Industry Report: Animation
Business Strategies of Leading Production Companies
by Cartoon, the European Association of Animation Film
08/06/2010 - Carlos Biern Lliviria is Executive VP - Coproductions & Worldwide Distribution – at BRB Internacional. His experience includes more than 20 coproductions in Spain, France, Italy, UK, Canada, South Korea and the US with series such as “Iron Kid”, “Bernard”, “The Imp”, “Angus & Cheryl”, “Papawa” or “Khuda-yana”.
How did the kids market change these last years?
Kids and teenage markets are the market that changes the most. The kids are really active, really dynamic, always open to new waves of trends, fashion, technologies… As producers we have constantly to redevelop our finance model, almost every three or four years. Is it not only linked to the present crisis.
How BRB started working in animation?
BRB started as a merchandising company. We were doing merchandising for the US market. After many years working as an agent, in the 80s we decided to create our own IPs.
We produced several series and we created a very strong library co-producing up to three or four shows per year back in the 80s and the 90s.
During the last two years BRB has been evolving as we created a very strong game division. We are working very openly right now to create brands for the online games. We believe the online games and the interactive division will change the perspective of our business. Kids spend more time with the Wii, the DS and the internet instead of television. The phenomenon is very well known by broadcasters.
What are the key elements of your success?
Our company has been able to adapt to the times slowly; some of the shows worked, some of the shows didn’t work. We survived because we were able to differentiate the revenues.
Can you explain the BRB’s business model?
The business model can be summarised in a single word: S.A.M. S stays for subsidies (local, national or international). A stays for advertising, which is the money that we get from the broadcasters, from different kind of sponsorships and from the Internet. M stays for margin over products. It’s the difference between what a plush costs and how much revenue I get from selling the plush. Margin can also be produced by placing a game into a DVD, how much does it cost and how much I get from selling it; the margin can also be the difference between the cost of putting a film into a VOD service and the revenue I have from selling the film.
How can a producer maximize these three elements?
As far as subsidies are concerned, it depends a lot of where your company is based. A French producer, for example, can easily have a support from a local broadcaster. In France TV channels have to invest by obligation into independent production. In France you can also get the CNC subsidies and you can be much stronger in terms of being faster and financing a major part of the show.
How does it work in Spain?
Until recently the situation in Spain was difficult for the animation sector. There was small support from the broadcasters or from the Minister of Culture (ICAA). Spanish companies looked for money outside Spain. Spanish producers are probably less lazy and more open internationally.
Spanish producers work a lot with France and Canada. Generally we are associated as minority co-producers. The French system is very well developed (artistically and financially). Canada developed a strong animation industry probably to fight the “US invasion”.
These two countries could finance us up to 60, 70, or even 90 per cent of the shows, especially if the animation is realised in the countries.
The other countries in Europe where you can get subsidies are the UK and Ireland (especially for the feature films), Luxembourg and Belgium thanks to the tax credits and tax shelters.
Italy is an interesting country because of the support a producer can receive from the public broadcaster.
Did you approached the Asian market?
Asia has been used for many years for sub contracting. Recently Asian countries are trying to develop their own shows. The governments are supporting the animation companies, especially in Korea, China, Singapore and Malaysia. In 6 to 8 years these countries will be able to produce successful shows.
What about Latin-American countries?
The most interesting countries are Brazil and Argentina that strongly supports the animation industry.
What about advertising in your business model?
When we create a show we try to reach at least these seven markets: France, Germany, UK, Italy, Spain, USA, Japan. We look on these markets in terms of the taste of the shows, the pitch of the show; the name of the show, the look of the show, we try to reach as many of these countries as possible.
If you sell to all these seven markets you are going to have probably a great successful show. If you get three out of them, probably you are going to have a very good show. If you get two, you can get a good show; and you can get none of them probably you are going to have an average show not very successful.
How to approach these seven markets?
If a producer wants to work not only on getting maximum revenues from what the TV pays per half an hour, he has to look for exposure and visibility. Right now it’s very important to get visibility through the Internet, the social networks, Facebook and Twitter. If a show is on the air you will have much more opportunities to work on the other revenues, on the margins, likes toys, publishing and staff like that.
What about the M in your business model?
M stays for “margin”. Producers may try to look for more money in the merchandising sector, home video and publishing. The merchandising sector is particularly important with preschool shows, because the toys, plush and books are bought by the parents. When we talk about the margin, we can talk about two different perspectives. The traditional perspective is to get a master toy licensing and find a distributor that sells the toys worldwide. The new perspective is to become distributor and sell the toys directly via the Internet. This is the route BRB is trying to follow.
Why BRB is producing so many short films?
With a short film you can achieve a very fast exposure of your future show. You can test the show in every market and adapt it to the territory. We produce animation shorts that of a duration of two or three minutes. We try to create exposure in order to release the toys and the merchandising articles.
What is the BRB strategy for the next years?
BRB is creating new brands, especially for the parents. We develop our own properties with a strong musical element.
We also develop shows adapting older brands. This is a way to attract the parents who used to be watching that show when they were four or six years old, and you also attract their kids, because the parents want kids to watch what we used to love.
With the reduction of the budgets from broadcasters, it is the more and more difficult to finance the shows. What are yours answers to this problem?
If we do not have all the money to produce a show, we cut the costs. If we don’t have six million Euros to produce a twenty six half hours show, but there are many broadcasters that like the project, we produce thirteen episodes of thirteen minutes. At least you start with the production and you can taste the characters.
The other strategy is to search new technological applications to cut the costs without loosing quality. We are also trying to rationalise the pre-production process using for example video games methodologies.
Which are the main partners you work with in Spain as production company?
In Spain there are 46 millions inhabitants. The particularity of Spain is that we have five different languages: Castellan, Catalan, Galician, Basque, Valencian... In the different communities the public broadcasters want their kids to learn the local languages through animation. Public broadcasters like Forta release up to twelve hours per day of animation.
As a production company, how did you evolve during the last twenty years?
Before the eighties Spanish production companies were just services studios. We were only used for advertising, pre-production and animation. During the 80s and the 90s, after some big success of Spanish series, Spanish producers started to build international co-productions. Most of the shows were based on books, like The Musketeers, Around the World in 80 Days. Recently the Spanish series are produced in 3D, using latest technology and innovative design.
Which are the other important public founders of animation in Spain?
Since the government announced a few months ago its intention to remove advertising from state television, producers started to wonder how this will affect the current precarious balance between film and television. By law, the latter must invest 5% of its revenue in film.
in June 2009, the Council of Ministers therefore approved the draft bill of the much-awaited General Audiovisual Law, which, among other things, allows television networks to invest part of this 5% in television series. This is one of the main demands of UTECA (Union of Associated Television Networks).
In any event, at least 60% of said investment should be allocated for film and at least half of that will go to independent productions.
In order to compensate for the decrease in film funding, the draft bill includes a greater number of companies obliged to invest 5% of their income in film, specifically electronic communication service providers that broadcast television channels and programme catalogue service providers.
ICAA will invest around 5€ million per year into TV animation series. The ICAA in Catalonia is trying to support the production of shorts and animated TV movies with around 1.5€ million per year. Everything should be done in Catalonia.
The government of Catalonia has also been supporting the animation industry since many years. 1% of any single income coming to TV Catalonia goes to produce animation series.