The Global Appeal of Foreign Content

Cinema Audience Coming Soon

For well over a century, Hollywood has been exporting American-centric film and television content to the world.  Now the tide seems to be turning as the world exercises its own creativity in telling its own stories.  Those stories are now beginning to take root in what has long been both Hollywood’s own back yard and the world’s most lucrative content market.   

The entertainment industry continues its remarkable transformation as content production around the world accelerates and global streaming platforms become ever-more dependent upon an evolving audience sentiment.  That audience sentiment is increasingly transient and adventurous. 

The “churn” rate for subscribers to premium streaming services such as Netflix, Disney+ and HBOMax has risen consistently over the past several years.  As the Media C-Suite has previously reported, statistical data shows that as many as 37% of consumers internationally may have cancelled a subscription to a streaming service during 2022, with younger audiences reporting much higher levels of cancellation.

Those figures may rise as consumers begin to give more weight to value for money.  One measure of value is how long it takes a paying subscriber to scroll through thousands of titles to find one film or television show that they haven’t already watched.

The search may not be entirely reserved to a distinct title, but to the stories being told.  Many of the titles across streaming platform libraries are simply derivative of a once original story.  Sequels, prequels, spin-offs, reboots and outright rip-offs can be seen as a majority of titles in libraries of the largest streamers.  Other issues include a distinct dominance of Americana and titles that come and go, often without notice.

Hard Wired Heritage in a Wireless World

Many of these issues are structural for an industry rooted in distinct content markets often defined by language and cultural reference.  The content libraries of each streaming platform varies from country to country as a result of distribution licenses tied to long-standing relationships between distribution companies and local cinema networks. 

A title on Disney+ that is available to subscribers in Germany may not be available to subscribers in England due to arrangements made by Disney’s sister distribution company, Buena Vista many years ago.  Those arrangements may have given exhibition rights to a company now affiliated with Netflix or one of its competitors.  That title will likely be removed when its license expires and Disney is able to reclaim it for Disney+, something that plagued Netflix subscribers from the moment each of the Media Majors committed to its own streaming strategy.

This is a throwback to a pre-digital age. It shapes a growing divergence of the international streaming business model that relies upon acquisition and retention of subscribers across markets from the traditional roll-out of feature films for cinema audiences divided into separate markets.  Those audiences, traditionally divided by language and cultural reference, are increasingly united in their consumption of foreign language content and increasing hunger for even more diversity across stories and storytellers. 

One notable area of concern for the Media Majors, who have now each committed to the streaming business model, is that the Hollywood content factory is simply not built to deliver what subscribers around the world really want:  a lot more truly original stories (and a little less Americana).

Money Heist Poster
La Casa De Papel, or Money Heist, 2017. Created by Alex Pina, a Netflix Original Spanish-language series that became its number 1 show. Image: courtesy Netflix.

The Media & Entertainment Industry has developed, for better or worse, on a model built in Hollywood.  For many years, that model included absolute control over which films cinemas were allowed to show audiences.  The aim was to control distribution and prevent competition from any producer outside the “system”.  That control was so absolute that in the late 1940s, the US Supreme Court ordered Hollywood’s “Major Studios” to breakup what amounted to a cartel on content in what is often referred to as the “Paramount Decrees”.

While cinemas were effectively freed from abusive market practices by the Hollywood studios, the distribution system was never really dismantled. Hollywood studios have transformed themselves from actual film-makers and into global distribution giants. Those distribution giants control distribution networks that continue to decide which films are seen by which audiences.

A limited number of distribution networks that service a limited number of delivery channels include a correspondingly limited number of decision-makers who “green-light” the production process for films and television shows.  Anecdotally, there is a preference for stories that have played well before and that your own company controls the rights to. 

Taking a risk with a high-paying job on a story that hasn’t already proven itself in a previous incarnation is less likely than approving the tenth or eleventh sequel in a successful franchise.  This results in vested interests being concentrated within a shrinking pool of movie franchises and “cinematic” universes. 

