Creating Valuation from Your Content
Asia’s top media evaluators weigh in on the content valuation formula.
Content valuation can be one of the least known and murkiest tools of the industry. But it’s also one of the cornerstones of the media business, living in the nexus of corporate finance, distribution, and investment. We speak to a few of Southeast Asia’s leading content valuation experts to get their thoughts on monetising content and how the regional markets can create opportunities for itself by paying attention to one of the fastest growing product spaces in Asia.
Q: Tell us a bit about your background in valuation in the media industry.
Kevin Balhetchet (KB): I’ve been structuring and doing valuation and consumer licensing deals for the last 20 years in conglomerates from Disney to Pearsons. I’m now running one of Southeast Asia’s largest distribution firms under our listed parent company, doing thousands of hours of licensing deals each year throughout the world including creating value for libraries and new platforms and channels.
Justin Deimen (JD): I’ve been everything from a film critic to a screenwriter, and now a producer and investor through Aurora Media Holdings’ media fund – Aurora Global Media Capital. We’re the only VC fund focusing on content investment so robust valuation multiples is part and parcel of the discussion we have every day in building international standard media asset classes.
Chan Gin Kai (GK): I started the Silver Media Group, the first private film fund in Singapore and am an advisor to film funds and film bodies around the region. I am also the President of the Southeast Asian Audio-Visual Association where one of our continued mandates is to ensure a vibrant media investment scene in our region and one of the ways to do that is to encourage stronger co-production and co-financing ties between producers and investors.
John Caldon (JC): As Chairman and Managing Director of Flame Media I work closely with both the Distribution and Production arms of the company. My business and commerce background stands me in good stead to ensure Flame Media operates as an effective and innovative company. The organisation is distribution and audience led and seeks to produce, acquire and sell content that appeals to consumers. In short, we aim to give the market what it asks for. My background working in banking and finance through different industries gives me perspective on how media and content plays a part in the larger canvas of things.
Q: Can you speak about some of thought processes that go into valuing content?
KB: First thoughts in valuing content would be to understand the scenarios. You have to know what the producers’ objectives exactly are, and what sort of markets the intellectual property can viably can exposure into among many other qualifications. My job is to understand the context of the property and how it relates to consumer spending.
JD: We work backwards essentially. In order to know how much to invest and how much we’re willing to invest, we need to know its potential. And that comes from creating a matrix of qualified estimates to anticipate and assume the sales and exposure of the brand or IP and whether it creates knock-on value for other properties and products. The most important thing to note about content valuation is that it’s essentially IP valuation, which is ultimately used to create company valuations. And that’s the real deal.
GK: Figuring out the grand strategy of your content and IP is the most important first step. Why are you creating this IP or brand? Is the content production the end-game or is it an engagement tool? Having that value chain planned out early shows the life-cycle and true worth of your content’s potential. Licensing is the life-blood of the industry as anyone can tell you, but ensuring that your IP and ensuing content is part of a bigger scheme. Look at Netflix as an example. It doesn’t produce content to scope the value of the product. They use their product to fill a need for their subscribers, and importantly, to create a larger eco-system and eventually a global brand.
JC: The valuation of TV and film rights is very different from the valuation of real estate. Two apartments of the same size on the same floor in a New York skyscraper will attract a much the same price irrespective of the interior finish. TV rights valuation is not only affected by the genre (substitute location in real estate speak). It is also significantly affected by its final finish or “cut”. So the subject matter is complex.
Q: Why do you think Asia is lagging behind in this practice?
KB: Fragmented markets and the age of media industries here play a big part. China, India, Japan, and South Korea’s strong domestic markets don’t really have a need to move beyond their borders, while everyone else is playing on their own small playgrounds and not actively and aggressively cross-pollinating and placing their contents in different territories to build the value of the idea. Putting aside quality, this fundamentally limits the worth of a programme as distributors and buyers and consumers around the world are not even aware of the programme enough to even want to buy it.
