Video on demand (VOD) streaming has taken the world by storm, bringing with it new opportunities for economic developers. US streaming pioneer Netflix’s foray into South Korea is a case in point. 

Since entering South Korea in 2016, Netflix’s investment in content production has generated almost Won5.6tn ($4.7bn) of economic impact and created more than 16,000 jobs, according to Deloitte Consulting Korea.

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Successful local content has also contributed to the decades-long phenomenon of ‘Hallyu’ — the Chinese term describing the ‘Korean wave’ that has hit the rest of the world, as its culture has been popularised and exported globally.

Within just four weeks of the Korean dystopian drama Squid Game being released on Netflix in September 2021, more than 140 million subscribers had logged on to see the show.

“The viewing outside Korea has been phenomenal,” Ted Sarandos, Netflix’s chief content officer, told investors on October 19. “We’ve had successes — not on that scale, but like that — with La Casa de Papel from Spain, Lupin from France, Blood Red Sky from Germany and Sex Education from the UK, where the stories of the world can increasingly come from anywhere in the world.”

In a battle for subscribers, VOD streaming platforms such as Netflix, Amazon Prime and Disney+ are investing in local content production in more countries than ever before. 

For economic development agencies from Seoul to Bogota and Mumbai, these ‘streaming wars’ have created a new era of entertainment industry investment. The potential to stimulate high-value-added job creation, urban regeneration and cultural exports is being capitalised upon worldwide. 

Subscriber-driven expansion

In the digital era, Hollywood has collided with Silicon Valley. When Netflix transitioned from by-mail DVD deliveries to subscriber-based streaming in 2007, it laid the foundations for a proliferation of competing global digital content platforms.

A decade later, Netflix was operating in more than 190 countries. It now has 140 million of its almost 214 million subscribers living outside the US and Canada.

“The new streaming models privilege more of a convenience logic [enabling consumers to watch content on a personal device as opposed to going to the cinema], which is much more global than local,” says Allègre Hadida, an associate professor of strategy at the University of Cambridge, who has researched the impact of streaming services on Hollywood studio filmmaking.

Stay-at-home orders during the pandemic have been a boon to streaming services too. In 2020, the number of subscriptions to online video services globally spiked by 26% to reach 1.1bn, according to the Motion Picture Association.

But given the virtually non-existent cost to switch between platforms, streaming services have been ramping up content production to retain and gain new subscribers.

“There’s a massive investment in content by online platforms right now,” says Ms Hadida. “While streaming platforms have different business models and objectives, pure players like Netflix evidently need subscriptions.” 

Netflix is currently producing local TV and film in around 45 countries and plans to spend $17bn on content in 2021.

While Amazon Prime is already available in more than 200 countries, the tech giant has grown its team of in-country content leads to develop and commission original series in the UK, France, Italy, Spain, Germany, the Netherlands and Sweden. 

Meanwhile, Disney has announced it will increase the planned $8bn-$9bn of total content spend for its streaming platforms, Disney+, ESPN+ and Hulu, in 2024. The entertainment group has more than 340 local original titles in various stages of development and production over the next few years.

Apple TV, the video streaming arm of tech giant Apple, is available in more than 100 countries, and reportedly has a budget of at least $500m to spend on marketing its shows over 2021.

Streaming platforms are boosting investment in the whole content production industry. Purely, a London-based fintech company that connects film and TV content-rights owners with streaming services, foresees even more spending into producing and licensing new entertainment. 

In 2020, at least two-thirds of the $220.2bn spent on global film and TV production came from Hollywood studios and US-based streaming services. By the end of 2021, Purely expects global content spending to exceed $250bn and continue to rise amid spending from recently merged media giants such as Warner Bros-Discovery and Televisa-Univision.

Booming FDI

Amid a backdrop of international expansion and bulging content budgets, foreign direct investment (FDI) has poured into audiovisual (AV) operations ranging from regional offices to post-production facilities.

FDI in the AV sector tends to have high socio-economic impact, making it highly sought after by economic development agencies. Film and TV productions create skilled direct jobs in everything from costume to sound engineering and visual effects, as well as opportunities for nearby ancillary services and spillovers into other industries, including publishing, tourism and hospitality.

