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FUENTE ANEMIA FUENTE ANEMIA, Monografías, Ensayos de Ciencias Sociales

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How Are the Major Streaming Services Reshaping the Film Industry
Master Thesis
MSc Strategy, Organization and Leadership
Submission: May 9th, 2018
Normal pages: 106 (237.228 characters incl. spaces)
Supervisor: Mehran Moghaddas (DVIP, INT)
Students: Viktoria Vas &
Gerda Binkyte
Copenhagen Business School
2018
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How Are the Major Streaming Services Reshaping the Film Industry

Master Thesis MSc Strategy, Organization and Leadership

Submission : May 9 th, 2018 Normal pages: 106 (237.228 characters incl. spaces) Supervisor : Mehran Moghaddas (DVIP, INT) Students : Viktoria Vas & Gerda Binkyte

Copenhagen Business School

Abstract

The paper examines the effects major streaming services, such as Netflix, Amazon, HBO have

on the Danish film industry, and seeks to identify how individual producers and independent production

companies in the country can exploit the rising opportunities. The research used a mix of deductive and

inductive reasoning in the analysis, for which twelve semi-structured in-depth interviews were

conducted with industry professionals from Denmark over the course of five weeks. This led to

insightful findings that can be used for further researches for both academics and professionals.

The analysis built on theories discussed in the literature review; Porter’s five forces (Porter,

1979), supply chain, emerging strategy (Mintzberg, 1987), marketing mix, four trajectories of change

(McGahan, 2004). The findings include changes in certain links in the supply chain of film production,

such as; affects on producers and film financing, changes in sales and distribution. While for producers

SVOD services mainly bring additional financing opportunities, decreasing the power of DFI and the

national broadcasters, sales agents and distribution is highly affected. Sales agents will need to adapt to

the changing conditions, and transform themselves from traditional sales agents to agents who offer

extra services for their clients. Distribution is affected in a way that its release windows system is

disrupted and shortening some of these windows might not be avoided in the future.

Additionally, the study, with the help of the model of marketing mix, identified that in the

hypothetical case of Danish producers or production companies selling their projects for major

streaming (Netflix, Amazon or HBO) services as original content, they need to face several challenges.

Streaming services look for local, yet mainstream projects and in the last few years they were mainly

interested in serialized content. As the SVOD platforms do not release any data regarding sales and

audiences, they have an unfair advantage when negotiating for price. If a title is released on a major

streaming platforms, it does not automatically mean it will reach a large audience, as mostly American

and English language titles are highlighted on the platform, leaving foreign language products in the

background. Furthermore, Danish producers, who are used to a system of subsidiaries as main source of

financing, will have to adapt and use different promotion styles if they seek to sell their projects to a

major platform. To understand the ongoing changes from a strategic point of view, the four trajectories

of industry change model (McGahan, 2004) has been applied, stating that while at the moment the

changes can be considered progressive for producers and production companies, the future is uncertain

and as any other industry, it can catapult into radical or intermediating change. Conclusively, the above

discussed findings are applicable to not only the film industry in Denmark, but all across Europe, as the

Danish film industry in its structure resembles to most film industries in the continent.

    1. Introduction
    • 1.1. Research Question and Delimitations
    1. Methodology
    • 2.1. Research Philosophy
    • 2.2. Research Method and Design
      • 2.2.1. Qualitative Research Design
      • 2.2.2. Operationalization of Theory
    • 2.3. Structure of the research
      • 2.3.1. Literature review
      • 2.3.2. Analysis
      • 2.3.3. Conclusion and discussion
    • 2.4. Data collection
      • 2.4.1. Primary data..................................................................................................
      • 2.4.2. Introductions of interviewees
      • 2.4.3. Secondary data..............................................................................................
    • 2.5. Evaluation of research process
    • 2.6. Limitations of research
    1. Literature Review
    • 3.1. Industry Analysis
      • 3.1.1. Five Forces
      • 3.1.2. Four trajectories of industry change
    • 3.1.3. Emerging strategy
      • 3.1.4. Creative Industries: Film Industry
    • 3.2. Supply Chain: Creating A Value
      • 3.2.1. Project
        • Filmmaking as a project
        • Film..........................................................................................................................
        • Creative Control
      • 3.2.2. Financing
        • Financing methods...................................................................................................
        • Equity financing
        • Institutional grants
        • Co-production
        • Pre-sales
        • Crowdsourcing
      • 3.2.3. Sales Agents
      • 3.2.4. Distribution
        • Distribution Windows
        • VOD
        • Aggregation
    • 3.3. Demand
      • 3.3.1. Market segmentation
      • 3.3.2. Demand in the film industry
    • 3.4. Marketing
      • 3.4.1. Marketing Mix
      • 3.4.2. Relationship marketing
      • 3.4.3. Word of mouth
      • 3.4.4. Film festivals
      • 3.4.5. Pitching
        • Visual aides for pitching
    • 3.5. Conceptual framework
    1. Analysis
    • 4.1. Creative Industries: Film Industry
      • 4.1.1. Porter’s Five Forces
        • Threat of New Entrants
        • Bargaining power of buyers
        • Bargaining power of suppliers.................................................................................
        • Threat of substitute products
        • Rivalry among existing competitors
      • 4.1.2. Film...............................................................................................................
      • 4.1.3. Demand.........................................................................................................
    • 4.2. Supply Chain........................................................................................................
      • 4.2.1. Producer
        • Changes in the tasks of the producer
        • Distribution rights questions....................................................................................
        • Creative control
      • 4.2.2. Financing
        • DFI...........................................................................................................................
        • National broadcasters
        • Co-productions
        • Other
        • Star Power
      • 4.2.3. Sales agents
      • 4.2.4. Distribution
        • VOD
        • Main VOD Players
          • Netflix
          • Amazon
          • HBO
          • Other
        • Aggregation
    • 4.3. Marketing Mix
      • 4.3.1. Product
      • 4.3.2. Price
      • 4.3.3. Place
        • Reaching an audience through VOD
      • 4.3.4. Promotion
        • Pitching
        • Networking as a way of promotion
    1. Discussion
    • 5.1. Four Trajectories of Change
    • 5.2. Future Research
    1. Conclusion.................................................................................................................
    1. Appendix
    • Appendix 1: Interview Guidelines
    • Appendix 2: Definitions of the rights
    • Appendix 3:...................................................................................................................
      • Figure 1: Structure of the study……………………………………………………….. Figures and Tables
      • Figure 2: The supply chain of film production………………………………………..
      • Figure 3: Conceptual framework……………………………………………………...
      • Figure 4: The Windows system of film release……………………………………….
      • Figure 5: The distribution flow of today……………………………………………...
      • Figure 6: The aggregators in the VOD distribution chain…………………………….
      • Table 1: Interview overview…………………………………………………………..
      • Table 2: The windows system………………………………………………………...
      • Table 3: Continuum of film consumers……………………………………………….
      • Table 4: Examples of players moving into VOD aggregation………………………..

Consequently, VOD platforms and their growth in the country bring many changes

to the industry and affect producers, distributors and sales agents as well by creating both

opportunities and challenges. It is clear that streaming services give additional financing

ways for producers to help their projects of filmed entertainment, thus, it is worth to

investigate what other effects they have on the Danish film industry. “ There is a little

transparency for producers to both identify the full scope of their opportunities they can

capitalize upon, and recognize the risks they are to face” (Binkyte and Christensen, 2016:1).

1.1. Research Question and Delimitations

The above described characteristics and dynamics of the Danish film industry have

led to the formulation of the following research questions:

Main research question:

What effects do major streaming services have on the Danish film industry, with the

focus on independent production companies and individual producers?

Sub-question:

How could Danish production companies and individual producers use the evolving

opportunities to reach broader audience?

This paper will investigate the film industry from a researcher’s standpoint and will

seek to identify current characteristics of the industry and how would these (characteristics)

change in the face of major streaming services starting to invest in local independent film

projects.

It has been chosen to focus the research on production companies and individual

producers in Denmark that produce both feature films and TV drama (TV series), in order

to understand the industry and gain knowledge on what are the expectations of Danish

filmmakers towards the new concept of VOD (video-on-demand) service providers

investing into local films, as well as starting their own productions. It has also been decided

to limit the scope of streaming service providers to only the major ones that operate within

the Scandinavian industry; Netflix, Amazon, HBO; and touch upon some other VOD

platforms that provide similar services, which include local ones, such as ViaPlay.

The thesis of how streaming services are reshaping the film industry is intended

towards Denmark but also has an international appeal, for streaming service providers

offering their services across the globe, hence, in many different European markets acting

similarly. Additionally, producers seek international markets to showcase their films to

reach financial aspirations.

The structure of the paper is as follows; the first part is the methodology of the

research, where the process of the data collection and analysis is introduced as well as

explained. Next is a literature review based on the previous researches within the film

industry and introducing theories and models such as supply chain, Porter’s five forces

(Porter, 1979), four trajectories of industry change (McGahan, 2004), marketing mix, and

relationship marketing in order to build a theoretical framework for the analysis. The

following part contains the analysis of the collected data structured based on the theoretical

framework. The paper concludes in a discussion and conclusion about the findings in the

analysis.

2. Methodology

2.1. Research Philosophy

In order to be able to properly define the research design and overall research

strategy of a thesis, one has to understand the different philosophical approaches to

qualitative research. The two main philosophical concepts behind qualitative researches are

ontology and epistemology (Eriksson and Kovalainen, 2008). “Ontological assumptions

are concerned with what constitutes reality, in other words what is. Researchers need to

take a position regarding their perceptions of how things really are and how things really

work” (Scotland, 2012:9). On the other hand, “epistemological assumptions are concerned

with how knowledge can be created, acquired and communicated, in other words what it

means to know” (Scotland, 2012:9). Thus, ontology tries to answer the question of “What

is there in the world?” (Eriksson and Kovalainen, 2008:7), while epistemology is seeking

2.2.2. Operationalization of Theory

Generally, two alternative ways of linking theories to reality exist: the deductive and

the inductive approaches. The deductive research is typically based on theory testing and

implies that existing theory can be applied to reality. On the other hand, the inductive

approach can be seen as a method of theory building and assumes that empirical findings

could be used as a basis of developing new theories. It is worth mentioning, that studies do

not necessarily use either the deductive or the inductive approach, but can use both in order

to examine complex questions (Saunders et al., 2009).

This paper is considering both approaches. The deductive approach was used to

provide a systematic literature review. After collecting and organizing the literature review,

the same deductive approach was used to build a conceptual framework (See Figure 3),

which is essential in defining the research design (Yin, 2003). The approach switches to

inductive as analysis of the collected data commences, and continuous throughout the

application of the findings to a hypothetical case, as well as during the course of the

discussion.

Figure 1: Structure of the study

2.3. Structure of the research

2.3.1. Literature review

It is extremely difficult to attach academical theories to the film industry due to its

uniqueness and special characteristics. In order to build the theoretical framework that can

Literature Review

Conceptual framework

Analysis of Data

Discussion and propositions

Deductive Inductive

Application of Findings to a Hypotethical Case

be used as a base for the analysis, several academic journals, articles, online articles and

academic books were explored. The main theories explained in the literature review revolve

around the topics of industry analysis, changes in the industry and the supply chain of the

film industry. Without understanding the dynamics and different roles of the players within

the industry it is impossible to conduct any research, thus, an overview of the industry was

added to the literature review. The proposed conceptual framework combines and connects

the different model into a coherent one as a means to provide a structure for the data analysis,

discussion and conclusion (See Figure 3).

