By Adam Guy Orlebar Garrett, MEng (Oxon), MBA (IUJ), CQF, CAIA, Chief Investment Officer at Hong Kong based New Asia Ferrell Asset Management Limited where he is leading the firm's alternatives business including in the media investment space.
Introduction
Covid may have decimated box office returns over the past few years, but with ever increasing eye-watering amounts being spent annually on content by streaming giants creating an unprecented, highly exuberant sellers market in the global media industry, is media now poised to become the next hot alternative for investors?
This is a very valid question, not least because investors around the world are already showing a strong appetite for exploring exciting non-traditional asset classes like cryptocurrencies. Can media as an asset class provide similar returns and diversification benefits, without the horrendous volatility swings exhibited by bitcoin etc? Over the course of this three-part article series, let's find out.
In this first article, let's introduce the industry itself, starting with Hollywood Studios.
Major Hollywood Studios
There are currently 5 major studios in Hollywood:
- Disney (+ 20th Century, Lucasfilm, Marvel, Pixar)
- Paramount (+ Miramax)
- Sony (+ Columbia, TriStar)
- Universal
- Warner Brothers (+ New Line)
In brackets you can see above which smaller studios have already been bought by these five.
Mini-Major Hollywood Studios
There are also a small handful of smaller studios, which we call mini-major studios, still left in Hollywood too:
- Amblin (+ DreamWorks)
- Legendary (owned by Wanda)
- Lionsgate
- MGM (now Amazon)
But note that two out of these four mini-majors are already owned by larger companies, and even Amblin's parent companies (whilst not indicated above) actually already includes both Universal and China's Alibaba Pictures.
Streaming Platforms
Here are the top streaming platforms by content spend (according to The Streamable):
- Disney+
- HBO Max/Discovery+ (Warner Bros. Discovery)
- Netflix
- Peacock (NBCUniversal/Comcast)
- Amazon Prime
- Paramount+ (ViacomCBS)
- Apple TV+
A recent Nikkei article last last year entitled "Netflix data shows Asia content key for U.S. streaming services", describes how Disney+, Netflix and Amazon Prime are all very active in investing in content in Asia. Given the international success of shows like Squid Game (which subsequently introduced Netflix viewers to many other excellent Asian shows such as Alice in Borderland), these three studios recognize the importance of acquiring quality international content to make their platforms more appealing to subscribers from all their markets, including USA. Therefore, as the other streaming platforms continue to grow and launch in more overseas markets in an attempt to catch up with these market leaders, over time they will also likely choose to invest in Asia content too.
Film & TV Markets
The media industry has an annual rhythm for doing business which, to a large degree, revolves around global film & TV markets that take place each year in specific cities, usually in parallel with an annual international film festival running at the same time and place.
It is at these markets that content producers are able (either directly or via sales agents) to seek distributors to buy their content for particular countries, or particular geographical regions, or for global release - either theatrically or via streaming (or both).
These major markets are:
- Feb - European Film Market (EFM) - Berlin, Germany
- Mar - Hong Kong International Film & TV Market (FILMART) - Hong Kong, China
- Apr - Marché International des Programmes de Télévision (MIPTV) - Cannes, France
- May - Marché du Film (Cannes) - Cannes, France
- Oct - Asian Contents & Film Market (ACFM) - Pusan, Korea
- Oct - Marché International des Programmes de Communication (MIPCOM) - Cannes, France
- Oct - Tokyo International Film Festival Content Market (TIFFCOM) - Tokyo, Japan
- Nov - American Film Market (AFM) - Los Angeles, USA
- Dec - Asia TV Forum & Market (ATF) - Singapore
Note that, irrespective of where the film or TV market is being held, because of the global nature of these markets, there are typically representatives from all major industry players (as well as many smaller players) from all parts of the world.
Note also that, there are essentially no major global markets between June and September each year.
Major Trade Publications
The major trade publications in Hollywood are:
Note that all, except Screen Daily, currently have the same owner (as reported by MetaFlix and others).
Box Office Trends
The above chart from Statista shows clearly the recent developments of the global box office, including the immediate impact of covid in 2020, as well as the gradual recovery since then.
Historically the US box office has always been the largest but the mainland Chinese box office, as the China economy itself grew, gradually caught up. When covid hit in 2020, box offices in most countries around the world, including the USA, were decimated, but because mainland China was able to keep the covid virus relatively contained during the years 2020 and 2021, it became leading #1 box office. Post-pandemic, the largest two box offices will likely continue to be China & US, with other countries' box offices remaining considerably smaller.
The BoxOfficeMojo website, and the annual THEME (Theatrical and Home/mobile Entertainment Market Environment) reports from the Motion Picture Association of America are excellent sources for global box office data.
Content Spend Trends for Streaming
The above chart from Streamable shows clearly the incredibly large amounts being spent annually by each major streaming platform, as well as the continual expected growth in such amounts over the next few years.
Note that these streaming platforms are expected to spend US$140.5 billion on content in 2022 alone. This amount is far higher (i.e. US$140B compared to only US$40B) than the total box office market at its 2019 peak shown in the previous chart above.
In addition to box office data, the aforementioned annual THEME reports from the Motion Picture Association of America also contain detailed data for the home entertainment market which includes streaming.
Recent Headlines
The follow headlines show how the major streaming platforms, particular Disney, Netflix and Amazon, are investing in new content in Asia:
- "Disney wants some of Netflix's Asian success" CNN, October 14, 2021
- "Netflix unveils huge expansion of Japanese content", Variety, November 9, 2021
- "Amazon Prime Video to enter local-language content in Southeast Asia", Screen Daily, December 2, 2021
- "Netflix plans to double spending on original content in Asia", Bloomberg, December 2, 2021
- "Netflix original Korean drama series spending to continue after global success of Squid Game", South China Morning Post, January 16, 2022
- "Netflix signs cooperation agreement in Taiwan", Variety, March 21, 2022
Final Words
As we can see above, the amount of money being invested by the major streaming platforms in content globally, and content in Asia specifically, continues to grow for the foreseeable future. With the worst of the covid pandemic hopefully now behind us, the global box office is also gradually improving.
To end this first article, here's a great quote from Walt Disney himself:
"We don’t make movies to make money, we make money to make more movies."
Here's full video:
About the Author:
Adam Garrett is Chief Investment Officer at Hong Kong based New Asia Ferrell Asset Management Limited, an Asia-focused financial services group which has been serving family offices and private individuals globally since 2016 with innovative investment solutions including in the alternatives media investment space. Previously, Adam was Chief Investment Officer at PINS Asset Management (Asia) Ltd for 5 years, specializing in alternative investments in real estate, quant trading, food & beverage, and TMT private equity. In addition to his buyside experience, Adam also has a financial sellside background in volatily trading at Mizuho Securities and quant trading & equity derivative structuring at Lehman Brothers in both Hong Kong and Tokyo. Through his film production company Agog Film Productions Ltd which he established in 2007, he is also an award-winning independent filmmaker, winning the 2009 Gold Kahuna Award for Excellence in Filmmaking for his directorial debut that starred Hong Kong's Gordon Liu, and announcing in early 2022 Agog Films' involvement in a global genre slate of projects to be shot in the Philippines.
