Discovery’s series funding model: “There is uncertainty that needs to be addressed”

With the news emerging this week that a new funding model for unscripted programming at multi-channel media company Discovery is reportedly ruffling feathers in the unscripted community, some within the ...
June 28, 2019

With the news emerging this week that a new funding model for unscripted programming at multi-channel media company Discovery is reportedly ruffling feathers in the unscripted community, some within the industry are hoping the network group will adapt elements of the policy to address the myriad concerns being voiced.

Since acquiring Scripps Networks Interactive over a year ago, Discovery has, over the course of this year, implemented a funding scheme that sees production companies footing the bill for the titles they produce, to be paid later by Discovery only upon delivery of completed projects. To ease the financial burden of production costs, Discovery has entered into an agreement with Citibank to facilitate low-interest loans. Discovery calls the scheme “financially neutral” for its partners as the interest costs can later be claimed as budgetary line items to be refunded by Discovery upon completion of a given project.

Variety and Deadline first reported that Discovery was facing a backlash from members of the production community on Wednesday (June 26), though Discovery maintains that the funding scheme has been received positively. A statement from Discovery sent to Realscreen says: “We have engaged in constructive discussions with our producing partners to better manage our cash flow as we invest more in content than ever before. We have gotten a positive response so far from both big and small production companies.”

However, one producer who has worked with Discovery describes widespread dissatisfaction with the model among fellow producers they’ve spoken with in the “tight-knit” unscripted community.

For John Ford, general manager of non-fiction prodco trade association NPACT, the issue with the model depends on who the players are. “It depends on the size of the producer,” he tells Realscreen. “A large-scale producer may be able to work the financing into its plan. A smaller shop may find that more challenging. I’m hearing a lot of concern from many of the small-to-mid size companies. Perhaps Discovery can adapt its plan accordingly.”

Despite similar funding schemes in Europe, the producer who spoke to Realscreen pointed to the major difference that UK and European producers keep their intellectual property, while those signing production deals with Discovery are expected to self-finance IP retained wholly by Discovery.

Of course, cable networks in the U.S. have been retaining rights for unscripted content for decades, and the current ecosystem finds streamers with global reach also taking a hard line approach in retaining global rights for original funded content. That climate, coupled with the call from shareholders for network groups such as Discovery to perform financially as well as commercially, creates new pressures for networks and producers to contend with.

“Fragmenting audiences in the U.S. are diminishing revenues and forcing networks to use other platforms and pay methods to make money,” says Ford. “That’s the backdrop to this.”

A Discovery spokesperson would not comment on the company’s existing or future deals with regards to IP retention for producers.

In terms of what this might mean practically, the producer who spoke to Realscreen predicted that such a policy could put Discovery lower on the list of companies to pitch to in an industry saturated with buyers, reducing the value of the IP Discovery does retain.

Overall, they see this as one more way to transfer risk and responsibility on already overburdened producers who don’t even have the benefit of retaining IP to bring in profits over time if their shows are hits. And with the general trend towards increasingly lower budgets, the promise of financial neutrality demands good faith that is in danger of evaporating under current circumstances. If prodcos pay for high production value only to be later told they need to cut costs, the money will need to come from somewhere.

Ford echoes some of these concerns: “Is the overall production budget staying at its previous size, or is it being cut, essentially negating the interest payback?” He also questions whether interest paybacks will remain in future contracts or if they might be negotiated out later. “There is uncertainty that needs to be addressed.”

But as a long-term solution, not everyone can bypass a giant like Discovery. “This can happen for shows that cross over into other networks or streamers’ domains,” Ford tells Realscreen. “But if you have a food or interior design series, or a shark show, you have few other options among networks. This will shake out gradually, project by project.

“Discovery is an enormously valuable partner for non-fiction producers; most producers need to do business with them and want to.”

It’s still early, and these concerns have only just begun coming to light publicly for the first time this week. Ford sees hope in possible negotiations, including IP-sharing discussions that wouldn’t necessarily take major IP control away from Discovery.

“I believe once they round up all the concerns producers are expressing, Discovery will choose to address them.”

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