Mipcom Grapples with Funding Crisis
CNBC presenter Ross Westgate offers his view of how audiovisual and content companies are grappling with a financial meltdown across the globe from the Mipcom conference in Cannes.
Another year and another global audiovisual content market conference has kicked of in Cannes with Mipcom 2008.
But boy, what a difference a year makes.
The financial and economic background has changed beyond all recognition. Right now there will be two fundamental questions behind every interview.
How will the global financial crisis affect direct content funding and what will the slowdown in advertising from the resultant global recession mean for those who commission the content? Already we're seeing the impact.
On Friday, just before Mipcom started, Viacom cut its full-year profit target and CBS said it was writing down the value of its licenses by $14 billion. Moments later, National Amusements, an entity that controls executive chairman Sumner Redstone's interests in Viacom and CBS, said it planned to sell $400 million in aggregate of the two companies' non-voting stock to pay down debt to comply with its debt covenants. The news triggered a near 18 percent decline in Viacom shares and a 20 percent plunge in CBS stock.
It also meant that Viacom chief executive Philippe Dauman wouldn’t be around for our interview and neither would any of our MTV guests. And the pain is starting to spread.
"Even digital growth is slowing," Amanda Purton, head of equity research at Barclays Wealth said. "Valuations look cheap at face value, but the risk to earnings downgrades means they're not as cheap as they look. M&A has all but vanished, with funding pulled by the banks."
But the crisis could, in fact, boost the value of really good content. Hollywood came of age through the ashes of the Great Depression.
And the strategy of British broadcaster ITV is a good current example. The savage fall in advertising has pushed ITV’s stock down some 65 percent in a year, but at the core of executive chairman Michael Grade's plans for a turnaround are UK-owned and originated programming.
James Ashton from the Sunday Times put it very well, saying: "when it was a monopoly, money rolled in from advertisers and the programmes lent a hand in winning an audience. Now it is the shows which ITV aims to sell abroad that are the tail wagging the dog."
Of course, Cannes is where they will try to sell those shows. ITV is also trying to get the British regulator to allow a lot more branded content, another area of key discussion at Mipcom.
And in much the same way we’re wondering whether the consumer in China and India can help dig us out of a hole economically, in Cannes we’re wondering about the impact new international markets will have on TV.
The director of Reed Midems Television Division, Paul Johnson, describes them as the meTRIC countries. They’re made up of the Middle East, Turkey, Russia, India (which just launched 300 new TV channels) and China and which -- despite the global credit crisis -- are all still pegged for double-digit entertainment growth during the next three years. If you’ve got a program or a channel to sell, then these are the people everyone wants to talk to.
And a final note of optimism.
For years it has been assumed that the growth of the Internet and digital developments would kill traditional TV. But here’s the thing, during the last Olympics NBC Universal (owner of CNBC) got record ratings for its Web service whlist, simultaneously getting its best TV ratings for nearly 30 years. Is it just possible that maybe online won’t cannibalize TV in the way many had feared?