Video Age International June/July 2016

IFE Business For CSPs 20 “most airlines partner with a single CSP, but we do have airline clients that use multiple providers.” Nowadays, some airlines spend up to $20 million each year on IFE content, and, according to Griffiths, the “IFE business is driven by first- run feature films.” For this reason IFE companies attend trade shows such as the Cannes Film Fest, AFM, TIFF and the airlines’ own market, Apex events and even the L.A. Screenings, but generally not NATPE, MIP or MIPCOM. IFE content must be thoroughly vetted: airlines stay away from scenes of terrorism and violence (for Europe); air disasters and nudity (for the U.S. and the Middle East); and political and religious content. Airlines even go to the lengths of changing gory scenes to black and white, and censoring dialogue that mentions pork products and scenes with homosexual content (for Singapore), and those showing competing airline logos. However, content owners provide only theatrical versions and inflight distributors will provide edited versions. If additional edits are required by the airlines, the CSPs will take care of them. However, according to Griffiths, nowadays theater distributors already edit most films for various territories. The IFE business model has changed from when airlines used to pay content owners $0.08 to $0.10 per seat. Today, the largest international carriers can pay $90,000 for a license to show one movie over a period of up to three months. In the U.S., airlines pay a flat fee, plus a fee each time the movie is watched. Usually, studios don’t give “airline windows” day-and-date releases, since theatrical box office is used as a metric for the downstream revenues. For GEE, Griffiths said that they license content for up to one year and sell content to airlines on a flat fee or on a per airline flight basis. The airline window is usually 40 to 90 days after theatrical release and there is no exclusivity. But, explained Spafax’s Chacko, “Airlines always “other windows.” The IFE sector is segmented into connectivity (wired and wireless), content and hardware (portable and non-portable). According to New York-based researcher Frost & Sullivan, in 2012 hardware took 68 percent of themarket share and connectivity took 20 percent. However, in 2020 the hardware share will decrease to 48 percent and connectivity will increase to 44 percent. But, the content portion is expected to decrease from 12 percent in 2012 to eight percent in 2020. Nonetheless, total volume for content suppliers is expected to jump to $464 million in 2020 (from $342 million last year). Indeed, it is a big increase if one considers that in 1982, movies sold to airlines brought to U.S. studios a total of $20 million ($50 million in today’s dollars). The structure of the IFE model is that airlines appoint content service providers (CSPs) — companies such as theMarina del Rey, California- based Global Eagle Entertainment (GEE), the London-based Spafax, Stellar Entertainment fromPompanoBeach, Florida, and InflightDublin in Ireland. CSPs in turn buy movies and TV shows from content owners, which could be inflight distributors like Encore Inflight (Hong Kong), JaguarDistribution (StudioCity, California), Skye Inflight (Montreal), Terry Steiner International (New York City) and Entertainment in Motion (EIM), a GEE subsidiary. Plus, CSPs buy fromU.S. studios, independent producers and sales agents. According to Jovita Toh, CEO of Encore Inflight, “the only airline that buys directly from content owners is Turkish Airlines. For the other 95 airline clients that we have, we work through the CSPs.” For indies the process is as follows: Airlines have divisions that screen everything and make a list for their CSPs to pursue. CSPs also make recommendations to airlines and advise on final selections. For these reasons content owners send screeners to both the airlines and CSPs. However, pricing is only discussed with CSPs. The business arrangements between airlines and CSPs can be on a total monthly or yearly spend, but some CSPs work on fixed budgets with the understanding to share the savings they manage to achieve as well as the over-budgets. According to Jim Griffiths, svp Content Distribution and Purchasing at GEE, “most airlines are represented by a CSP. GEE reps close to 150 airlines worldwide and almost 80 percent of those airlines are outside of the U.S.” Maura Chacko, vp Development at Spafax concurred, want exclusivity! While it’s obvious that many airlines will take the same new release titles in a given month, there is so much in a programming lineup that can be tailored to an airline and its passengers.” Arthouse titles could screen on airlines before theatrical releases. However, commitments are made earlier in order for themovies to be included in in-flight magazine guides. But this could soon change since, in order to reduce weight, airlines are phasing out print versions of their in-flight magazines in favor of digital versions. According to Encore’s Toh, “Purchase orders for films are placed eight to 12 weeks before screenings in order to give inflight magazines sufficient time.” While for Chacko, “We work with our airline clients to solidify a lineup approximately two months in advance of play. This allows for all related parties: the in-flight magazine team, the marketing team, and others to have enough time to promote the content.” As for the airline window, Toh stated that they could vary from one month to as long as a whole year. However, her company acquires films on a two-to-three year license period, regardless of how long airlines take them for. “Each of our clients decides how long they want to have a feature film onboard,” said Chacko, “In most cases, new release titles will be on board anywhere from three to six months. However, very popular titles are often held on longer or brought back for ‘encore’ performances.” Plus, content has to be dubbed in various languages and Toh explained, “For mainstream Englishmovies, themore languages you have, the more popular they will be with the airlines. For non-English movies, generally English subtitles are sufficient.” Dubbing is a rather complex matter, since for the main languages content owners are to provide dubbings. For specific languages (e.g., Arabic, Korean, Turkish) the CSPs undertake the responsibility. Explained Chacko, “Each of our clients has a very specific set of language requirements, based June/July 2016 V I D E O A G E (Continued from Cover) Encore Inflight’s Jovita Toh GEE’s Jim Griffiths (l.) with VideoAge’s Dom Serafini Spafax’s Maura Chacko (Continued on Page 22)