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Episodic content continues to grow and virtual production meets the demand

Olivia Broadley
Jan 28, 2021
5 min read

Chuck Parker, CEO, Sohonet – looks ahead to 2021 and the top trends the Film, TV and Ad industry should expect to see. Blog 1 in this series zones in on the continued investment in episodic content, and how C19 has given virtual production a material boost in financial viability

Content has always been king but it has never been more important to own a larger, higher quality and exclusive library than your competitors than it is this year. As content providers have doubled down on direct to consumer strategies, it is episodic content that continues to surge in volume. In contrast to single features, episodic productions provide a sustained wave of fresh content with which to engage subscribers for longer, generating higher perceived subscriber value.

Market leader Netflix, which ended 2020 with over 195 million paid customers worldwide, spent $17.3 billion on content last year – two and a half times more than Amazon Studios. By 2028, analyst BMO Capital Markets predicts Netflix will spend $26 billion per year on content. Amazon and Netflix have to spend considerably more on originals than rivals, in part because companies like Disney, NBCUniversal, CBSViacom and Warner Media Group have deep content catalogues they can pull from to enrich their services. Nonetheless, Disney+ and HBO Max have also unveiled huge investments at their investor days in their episodic slates building on franchises from Marvel, Star Wars, Pixar and DC.

The Mandalorian - virtual production
©2019 LucasFIlm Ltd. & TM. All Rights Reserved

In early 2020, there were analyst concerns that the lengthy lull in content production would negatively affect streaming business models in 2021. Netflix, however, said it still expects to launch more originals in each quarter of 2021 than in 2020. And with 73% of its subscribers coming from North America, Netflix has to pursue growth overseas with local content commissioned to attract customers in territories like India, Brazil and Spain.

As a result, the 2015 industry average of 1,400 annual TV and film productions (with material budgets) will soar well beyond 2,000 a year as competition intensifies. Even at such stratospheric multi-billion content budgets, each provider is aiming to strip costs out of production and still retain top tier value on screen. In parallel, the biggest challenge beyond the health and safety constraints of the pandemic are the real estate constraints created by the surge in volume of productions, which is driving more and more productions to shoot their content “off-lot” in empty warehouses and other large structures.

Original content investment of major SVODs (streaming, video, on demand)

Virtual production offers an answer

Combining live-action footage with computer graphics in real time was still relatively nascent for TV and film production when Covid-19 crashed into our industry, but the key benefit of reducing the need to travel for on location shooting has given virtual production a material boost in financial viability. While the pandemic persists, virtual stages are both a means to continue production safely and to reduce the cost of on location work (ie associated travel and accommodation costs).  If the practical effects delivered via virtual production can reduce the overall VFX budget for productions as promised, then this trend will accelerate rapidly.

The upfront capital cost of the technology remains expensive and the techniques are not yet embedded throughout the workflow, so expect growth to be gradual in 2021. When LucasFilm and Disney made The Mandalorian Season 1, each 40-minute episode reportedly cost $15m – the same as the per-episode budget of Game of Thrones’ finale. From their investor day, we learned that Disney’s long-term goal in pioneering virtual production at scale is to produce episodic series with all the production value of its blockbuster features with a step order reduction in costs and a faster turnaround. Watch The Virtual Production of The Mandalorian, S1 (ILMVFX)

The Mandalorian - virtual production
©2019 LucasFIlm Ltd. & TM. All Rights Reserved

The underlying technology, such as fine pixel-pitch LEDs and hyper-performance graphics cards, will advance in performance and reduce in price as the industry scales up (aided by Moore’s Law), making virtual production more accessible. The surge of real estate investment for purpose-built production studios will certainly give it a boost as well.  Directors and actors will gain creatively by being able to work in real-time with CG assets on set. Practical effects – like miniature models and explosions – will increasingly be done more efficiently in software on the virtual production stage. Greater use of the techniques and technologies will lead to better results and more streamlined production.

This has implications for the VFX industry and in particular for the titans of the sector. We will see VFX houses rapidly pivot to offer workflows and talent which marry virtual production with practical effects and the specialist creation of creatures and digital humans. It is not a given that those companies which were powerhouses prior to the pandemic will win this work. The VFX sector has suffered disproportionately during the halting of production; revenue streams were stunted; thousands of staff laid off. The winners in the race to virtual production will be the businesses that can perform at scale with the available capital to invest in the resources required to support this industry pivot while re-invigorating their core VFX business.

Sohonet awarded engineering emmy for advancing remote collaboration
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