2.3.2. Analysis

The research study uses the theoretical background of Mintzberg’s (1987) emerging

strategies concept throughout its full course. The analysis follows the structure of the

conceptual framework in order to seek answers to the proposed research questions through

the collected data. For this study, both primary (in-depth interviews) and secondary (journal

articles, online articles, books, online reports) data were collected. As the paper considers a

social constructivist point of view, quotes from the various interviews are displayed

throughout the analysis. In the first part of the analysis, a short industry study is provided

with the help of Porter’s (1979) five forces regarding individual producers and independent

production companies as a way to understand the current state of the Danish film industry.

In the following part, the changes that VOD services cause within the industry are examined

through the various links of the supply chain. The supply chain of filmmaking includes a

large number of parts, however, the predetermined limit of the study’s length allowed to

examine only those that are the most intertwined with producers and production companies.

Thus, four parts of the supply chain are considered in the analysis: financing, producer, sales

and distribution. After identifying the various changes in the supply chain, a hypothetical

case of an individual producer or production company selling their project to a major VOD

platforms, namely Netflix, Amazon or HBO Nordic, is taken into consideration. Due to the

proposed research question of identifying opportunities and their way of exploiting, the

model of “4Ps” of marketing mix (McCarthy, 1964 in: Khan, 2014) is applied onto the case.

the research (See Appendix 1). The first questions always revolved around introduction

about themselves to help them ease into the conversation and to gain knowledge about their

background. The further questions were formed around relevant topics such as the current

state of the Danish film industry as they see, what possible changes could the VOD

platforms bring to the Danish industry and how they see it, how do they see these changes

affect the different players within the industry, how do they see the arising questions about

certain rights, what would it mean for them if a major VOD platform picked their project

(See Appendix 1). Due to the interviews having been conducted in a semi-structured way

several topics and questions surfaced that were not taken into account prior to the first

interviews. These questions and topics were later discussed with interviewees that have not

been interviewed at a later stage. A total of twelve interviews were carried out in a period

of five weeks. A short overview of the interviews can be seen in Table 1.

Table 1: Interview Overview

Name Position Company Date Location Length

Eva Juel Hammerich

Producer / founder

Nepenthe Film ApS March 23 rd, 2018, 10:

Company office, Grønnegade 18, 1 1107 Copenhagen K

Jakob Staberg

Producer / founder

Statement Film Aps March 23 rd, 2018, 16:

Café, Skt. Annæ Wildersgade 52 1408 Copenhagen K

Bo Ehrhardt

Producer / founder / partner

Nimbus Film ApS April 4 th, 2018, 16:

Company office, Hauchsvej 17 1825 Frederiksberg C

Lars Feilberg

Producer / founder

Impact Tv ApS April 6 th, 2018, 17:

Company office, Rentemestervej 52 2400 Copenhagen NV

Henrik Danstrup Holst

Producer Klassefilm ApS April 11 th, 2018, 9:

Company office, Kronprinsessegade 46 D.

1306 Copenhagen K

Mikael Windelin

Producer / owner

Minerva Film ApS April 12 th, 2018 15:

Café, Espresso House, Kongens Nytorv 24 1050 Copenhagen K

Lars Herman

Producer / COO

Apple Tree Production ApS

April 13 th, 2018, 11:

Company office, Store Kongensgade 77 1264 Copenhagen K

Mikael Rieks

Producer / executive producer

Nordisk Film April 17 th, 2018, 15:

Company office, Mosedalvej 14 2500 Valby

Camilla Mølgaard Hansen

Junior distributor and marketing producer

41Shadows ApS April 18 th, 2018, 16:

Café, Espresso House, Vesterbrogade 3 1620 Copenhagen

Tine Klint Sales agent / founder / managing director

Levelk Properties ApS

April 20 th, 2018, 8:

