilm to start
generating a return virtually the moment the camera begins rolling.
Producer-fee line items ranging from $50,000 to $500,000, depending
on total budget, are incorporated into each production budget and
are typically paid to Wonderfilm on day one of principle
photography.
Through Wonderfilm Global, a film, television and media foreign
sales/distribution joint venture launched at the 2019 Cannes Film
Festival, and in which Wonderfilm has 51% ownership, Wonderfilm is
able to keep distribution margins in-house that formerly went to
other companies.
Within each production budget, Wonderfilm Global charges fees
for sales and distribution to cover presale costs. Unsold presale
territories (countries or territories left off of a film’s presale
list either strategically or because the broadcaster/distributor is
waiting for film completion) become major outside-of-the-budget
distribution sales opportunities for Wonderfilm.
The company largely produces relatively low-risk, easy-to-sell
films that feature desirable cast and genre. Once upon a time,
third-party distribution companies were earning roughly 10%, plus
expenses, on the company’s films with zero level of risk. Now,
however, Wonderfilm is generating revenue through presales of its
own projects and, at times, third-party films.
The average Wonderfilm picture is pre-sold for $5 million,
resulting in a commission that is between $500,000 and $750,000 per
sale. Now, rather than going to a third party, these commissions
remain in-house with Wonderfilm Global. The company anticipates it
will sell between 10 and 12 third-party films by fall 2020, which
will generate approximately $6 million in commissions for the
company.
In addition, the company’s film library continues to grow with
each new production, which adds to future sales revenue.
Exploitation rights for future worldwide sales return to Wonderfilm
four or seven years after delivery, depending on the agreement. As
of October 2019, the growing library of Wonderfilm-produced movies
comprised 18 titles for future exploitation.
Exciting Projects – Both in the Can and on the
Horizon
Wonderfilm has several potential breakout films currently on its
development/production roster.
The company takes pride in working with some of Hollywood’s best
talents to create unforgettable films while providing exponential
future value for shareholders. Wonderfilm’s slate of 2019 films
boasts some of Hollywood’s biggest names in the starring roles,
including Nicolas Cage and John Travolta. Cage has starred in two
Wonderfilm productions since 2018 and is slated to begin filming a
third Wonderfilm picture in 2020.
While Wonderfilm focuses on high-ROI low-budget films — the sort
that are ideally suited for direct-to-streaming release — the
company also produces a handful of large-budget films each year
that are designed to generate home-run potential.
Seventeen new Wonderfilm features are currently greenlit for
shooting, representing $58 million in production budgets. Most
notable among these are the horror film “Amityville 1974,” which is
slated for theatrical release in October 2020, and the action film
“Inside Game,” starring Tyrese Gibson, which will hit theaters in
fall 2020.
Wonderfilm is also actively developing various other new IP
projects, among which is a dramatic biopic about the life of Steve
McQueen, a screen adaptation of bestselling novel “Merchant of
Death,” and a TV series helmed by “CSI: Crime Scene Investigation”
creator Anthony Zuiker.
Big Opportunities
In the current fight among SVoD providers to offer the most
plentiful and alluring content to hook consumers, up-and-coming
production companies such as Wonderfilm are in a prime position to
strike lucrative deals, both with providers looking to acquire
existing content and those seeking to solicit new, proprietary
shows.
Newly launched by Apple Inc. (NASDAQ: AAPL) on
Nov. 1, 2019, Apple TV+ has already made history as the first
streaming platform to earn Golden Globe nominations during its
launch year, bringing in nods for its original drama “The Morning
Show.” Apple has touted its service as the first all-original video subscription service, thus
setting a high bar for itself right out of the gate to continue
delivering content that is both all original and award caliber.
This is, no doubt, a strong motivating force behind Apple’s efforts
to lure hot-commodity filmmaking talents away from established TV
networks and movie studios.
Veteran streaming platform Netflix Inc. (NASDAQ:
NFLX) has spent a reported $12 billion this year on
programming alone to satiate the content appetites of its 166
million global subscribers. Netflix is also one of the production
pirates that has been seducing writer-producers from studios and
networks with jaw-dropping
compensation packages.
Amazon.com Inc. (NASDAQ: AMZN) has done the
same, luring creative minds from established networks and studios
with big payoffs. The company spent $1.7 billion on streaming
content (both video and music) in Q1 of 2019 alone. Across the film
industry, big money is being tossed out in an effort to acquire
talents, scripts and ideas, and it’s happening at a level Hollywood
has never seen before.
The Walt Disney Company (NYSE: DIS) is another
big-hitter that is spending big bucks for streaming content to fill
out the offerings on its new Disney Plus platform, which was also
just launched in November. Disney has announced plans to spend over
$1 billion for original content during fiscal year
2020 and projects it will reach upwards of $2.5 billion in
expenditures for Disney Plus programming by 2024.
Hollywood’s streaming wars could last for years as these and
other big players with deep pockets wheel and deal, watch and wait.
But regardless how long the battle lasts, production companies can
claim victories right now as they step in to serve up the plentiful
entertainment offerings these SVoD providers — and their patrons —
are clamoring for.
For more information on Wonderfilm Media
Corporation, visit Wonderfilm Media
Corporation (TSX.V: WNDR) (OTCQB: WDRFF)
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