Production Financing for new films, TV-series, documentaries and animation projects has been under severe strain over the last few quarters. Strikes, wars, economic uncertainty, high interest rates, and a post Covid-19 readjustment in viewing habits – all have played spoilers in Production Financing. Not to forget the compulsions of streaming companies to go back to trying out ad-supported models after some of them had vowed “NEVER-EVER!“

Key Insights for Production Financing Experts in the Media Industry

• Volatile Market Conditions (2022-2023):

Significant Decline in Q2 2023: Production financing faced considerable headwinds in 2022 and 2023, with volumes down by 52% if we compare the best quarter of 2022 (Q2 of 2022) to the last quarter of 2023. This decline was influenced by global economic uncertainty, particularly due to the war in Europe and significant corporate restructuring at major media conglomerates like Warner Bros. Discovery and Disney as well as the change in valuation metrics by Wall Street. For financing experts, the current period highlights the need for strategic risk management and diversification to navigate global disruptions.

• 2022 Wall Street Shock:

Crippling Blow to Production Financing: The Wall Street shock in 2022 dealt a severe blow to production financing, especially in Hollywood and across the Americas. The financial instability triggered by this shock led to tightened budgets and reduced capital availability, leaving many projects in jeopardy – especially since a lot of those projects are backed by US-headquartered media groups. By the time the Hollywood strikes occurred in 2023, the damage had already been done, exacerbating an already fragile financing environment. Experts should take note of the compounded risks from financial markets and industry-specific disruptions, emphasizing the importance of financial resilience and proactive crisis management.

• Impact of Industry Strikes

Hollywood Strikes: The onset of the Hollywood Writers’ Strike in early 2023, followed by the actors’ strike, caused a sharp decline in production activities, severely limiting financing opportunities. The prolonged strike underscored the vulnerability of production financing to labor disputes. Experts should consider contingency planning and alternative investment markets to mitigate risks associated with such industry-wide disruptions.

• Post-Strike Recovery (2024):

Signs of Stabilization: With the end of the strikes in mid-2024, production financing began to stabilize. This suggests a cautious return of investor confidence, with a moderate increase in financing activities. For financiers, this period may present opportunities to engage with projects that were previously stalled or delayed, capitalizing on the pent-up demand for new content.

• Regional Shifts in Financing Opportunities:

EMEA Gains Ground: The modest global recovery saw a shift in financing opportunities, with the EMEA region showing increased production activity, while the Americas continued to struggle. In fact, owing to the twin major shocks of Wall St. meltdown (2022) and Strikes (2023), plus the aggressive sops and tax incentives, there have been 3 quarters – Q4’2022, Q3’2023 and Q1-2024 – when EMEA reported more productions than Americas! This regional shift indicates potential to explore and prioritize productions financing, CoPros and partnerships in markets within EMEA, where growth is gaining momentum.

• Content-Type and Language Diversification:

Growth in Unscripted Commissions and Multilingual Originals: The increase in unscripted content commissions and the rise of original productions in French, Spanish, and Indian languages suggest that financing opportunities are diversifying beyond traditional scripted formats. Financing experts should consider expanding their portfolios and to study unscripted and international projects, which are gaining popularity and investments.

• Long-Term Financing Outlook:

Season Renewals at a High:By mid-2024, season renewals reached a 24-month high, signaling a more risk-averse environment in favor of less risky and time-tested shows. This trend suggests a growing preference for financing ongoing series with established audiences, offering lower risk compared to brand new productions.

• Risk Mitigation Strategies in Production Financing:

Adapting to a High-Risk Environment: In response to the challenging market conditions, the data shows that production financing professionals are increasingly adopting a range of risk mitigation strategies. Co-productions (CoPros) and other partnership models are being leveraged to spread risk across multiple stakeholders. There’s also a noticeable reduction in the average budget per project, allowing for more conservative financial commitments. High-risk projects are being stalled or canceled outright, with a greater emphasis on scrutinizing development stages and pilots before greenlighting full productions. The conversion rate from development to financed projects has decreased, reflecting a more cautious approach.

Content Strategy Adjustments: Production Financiers are leaning heavily on time-tested content, such as proven formats and remakes, to ensure returns on investment. Additionally, there’s a growing focus on local adaptations of content that has succeeded in other markets. Plus programmers and chief content officers across major streamers are looking more at cost effective localization strategies that conserve production investments and yet fill up their catalogs. Finally, there’s a significant shift towards financing content with lower production costs per episode, such as factual programming and documentaries, which offer more predictable financial outcomes in a volatile market. Not to forget grabbing those lucrative tax incentives from aggressive governments across LATAM, APAC and EU.

All the data-points shared here are from Vitrina’s daily monitoring of new productions on a global scale that provides an unparalleled pulse on production financing trends across the world. Our insights empower production financing strategists to navigate the complexities of the current market with precision and confidence.