Café, Meyer’s Deli, Gammel Kongevej 107 1850 Frederiksberg C

Klaus Hansen

Managing director

Producentforeningen April 20 th, 2018, 12:

Company office, Bernhardt Bangs Alle 25 2000 Frederiksberg

Stinna Lassen

Producer / founder / CEO

Good Company Films ApS

April 24 th, 2018, 15:

Company office, Vesterbrogade 95a 1620 Copenhagen V

2.4.2. Introductions of interviewees

Eva Juel Hammerich is a film producer and co-founder of the production company

Nepenthe Film. She has finished her bachelor studies at CBS, then after moving to Los

Angeles, she has received a Master of Fine Arts in Film Producing from the American Film

Henrik Danstrup Holst is a film producer who has been within the industry for

more than twenty years. He has worked as a producer for various companies in Denmark,

such as Zentropa. In the early stages of his career he focused on feature films, while in the

last few years he concentrated on producing entertainment content for children (Interview

with Henrik Danstrup Holst, 2018, 01:50; LinkedIn, 2018).

Mikael Windelin is a producer and the owner of the one-man production company

Minerva Film Rights. He has studied film, media and music at university and has been in

the industry since 1994. In 2001, he started his own business called Take-Away Film, that

mainly focused on advertisements. He became a co-owner of Minerva Film in 2006,

however the company went bankrupt in 2012. After that he started working in a company

called Ghosts that focused on visual effects. He later bought out what was left of Minerva

Film and became the owner of Minerva Film Rights. He mainly focuses on visual effects

and post-production on projects in collaboration with small production companies

(Interview with Mikael Windelin, 2018, 00:15).

Lars Herman is a producer and COO of the company Apple Tree Productions.

Having started in the industry in 1991, his extensive experience includes head of co-

production at Nordisk Film, head of development at DFI and deputy head of drama at DR.

Together with Piv Bernth, the former head of drama at DR, he funded Apple Tree

Productions in December, 2017. The company’s main focus is producing drama series for

TV channels in Denmark and other Scandinavian countries, as well as international co-

productions (Interview with Lars Herman, 2018, 00:57; Apple Tree Productions, 2018).

Mikael Rieks is a producer and executive producer working at Nordisk Film

Productions that he has joined in 2003. He has been working in the industry for twenty-six

years. He has experience with both documentaries, TV series and feature films. Currently

he is mainly focused on producing feature films for both the domestic and the international

markets. In the last six years, he concentrated on international co-productions. His last

finished project was the film called “Land of Mine”, which co-produced with several

European countries. The movie has also been nominated for an Academy Award (Interview

with Mikael Rieks, 2018, 03:10; Nordisk Film, 2018)

Camilla Mølgaard Hansen is the junior distributor and marketing producer of

41Shadows, a company that is working with both distribution and production. In November,

2017 the company launched its own streaming site, FilmLounge. Camilla’s responsibilities

cover PR & Marketing, and film acquisitions. She has been working as a marketing producer

on the company’s first feature film “Kaptajn Bimse og Goggeletten” scheduled to release

this year (Interview tin Camilla Mølgaard Hansen, 2018, 00:14; 41Shadows, 2018).

Tine Klint is the owner and managing director of LevelK, a company working with

international sales and distribution and operating as an aggregator as well. She has been in

the industry for 20 years, having started her career at Zentropa, mainly working in sales and

distribution. After leaving Zentropa, she has started working for Nordisk Film, then later

Trust Nordisk. In 2009, she started her own company LevelK, that works with sales and

distribution. In 2011, the company extended its activities to include VOD aggregation,

making it one of the few aggregators operating within Nordics (Interview with Tine Klint,

2018, 01:06; LevelK, 2018).