Since 2010, investors have announced FDI projects worth more than $17.8bn in the motion picture and sound recording sub-sector, according to fDi Markets, a greenfield investment tracker. 

Despite the pandemic, which led to the postponement of many film and TV productions, a record 99 AV FDI projects were announced in 2020. This is up from just 22 projects a decade earlier, thanks in part to streaming platforms expanding their physical footprint.

As part of Netflix’s Won770bn investment into the Korean creative economy since 2016, the streaming giant has taken out lease agreements on two production facilities in Paju and Yeoncheon, near to the capital Seoul. The company also announced plans in April 2021 to open a new office in the Colombian capital, Bogotá, after a suite of successful locally made productions, including the crime television series Narcos.

For years, Colombia has championed the so-called ‘orange’ economy, aiming to use creative industries as a means to develop local job opportunities and development. Since 2014, Netflix has invested more than $175m into local Colombian content production and has more than 30 new local projects planned for 2022.

Elsewhere, Netflix has set up post-production facilities to leverage local tech talent, such as in Mumbai, the home of India’s Bollywood cinema industry.

Other entertainment giants are setting up offices in line with plans to expand coverage of their platforms. For instance, Warner Media announced plans in September to open a base in Singapore in anticipation of the rollout of its HBO Max streaming service in Asian markets.

“Our new office space in Singapore as a regional headquarters will be the perfect backdrop for the innovative work to be done in the lead up to our launch,” Amit Malhotra, managing director for HBO Max in south-east Asia, India and Korea, said in a statement.   

Meanwhile, Disney Animation Studios is set to open a new production studio to produce content for Disney+ in the Canadian city of Vancouver, which has emerged as a leading hub for film and TV production.

LA connections

New investments are often brought about from relationships between industry players and local film commissions. When US production company Shondaland were seeking studio space to shoot their upcoming Netflix series Bridgerton, they invited British film producer Adrian Wootton to Los Angeles.

After being introduced to Chris van Dusen, the now famous showrunner behind the hugely successful romance series, Mr Wootton and his team set about to find a suitable space for the production company in London.

“One of the biggest shows in the world happened in what seems like a heartbeat,” recalls Mr Wootton, who has served as the CEO of the British Film Commission (BFC) — which promotes the UK as a location for film and TV production — since 2003. 

The UK is one of the leading hubs globally for streaming content production. In the first half of 2021, a record £1.9bn of inward investment was spent on film and TV production, according to BFC figures. 

But with so much activity driven by streaming services, available studio space has been hard to come by.

“There is a complete mismatch between studio demand and supply,” says Chris Berry, a London-based director specialising in media investments at the real estate advisory firm Lambert Smith Hampton.

“The production industry is taking it upon itself to fix the problem,” he adds, noting that sites developed for industries such as logistics are increasingly being repurposed as studios.

One example of this is in the London borough of Enfield, where Netflix recently took a lease out on a speculative unit to set up a campus including sound stages, studios and set production.

“Logistics is a direct competitor for the same sort of sites as studios. The massive amount of money going into studios can’t source land because anything developable is being bought by logistics,” explains Mr Berry.

Development opportunities

To meet demand for production space, real estate developers and institutional investors are piling in. Los Angeles-based Hudson Pacific Properties, a studio developer and operator, and asset manager Blackstone announced plans in August 2021 to invest more than £700m into new studio facilities in Broxbourne, Hertfordshire.

Victor Coleman, the CEO of Hudson Pacific Properties, tells fDi that while they surveyed four metro markets to expand into — Los Angeles, New York and Vancouver being the other three — the Broxbourne site offered a “phenomenal” opportunity given the UK’s film and TV heritage.

“The location, access to local tax credits and generous opportunities of current crew and talent in that marketplace were a highly desirable place for us to put a production facility,” he adds.

Mr Coleman, who made his first studio acquisition back in 2007, says there has been a “massive shift” from studios being leased by production companies on a project-by-project basis to much longer periods of time.

“The massive proliferation of content for companies like Apple, Amazon, Netflix and Hulu changed the entire landscape,” he explains. 

Production and streaming companies are now leasing facilities “to control their destiny”, notes Mr Coleman, who says they are moving to secure space and develop staff to be associated with their companies, rather than using third-party providers and freelancers. On top of a “scramble” for studio space, highly skilled talent and workforce development is another force being driven by the streaming platforms.