It should come as no surprise that audiences might experience fatigue.

For one remarkable reason, Hollywood might not care. 

One Market to Bind Them All

The content production market in the United States services its own domestic distribution market, which so happens to remain the world’s most lucrative market for film and television content.  American film-makers and television show runners don’t necessarily cater to American audiences so much as to the distributors and commissioning execs that purchase that content. 

Increasingly, those distributors and commissioning execs exercise control over the choices that cinema owners and television channels have over what content to deliver to audiences.  Unfortunately, for streaming subscribers, that content inevitably ends up being offered on the streaming platform affiliated to whichever distribution company committed to it. 

So long as money is being made in the US, few distributors seem eager to change from the inside.  Those same distributors tend to be subsidiary companies within the much larger publicly-listed media conglomerates.  These Media Majors are controlled from the very top by powerful CEOs tasked with five year strategies that they must answer to shareholders for.  Without exception, these CEOs have committed themselves to streaming, leaving distribution execs further down the food chain to carry on as best they can.  The best they can has meant status quo.

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That status quo has distributors green-lighting production of films that they feel confident in for the US market; finally pushing those films out to foreign markets through distributors, often within the same corporate chain of ownership.  The result is the same Hollywood movies, year after year.

But the growing divergence between international streaming business models and highly regionalised theatrical box office may be changing this.  One thing that will likely not change is this:  if a film makes it big in the United States, it will make it big everywhere. 

Coming Home to Roost

Weariness among global audiences toward Hollywood’s reliance on repetitive storytelling has been growing for a number of years.  For distribution and commissioning executives focused on the US content market, this may not matter.  But for the CEOs of their parent companies, it matters a lot.

The abundance of sequels, reboots, and adaptations on streaming platforms has created a sense of predictability that has fuelled an increasing trend in subscriber cancellations at the top of the streaming  food chain.  Audiences are demonstrating an appetite for originality, as opposed to “Originals” and the excitement of discovering new voices that challenge established conventions.  

Unsurprisingly, it was Netflix that first understood this enough to incorporate it into its commercial strategy.  In December 2017, Netflix began streaming the Spanish-language drama entitled, La Casa De Papel, also known as Money Heist.  That show quickly became the most watched non-English language show on Netflix globally. 

Parasite Movie Poster
Parasite, 2019. Directed by Bong Joon-ho, This Korean language Netflix Original won the Palm d’Or at Cannes and Best Picture plus 3 other Oscars at the 22nd Academy Awards. Image: courtesy Netflix.

By 2019, the historically US-Centric Academy of Motion Picture Arts & Sciences awarded four Oscars for the South Korean film, Parasite during the 92nd Academy Awards, including “Best Picture”, “Best Director” and “Best Original Screen Play”.  This was the first time a foreign language film had won “Best Picture”.    

In 2022, according to statistics compiled by Parrot Analytics, a number of foreign language shows in the United States were reaching over 40 times more demand than the average show nationally.

While many foreign language shows demonstrate remarkable success internationally before exposure to U.S. audiences, the success of a foreign language film or television show in the U.S. market inevitably means greater success internationally.

For investors, this is significant. 

Following the success of La Casa De Papel, Netflix invested heavily in content production facilities and offices in Madrid and increased its content acquisition budget for Spanish-language content significantly.

Similarly, following the success of its Korean-language content in the United States, such as Kingdom and Squid Game, Netflix has announced plans to invest US$2.5 billion into Korean-language content over the next four years.

When Netflix first began offering delivery of films and television shows over the internet, they opened a new content distribution and delivery channel to global audiences.  The many other streaming platforms that have followed have widened and deepened that distribution and delivery channel beyond what Hollywood is capable of filling.

The result is more Americans experiencing what the rest of the world has to offer.  It will be interesting to watch how well Hollywood does with real competition in its own back yard. 

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