Klaus Hansen is the managing director of Producentforeningen, the Producers’

Association in Denmark. He studied law at KU, but has been working in the film industry

for several decades having started working with cinemas both in West-Berlin and

Copenhagen. He has been the managing director of Producentforeningen for almost twenty-

four years. The association is seeking to promote members’ interests to the copyright

Organisation, public institutions and TV stations as a way to provide better production

conditions for producers. Moreover, the association negotiates agreements with various

employee groups within the Danish film industry (Interview with Klaus Hansen, 2018,

00:01; Producentforeningen, 2018).

Stinna Lassen is a producer and CEO of Good Company Films. She studied at the

National Film School of Denmark and has been within the industry for fifteen years.

Previously, she has worked as a producer on the TV series “The Team” at Nordisk Film.

She started Good Company Films in September 2014, together with producers Vibeke

Windeløv, Ole Søndberg and Anni Faurbye Fernandez. The company is focusing on both

creating commercial content and promoting new talents. They have produced three feature

films and two short TV series so far, and are currently working on a TV series as part of an

primary and secondary data were both collected. Hence, the number of interviews and the

various articles and websites allowed the researchers draw conclusions based on a large

amount of sources. Moreover, the theoretical framework described in the literature review

provided evidence and validity for the research topic.

As a way of constructing internal validity the process of matching patterns from

the collected data to patterns from academic studies and literature within the topic is advised

(Yin, 2003). The provided literature and theoretical framework are the base of the interview

guidelines and questions created and sent out prior to the interviews. The guidelines and

questions focused on topics and themes that are discussed in the literature review, while also

allowing the interviewees to discuss topics and questions that might not have been taken

into account beforehand. Therefore, it was possible to ensure that the collected data match

the patterns and statements of the conceptual framework.

Construction of external validity suggests that findings and conclusions in a

research need to be generalizable to other cultural settings, countries, industries outside of

the focus of the research study (Yin, 2003). The various interviews and examined players

within the industry helped gain external validity to some extent. On the other hand, as the

research focuses on the Danish film industry, in order to be able to generalize the findings

to other countries and industries, further investigation is necessary within the topic.

Reliability provides aides to guarantee that the conducted research is consistent and

can be repeated. Hence, if researchers in the future conducted the same research and

followed the exact process, they would draw the same conclusions as the research study

(Yin, 2003). The detailed descriptions of used theories and models in the literature review

are part of ensuring reliability within the research. During the data collection process,

interviews were carried out on the same guidelines for professionals working in the same

field. Interviewed producers received the same questions and guideline, while distributors

and sales agents were presented with a slightly different set of questions. This way the

collected data were structured and comparable. Furthermore, as the exact research, data

collection, analysis process and their distinguished steps are discussed in the methodology,

it could be a guideline and an aid for the future researchers to be able to conduct the same

research.

2.6. Limitations of research

The following limitations arose within the research as a result of limited

methodology and dataset:

  • First, only a limited number of academic studies and researches exist within the field of economics and business regarding the film industry. The industry possesses certain special characteristics and dynamics that make it difficult to attach existing models to, that describe it perfectly. As the film industry is a unique mix between art and business, the existing research lacks to identify certain characteristics and patterns.
  • Second, the dataset of the study is also limited. Due to the time constraint and limited accessibility, twelve interviews were conducted with industry professionals, thus, the research could be subjected to size bias. The research lacks of interviews with certain players such as VOD platforms and distributors. Furthermore, the available secondary data were also limited. Industry professionals, such as streaming services are reluctant to release data regarding their activities and other existing data is often outdated due to fast ongoing changes within the industry.
  • The third limitation is linked to language barriers. The interviewed professionals were all of Danish nationality. Yet, because the researchers’ lack of knowledge of the Danish language and the required language of the thesis, the interviews were conducted in English. Since English is not the first language of the interviewees, certain imprecisions and deformations could have taken place. Lastly, as the focus of the paper is the Danish film industry, many existing data, reports and researches are in Danish, that made it impossible for the researchers to use. The National Film School of Denmark also provides data and research findings that could have been useful to the study, but these are written in Danish as well.