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“When Jerry Seinfeld and Larry David met NBC managers for the first time to make a ‘program about nothing,’ no one could have envisioned where the investment in this format would go. Today, more than 15 years later since the most successful local series of all time went off the air, it still generates millions of dollars in annual royalties to the copyright owners, as if it were a rental apartment or income-producing asset,” says Alon Dolev, the co-founder and partner of TV Format Fund (TVFF), which specializes in financing television formats for export. “The realization that a successful television format can provide its owners and investors a fixed income, sometimes for life, is the idea underpinning the establishment of the fund.”
At the MIP television and film festival in Cannes, TVFF sold its first original format to Endemol Spain, which licensed an option to air the trivia game show 300.sec Ride. The format, produced by Ami Glam, requires contestants to answer eight questions in 300 seconds as the move along a special ride in the studio.
As one of the first people to spot the business potential of commercial collaboration with advertisers, and a founder of a company to finance content productions which was responsible for hundreds of productions, Dolev is familiar with the Israeli media and content industry and its potential.
The global television format industry has an annual turnover of $3.5 billion, and all that is needed to win a share of the pie is one winning format. In the past few years, quite a few Israeli formats have been successfully licensed, from The Safe to series such as In Treatment and Kidnapped. “Over time, Israel has become one of the most interesting and appreciated sources of television formats. Demand for Israeli content in the world is very high, which increases the motivation of local production companies to try their luck in developing formats,” says Dolev.
“We are a kind of commercial area for production companies. When a television format is licensed in the international market, all of its investors win a proportionate share of the profits from the current license, as well as any future business activity the format generates,” says Dolev. “In this way, each investor will be eligible for a proportionate share of any licensing of the format to another country, any production of another season, any sale of merchandizing, and so on, so long as the format generates profits for the investor.”
Smart virtual content
TVFF’s main innovation for investors is its business model, which basically applies the model of technology incubators to a “content incubator.” “Just as investors in technology incubators invest in an incubator rather than in one company, an investor in TVFF invests in the fund, which disperses their investors across a number of formats,” explains Dolev.
For example, TVFF invests simultaneously in reality shows, game shows, soaps, and thriller formats. As with technology, one format licensed justifies the entire fund. “We consider ourselves as an investment fund just like in high tech, where diversifying the investment reduces the risk, but we seek investors who think that investing in television formats is an opportunity to make a profit and contributing to Israel’s original production industry and Israeli creators,” he says.
TVFF’s representatives meet creators, examine potential ideas, and examine the marketing and financial feasibility on the basis of market trends in the world. After picking a format, a pilot is developed in cooperation with the creators. Dolev says that, belying conventional wisdom, developing a format and producing a pilot involve fairly small sums, amounting to a few hundred thousand shekels. “Due to the high demand for Israeli formats and the strong appreciation for Israeli creators, we discovered that it was enough to invest in developing a format and pilot alone to market a program,” he says. After producing the pilot, the fund’s representatives offer to license it to foreign networks and production companies.
An asset for a lifetime
TVFF’s business model is based on a format license becoming an asset that generates its investors income so long as it is “alive”. “The royalties market lives on a 5-7% commission for each episode broadcast overseas, but there are other sources of profit,” says Dolev. “As technology develops, the world of television changes, it creates many creative business opportunities vis-à-vis audiences. For example, off-screen activity, such as merchandizing, YouTube views, and shows. The sky’s the limit.”
In addition to licensing 300.sec Ride in Spain, TVFF has developed three other formats, for which it is in advanced licensing negotiations with several production companies, including US giant Warner Brothers.” The author is the content editor at Rubicon Business Group
Published by Globes [online], Israel business news - www.globes-online.com - on November 27, 2014
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