Date:

January 25, 2023

Localization is Key to Market Growth During a Recession

How to respond to budget cuts and better compete in the global marketplace

Despite governmental and economist statements to the contrary, a review of content-buying companies' Q4 earnings , news reports , think tank analyses , and layoffs suggest that many in the Media and Entertainment (M&E) industry believe a recession is already upon us. Amazon , AMC , Roku , DirecTV, Warner Brothers , and others have responded to the threat by announcing job, budget, and production cuts.

Given the increased competition between distribution platforms and the decline of theatrical distribution, how do companies stay competitive? How do they increase market share with fewer resources devoted to content? How do you cut and grow simultaneously?

We believe the answer lies in the localization of content developed for other markets.

Content Impacts

In the past, studios, television networks, and production companies responded to a recession in several ways:

1. Halt or decline funding of projects

2. Reduce the number of projects being green lit

3. Cancel shows with marginal audience shares/minutes watched

The above are all pure cost-cutting measures. They reduce a wide range of expenses related to the development, production, and distribution of content, which from an accounting perspective, may address the problem. It doesn't feed its subscriber's appetite for new content. That's a real challenge as cutting production expenses may appease executives; fewer shows to watch and lower subscriber numbers due to increased churn will not appease viewers or shareholders.

How Cutting Production Impacts Market Share

Market research indicates consumers want four things from their streaming service:

1. Competitive pricing

2. Access to popular shows/movies

3. An ad-free option, and

4. Original programming

The reduction of the production budget impacts each of these areas. Without a constant supply of popular or original content, ad revenue will be harder to attract, and competitive pricing may become irrelevant because consumers won't see the value in subscribing. Relying on reruns is not the answer because many series reruns are available on numerous linear, OTT, or FAST channels. This undermines the overall value proposition, leading to increased churn rates and declining revenues. Production budgets are trimmed to keep shows in production, but those cuts could manifest in lower story and production quality, neither desirable outcomes.

What Is the Best Option?

Not everyone has this ability, but importing or exporting new content from other countries or cultures is a good option. There are risks here, too, such as choosing the wrong titles, incompatible markets, or cutting corners in the localization process. Recognizing the importance of getting the story, language, and culture right can have big payoffs. Following the bru-ha-ha over the subs and dubs quality of "Squid Game," consumer expectations of accurate language translations, staying true to the original storyline, and cultural integrity are much higher than they used to be. As the last two Best Picture Oscar winners, " Parasite " and " Coda ," prove, audiences are more than willing to deal with subtitles and dubs.

Companies that create shows for non-US markets, such as Netflix , Disney , Amazon Prime , and others, have an advantage in this situation because those films or series are localized for other countries at a fraction of the cost of a new title. For example, in 2022, the cost per series episode ranged from $4M to $30M . The average price of translating a single episode of a 30-minute TV show can start at $10,000 per language and go up depending on the type of content, desired markets, age rating, and story or cultural complexity. It's a deal by comparison.

Then there's the benefit of single languages being spoken or understood in multiple countries. Localizing a title using subtitles, dubbing, or both allows a title to reach much broader audiences. The top five non-English languages include Chinese (1.3B), Spanish (471M), Hindi (342M), Arabic (315M), and Portuguese (232M). The total population across all these languages, including English, is 3 billion. Not all platforms have subscribers in each of these countries. Still, the point is that localization is a way to provide new content to voracious subscribers economically.

If you have titles you'd like to release outside of native markets, Spherex can help you understand the effort required to make that happen. Spherexgreenlight ™ is an AI/ML platform that can provide cultural and regulatory insights for over 200+ countries and territories worldwide. Contact us to learn how we can help your title reach its full potential.

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