I’ve been working on an interesting project lately, looking at the interaction of digital media production companies and the more ‘traditional’ television production companies in Canada. As you may know, the Canada Media Fund (CMF) now requires that any television production that comes to them for funding have an associated digital media component. But this relatively new requirement (only a couple of years old) has not necessarily been a happy or easy one for the traditional TV producers, or for that matter their broadcasters. Digital media producers come from a different space than TV producers and they don’t necessarily speak the same language.
In essence, DM companies are operating under more of a ‘creative agency’ model, where ideas are pitched and the successful agency wins the project and is paid a fee for developing the creative elements. The agency does not retain any IP to these elements. TV production companies work under the traditional ‘production’ model, where projects are pitched to broadcasters and producers are required to carry a good portion of the development costs themselves. Larger successful production companies allocate their own funds for development while smaller companies often need to rely on funding from agencies etc. However, in any event, the IP rights stay with the TV producer and are not transferred at any stage to the broadcaster.
By virtue of operating under different models, and given the relative immaturity of the DM industry there is a limited understanding of each other’s revenue models. While the consensus is that the revenue models for digital media are not quite there yet, there is growing evidence of the impact of second screen activity in driving audience engagement and therefore increasing advertising value and TV commerce opportunities. However, paying the costs of developing digital media components is creating stress in the relationship between TV producers and digital media producers, as funding of the digital media component has its own challenges. The CMF will fund part of the costs and the broadcaster is required to contribute 10% of the digital budget, but the remaining balance has to be funded by the TV producer and/or the digital media producer. Some provinces have tax credits to help cover this cost, but not all.
So while Canada may be seen as forward-thinking in driving Canadian-content digital media production, there are still some kinks to be worked out. But this has to be better than being left behind in the exploding digital content world.