JD: There’s a lot of misconceptions about how content creation can actually be commoditised. Too many producers in this part of the world look at their content in very limited terms. They look for investment or commission to make short-term production profits. They don’t look to market or develop the idea in a way that makes sustainable sense. Basically, they aim to sit on profits made on inflated production budgets, and not through licensing and syndication, which means that there’s no incentive to create IPs that travel or work with production quality that sells overseas. This is a key consideration that investors look at when they assess projects – how can we ensure that the project is more than the sum of its parts. While this happens, we lose the ambition of building infrastructure, which is the scary thought.
GK: Simple reason. We need more critical understandings of the media finance industry here. Through our ScreenSingapore partnerships and our Southeast Asian Film Financing (SAFF) Forum, we’re trying to educate the region on the financial aspects of the creative business. Once those principles are understood, then you’ll see projects made for right budgets and right financing plans. Co-producing between countries also strengthens the bridge of content flow and valuation as you’re opening up new markets even before you produce, as well as de-risking yourself. Once we do this, we organically start matching standards with the rest of the world, and also create our standards that the rest of the world will try to match. After all, Asia will be the centre of content in the near future.
JC: If the producer or filmmaker is unsure if something in Asia sells abroad, they should ideally talk to a very experienced distributor before producing a programme rather than after it is made. Trends change and purchasing levels can be different. At Flame Distribution we like to get involved with producers before the programme is made so that it can be better tailored for the international market.
Q: What are some of the practical aspects when it comes to assessment of the content’s value?
KB: I would say the concept or script’s strength, the production quality, the budget, the package of cast or creative team, and importantly, the ability for the project to have 360 licensing potential. I look at each avenue of rights available to me, I estimate each avenues value through algorithms and current deal parameters, and then I consolidate the value and get an idea of how much I can monetise everything for in however long I possibly can. It’s important to have a project that can sell to major markets.
JD: I would assess the strength of the project through creative lens first, which would then add a certain amount of value to it. I’d look at the attached elements of the project – the cast, team, funding apparatus, branding – and study it from a marketing perspective and whether we can expect exponential returns. If it can’t be marketed, it can’t be sold, which means it can’t be funded. Working with a large network of distributors, licensors, sales agents, producers’ reps, and platforms, we are able to get a sense of a project’s viability in the marketplace while running the sales estimates as well as the IP’s extensions into merchandising and other licensing avenues to create hard numbers that will inform our investment quantum. If it’s something that does not justify the budget, we will work with the producer in finding ways to adjust the project’s scope.
GK: Many ways to do this, each investor and producer may have their own methods or predetermining criteria. It really all depends on the objectives of each party and whether it’s aligned with the IP owner and the stakeholders. Ideally my guiding principle is to look at de-risking and protecting the investors and producers. We will look at the market cap of the project, look for ways to synergise with platforms and marketing avenues, and see how well it opens up territories for us. Another way is to look at slate funding, where we’re able to cross-promote and cross-collaterise our investments through a series of shared resources. This creates real value and cuts the fat from budgets while ensuring that one great investment lifts everything else up.
JC: Here are some measures that producers and filmmakers can take. First, pick a genre that is popular in most countries. Read the TV guides to see the types of genre which feature and attract high ratings. Current examples are series like the World’s Deadliest somethings; series on diet; series on science etc. Avoid what we might term passion projects. Secondly, pick a subject which is of international appeal and that is not peculiar to a local market. A programme on Malaysian swimming pools is unlikely to be of interest to the world market or for that matter in Malaysia!
Thirdly, consider the accents. A lot of international buyers speak English as a first language. Many who speak a different first language speak English as their commercial language. These buyers are often unable to understand a program other than in the English language. If they do not understand they will not buy.
Next, it is generally best to have an off screen narrator rather than host for an international series. If there is a host, attempt to have an internationally known celebrity on the series. Lastly, set the length of the program to the time requirements of the international buyers In essence, make your project easy to sell in the current landscape.