“You can have all the studio space in the world — if you don’t have the people to actually physically make your show, you are completely screwed,” said Georgia Brown, head of Amazon Studios Europe, in an interview at Edinburgh TV Festival in August. “It is really important that we invest in people and infrastructure.”

Leveraging the opportunity

Some UK local authorities are utilising streaming service investment into talent and space as a means to diversify their local economies. After years of productions from the likes of Netflix, Amazon and Apple, the east London borough of Dagenham repurposed local assets to target studio developers.

Lisa Dee, head of film at the London Borough of Barking and Dagenham, previously told fDi that over recent years “we were quite radical in our thinking, but the council was brave in commissioning a feasibility study and investing the money [in land and buildings]”.

Meanwhile in Kent, a former railway building is being developed into a studio complex, fit with stages, editing rooms and amenities, such as a restaurant and hotel. 

“If you have a film and TV studio development, that acts as the nexus for an entire ecosystem and supply chain,” says Gavin Cleary, the CEO of Locate in Kent, the region’s local development agency.

Mr Coleman notes that the jobs created for TV and film production are “sticky”, requiring highly specialised staff. “In an amenity-rich production facility, you have a lot of ancillary aspects that will create economic development and growth prospects.” 

Africa’s potential

While studio investments have historically been concentrated in metro markets in developed economies, such as London, New York and Montreal, emerging markets are hoping to benefit from investment into local content production and creative talent.

In Africa, Unesco estimates that the AV industry has the potential to create more than 20 million jobs and contribute $20bn to the continent’s gross domestic product. 

While VOD streaming has only 3.9 million subscribers on the continent, with Netflix accounting for more than half of them, Unesco expects this number to reach 13 million by 2025 as internet usage grows.

“In many of these countries, the local digital platforms are completely driving the ecosystem,” says Ernesto Ottone Ramirez, the assistant director-general for culture at Unesco and a former minister of culture, arts and heritage in Chile. 

Nigeria’s Nollywood is the most developed film and TV ecosystem on the continent. It produced 2599 films in 2020, making it the second-largest film industry in terms of output after Bollywood, according to Nigeria’s National Bureau of Statistics. 

Other leading film industries in English-speaking countries include Kenya and South Africa, while Senegal, Côte d'Ivoire and Burkina Faso have well-developed industries in Francophone Africa.

“Burkina Faso has the biggest film festival you can imagine that can really compete with some of the biggest renowned festivals of the north,” says Mr Ottone Ramirez.

However, a key factor holding African countries back is their lack of refined policies and support for the industry. Less than half of countries have national film commissions and only 55% have policies supportive of the film industries.

To support the development of the ecosystem, Unesco partnered with Netflix in October 2021, launching a short film competition aimed at finding African creative talent and folktales.

“We have to find new ways to work with the digital platforms that can help to preserve diversity of content,” says Mr Ottone Ramirez. “We are trying to show creativity today around traditions and identities in Africa, made by young African filmmakers.”

The six winners of the competition will each be trained by industry professionals and provided a $75,000 production budget to make a short film.

Asset-light regulations

However, streaming platforms face hurdles to their international push for subscriber growth, with issues about rights to content across borders, and government support for local filmmakers and production companies.

Lawmakers in Switzerland proposed a revision in October 2021 to legislation promoting local filmmaking called ‘Lex Netflix’. The law will mandate private TV stations and streaming platforms, including Netflix, Disney+ and Amazon Prime, to invest 4% of their gross Swiss income in national film production. Such laws are now being considered elsewhere in Europe.

Much like the push among governments to tax revenues on digital assets, these streaming platforms may have to ramp up their contributions in markets where they do not have a physical presence. 

Even with regulatory hurdles surfacing, streaming is set to continue its climb and afford new investment opportunities. PwC forecasts that VOD streaming will grow at an annual rate of 10.6% on average until 2025, making it an $81.3bn industry. 

“You can’t predict how virtual production and technology will progress in the entertainment industry,” says Mr Coleman. “But it will certainly be a long road of voracious appetites for content and multiples of billions of dollars spent.”

This article was first published in the December 2021/January 2022 edition of fDi Intelligence magazine. Read the online edition here.