Methods used to value film, television and music content have traditionally revolved around an analysis of the historical performance using a discounted cash flow methodology. For small libraries, a valuation would typically perform a title - by - title valuation, pivot tables would be used for larger libraries, Monte Carlo simulations would be run for Debt Rating exercises and Private Equity deals and Net Publisher’s Share (“NPS”) would be used in music publishing deals.
However, the advent of digital technology has transformed traditional distribution methods and timing of releases. Until now, the digital transformation has most dramatically affected the music industry by giving rise to digital piracy. While piracy costs the industry billions, distributing music is increasingly giving rise to these new revenue opportunities including advertising revenues, a-la-carte, subscription and streaming revenues from online retailers and wireless providers while questions of inter-operability, open vs. closed environments, and pricing strategies will continue to impact value.
In film and television, the digital landscape is transforming the length and order in which a product has been released through new windows of exploitation - theatrical, pay-per-view, video, television - and created new channels of distribution with online downloads and streamings.
Each technological innovation has increased the vale of existing entertainment assets but not after initially upsetting the distribution channels and creating a tremendous amount of anxiety amongst operators. These drastic changes create the need to use a firm like FTI that serves as a thinking partner to major content owners (film studios and music majors), influencing the future of distribution and knowing where the value of content will increase in the coming years. We also have proven traditional valuation expertise of content in various types of engagements: