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João Daniel Tikhomiroff

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In the first article of  Portada’s new Brazil Corner feature, published last week, Sao Paulo based journalist Carla Ponte interviews João Daniel Tikhomir, head of the Brazilian production powerhouse Mixer. Tikhomir described the state of the Brazilian audiovisual sector and the impact of production incentive laws on studios as well as  the relative infancy of branded content and product placement in Brazil. In the below second part of the interview, Tikhomir expands on his expertise in branded integrations, describes new  ways to finance audiovisual content and criticizes the high concentration of the distribution in the Brazilian movie market.

Brazil Corner – Despite all the limitations and the early state of  product placement in fiction content, Mixer has succesful  cases of branded integration.  Please describe them.

JDT – “We have made some deals including the series Mothern – produced for the GNT Channel (Globosat Group) in 2006 and it was  nominated for International Emmy Awards. The series had a very low-cost of production, and was managed in a very creative way. Another series we used product placement in  was “Descolados” for MTV in 2009. To be able to do these product placements deals, it is essential that the partner network is able to pursue these opportunities. Eventually, you may even count on the partnership with an independent producer, but in my opinion the focus should be on the network. It is crucial that our writers work together with the agency that places the product in order to integrate the product in the development of the scene.  Because these professionals have the perspective of both marketing and product positioning to be placed in the context of the series and the character. Product placement only works when it is inserted in the context of the drama.”

Brazil Corner – In American series, they insert a wide product range –  from drinks to games 0 in the scene – and generally this is done in a very organical way. Perhaps one of the best recent examples is the series “House of Cards” on Netflix with hundreds of product placements already on the first season. There was controversy, but nothing that really impacted the success  of the series…

JDT – “There’s a scene with two journalists that, if I’m not mistaken, are talking and one of them says, “want a Stella?”… and then they appear just drinking Stella Artois beer. But everything is done in a very natural way because people talk like that, it is part of our life. The brand  benefits from  exposure of the product but it does not harm the viewing experience. But for this it is essential that the scene is developed for this purpose, along with the writers, so that the product is part of the character’s life. Because our daily lives are filled with products and brands. They are part of our life and we consume naturally.”

Brazil Corner – Another approach and business model that is being used in Brazil l is the partnership between the independent producer a Pay TV network and an Open TV network; this is a way to split the bill and increase viewership through different channels. Does this model have a future in the light of the advance of VOD and OTT? 

JDT – “This is a business model that Mixer started with the series “Julie e os Fantasmas,” in partnership with BAND and Nickelodeon. Last year we debuted another series with this model in partnership with SBT and FOX. I do not see any problems regarding to VOD platforms and this business model. On the contrary, we even have a chance to add  VOD to the model. Nothing prevents us from negotiating with the three players – one in each platform. In my opinion, they are all complementary because the audience of Open TV is different from the audience of Pay TV, which is in turn is different from the audience of the VOD and OTT.  They are different and can watch the same content differently. And, of course, all benefit from this cross-channel approach. Those who heard of the series in Open TV channel or in the Pay TV channel, but prefer to watch the entire season at once will wait for it on VOD/OTT.”

A U.S. Hispanic audience will enjoy a  Brazilian product as long as it connects with the audience and is well dubbed.

Brazil Corner – You just were appointed as president of  SIAESP – Union of Audiovisual Industry of the State of São Paulo – and you are also part of CSC – Superior Council of Cinema / Audiovisual. One of the hottest topics in 2016 was the enforcement of quotas of Cable Law for Web TV channels. This would put the mandatory hours of local content on the VOD and OTT services. What is the current state of the  discussions?

JDT – “These discussions are still very preliminary. Indeed, it was one of the issues on the agenda of the first meeting this year for the Superior Council of Cinema Higher Cinema Council (which includes the audiovisual sector). There is a study done by Ancine currently under public consultation on Ancine’s web site to receive contributions from the public. The goal is to try to regulate the sector. But it is still at a preliminary stage of discussions, because there was a change in the Federal Government in 2016 and recently a change in the Ministry of Culture, a new Superior Film Council of Cinema/ Audiovisual and in May we will have a change in command at Ancine. In other words, there are many changes underway and while things may be going in a certain direction now, they can take another turn with the ongoing discussions and with the new leaders that are coming in. We are at a very early stage of the discussions.”

Brazil Corner – With Trump in the White House, many questions are in the air… But the census projection in the United States indicates that by 2050 the country will have more than 120 million people of Hispanic origin. And the American TV networks are eyeing this market through the production of content in Spanish, but the production is still focused on the United States. Telenovelas and series  are mostly produced in Miami, New York, Los Angeles, Chicago… How can Brazil compete in this market?

JDT – “A winning product in the audiovisual market is one that has quality and that connects with the audience. And today you cannot impose content on the viewer. The audience has to choose what they want to watch and when they want to watch it… And the audience chooses depending on the story, the protagonists, all the elements that will draw you. And to reach out to this Hispanic audience in the US you need to have relevant content. Within this perspective, the series “O Negócio”, even spoken in Portuguese, was very well dubbed by HBO for the Spanish-language market, and got an amazing audience, was broadcast in prime time, not only in Latin American countries, but also in the U.S. Hispanic market.  This shows that the Hispanic audience will enjoy a Brazilian product, spoken in Portuguese, as long as it connects with the audience and is well dubbed. HBO recently announced that “O Negocio” is the most successful series in the history of HBO Latin America. It is  a product created in Brazil, produced by a Brazilian company that offers a universe of women dealing with prostitution by using marketing strategies… It has a lot of humor, it is very intelligent, and it resonates in all countries of Latin languages. In Mexico, for example, the series is a resounding success. At the launch of Season Three, the main actresses made visits to several Latin American countries and were recognized at the airport, on the street etc. This is the proof that a product can travel well when it has universal themes and breaks the language barrier.”

Brazil needs to democratize the distribution and exhibition of movies.

Brazil Corner – Ancine reported that 2016 was a year of record numbers for national cinema, with 143 films released, and 97 works of fiction. And the figures of tickets sold reached close to 30.5 million, the best result since 1984, an increase of 3.5% of the audience share of domestic films. You just released your new feature, “Os Saltimbancos Trapalhões – Rumo a Hollywood”.  Is Cinema a good business in Brazil?
JDT – “It’s a good deal, but for very few companies.  And this is a point that has already been made and was introduced to the CSC agenda and is also a matter SIAESP is looking at. Although the figures look good,  the distribution in Brazil it is all very concentrated in the hands of a large player that holds 81% of the distribution of movies in the Brazilian market.  This is reflected in official figures that were released this year. Another distributor has almost 10%. And then all the other players have to divide the remaining 9%. Not taking away any merit and competence of the company that owns the 81%, it has to be said that in a country like the U.S. this would never happen. The anti-trust law would not allow it. Brazil needs to democratize the distribution and exhibition of movies, because today the choice and the way films are distributed is disproportionate. And in this scenario, we miss great opportunities for Brazilian productions to be better displayed and better distributed. Having large companies is very important, but it is also important to set limits.”

CHECK OUT: The first part of this interview: BRAZIL Corner: João Daniel Tikhomiroff – On the Intricacies of the Brazilian Audiovisual Market (Part 1) .

In the first article of  Portada’s new feature Brazil Corner, Sao Paulo, Brazil, based journalist Carla Ponte interviews João Daniel Tikhomiroff, one of the top producers and filmmakers in Brazil. Tikhomiroff is founder and partner of Mixer, a Brazilian production company.

THE BACKGROUND: With a prolonged political crisis, an economy struggling to overcome a long recession and endless scandals feeding an almost chaotic circle, Brazil has certainly provided an amazing collection of stories to writers and content producers. Nevertheless, the Brazilian entertainment sector has been growing at a high rate. Ancine, the agency that regulates the Audiovisual market in Brazil – reported  that in recent years – 2007 to 2014 – the Audiovisual sector grew almost 9% per year. In 2014 the sector had an overall size of US $7.9 billion.  The figures for 2015 and 2016 have not been reported yet, but some analysts suggest an average growth of 2% per year, which is still higher than most sectors of the Brazilian economy.
An institutional factor that explains the growth of the Brazilian Audiovisual sector is the Incentive Law that supports TV and cinema productions as well as by the implementation of national content quotas on Pay TV. These quotas were activated at the end of 2011 and require international channels to display 3 and a half hours per week of local content during primetime. The Pay TV sector is facing a  lot of pressure by a decrease of subscriptions – after a huge jump from 5 million in 2007 to 20 million in 2014 – and also by the growth of VOD and OTT services, which are growing in number of offers and subscribers everywhere in the world, including Brazil. What to expect for 2017?  Will the Brazilian Audiovisual sector  keep growing despite the country’s economy? How to break the chain and be less dependent on government support?

João Daniel Tikhomiroff (photo) answers the below and more questions in Portada’s Brazil Corner. Tikhomiroff is the most awarded publicity director in Latin America, with 41 Cannes Lions, and 10 years ago migrated to the Entertainment world to found Mixer, which ranks the top 5 Brazilian Production Houses with an internationally awarded portfolio.

Brazil Corner – Your agency Mixer opens 2017 with the release of the film “Os Saltimbancos Trapalhões – Rumo a Hollywood” directed by you; your company is also producing another season of  “O Negócio” for HBO Latin America – the first Brazilian series to reach a fourth season on the channel; you just got the renewal of the series “A Garota da Moto” for SBT – Open TV Network ; besides various non-fiction productions for multiple channels of Discovery Networks, including large realities as “Desafio Celebridade”. What share of the business does content production account for at Mixer? Is advertising still  essential  to pay the bills, even in this period of crisis in the advertising market?

JDT – Mixer’s revenue structure still needs the advertising market to pay its bills. But Entertainment – both content and branded – already represents 50% of our revenues. We closed 2016 with a 50/50 advertising/content revenue split. And, until very recently, the ratio was 60/40 (60% Advertising – 40% Entertainment). According to our business plan, in 2017, Entertainment should surpass 55%.

Brazil Corner – And what is the company’s main strategy for content production?

JDT  – We take great care with the structure. Mixer is the only Brazilian production house with its own development team, ie permanent writers (chief writers and writers who develop). And that is on both fronts, both in the fiction  and non-fiction entertainment space. This structure that is part of our DNA, because our aim was always to be a content producer which develops, and owns content and not merely provides service. Mixer was born with the goal of being a producer that, in fact, has its identity, its brand recognized through the work we create, develop and produce.

Brazil Corner – Ancine – Agency that regulates the Audiovisual market in Brazil – reported that despite the country plunged into economic  recession, the Audiovisual sector grew on average 8% per year. This growth rate is largely explained by  tax incentive laws. How can you overcome this dependence of the sector’s growth on tax incentives.?

JDT – “There are two issues here. The first is that tax incentive are key in any country that wants to create a new industry. And this goes for any activity, not only for audiovisual sector. The automobile industry always had tax incentives to set up plants in several states. And don’t forget that the United States also has state tax incentive, which is very strong in the production of TV series. In most American series, about 30% to 40% of the cost of production comes from tax incentive state laws. This happens in California, Florida and many other states. In addition, it is important to remember that when the TV entertainment industry was born in the United States, the US Congress passed a law that prohibited the channels to produce their own content. This law required that 100% of the content would be produced by independent producers or studios. And I’m talking about the Open TV channels in the decade of the 1940s and  later,  Pay TV in the United States, was born in a similar way to the current situation in Brazil, where content is produced by  independent producers.

Tax incentive are key in any country that wants to create a new industry.

Brazil Corner – It would be a legislation in the mode of Law 12.485 / 11, the so-called Cable Law, which came into force near the end of 2011 and which among other rules, requires international channels to display 3 and a half hours per week of local content in primetime.

JDT – “In Brazil we have a tiny share… and in the United States, the production process for TV in the forties started with a quota of 100% in Open TV channels. And that American law lasted 50 years. Only in the 1990s, the law was abolished by Bill Clinton, saying he believed that from that moment, the entertainment market was already mature and able to self-regulate. But nothing would prevent that, in case the reverse phenomenon is observed, a new request be presented to Congress to revive the law again. In the United States, this law helped regulate and create a way of doing business between channel, creators-writers and producers that lasted for decades. In other words, a relationship that has matured to the point of creating an audiovisual industry that is an economic powerhouse. So when we talk about Brazil and Latin America, we are still in our infancy. Because, in Brazil specifically, our content production for TV began in the opposite way compared to the U.S. As there was no law, it was considered best to follow a verticalization of production in Open TV with almost all content being produced internally. For Pay TV it was a semi-verticalized process, with several projects done internally, but, at the same time, opening a loophole for partnerships with independent producers for more specific projects, such as series and reality shows, because they had the know how and the financial savvy.  That is how Brazilian independent production was born. We got our first break, obviously, with the mechanisms of Tax Incentive Laws and also the so-called Cable Law that prescribes compliance with Brazilian content quotas. And this quota is very small compared to other countries like France, Spain, Canada.

Brazil Corner – But how do you create other mechanisms and business models so that the independent production can be structured by creating a parallel dynamic to the stimulus already guaranteed by Law?

JDT – “There are several business models that can be followed. The first and the most obvious is to work with original content. Original productions for channels or platforms that do not use incentive laws and pay 100% of the  production, but the channel owns the content.  Mixer produced the series “O Negócio” for HBO Latin America under this model and the channel invests a lot more. The value per episode is much higher (than compared to projects linked to incentive laws) because the channel wants to achieve a standard of quality that guarantees the export of this product to other countries.”

Brazil Corner – And what does the independent producer get from this business model, since in exchange for this investment the channel retains the rights of the work?

JDT – “First, the producer has the opportunity to produce at a very high quality level, showing that it is capable of producing a series with a quality level on par with other international series and can be broadcasted in any other countries. And another very important point for the producer is that we make our mark on the international scene as a player able to compete in the top markets. Therefore, the business model based on producing original and exclusive content for the networks opens the door to the international market, both for the producer and for all professionals involved in the series. And this is extremely healthy and desirable in this maturation process of our audiovisual market.”

Brazil Corner – The series “O Negócio” was even mentioned in BuzzFeed as one of the 26 non-American series that deserve to be followed. It is a series that could be sold as a format, but in this case the rights belong to HBO. Does Mixer have other products of your property that it can be turned into international formats?

JDT – “Yes, since our DNA lies in  the development of content, we have series both fiction and non-fiction with good chances to catch on as formats in the international market. The youth series “Julie e os Fantasmas” is an example. It was a co-production with Nickelodeon, including a 2011 parallel airing in Open TV channel BAND (TV Bandeirantes Network) and caught the attention of some countries. Italy aired with dubbing on TV. And since the series was also among the five nominated to International Kids Awards, it won a high international profile and we are reaping the results now. We are currently in talks with players in the US to sell the format. And in this case, the business model can be a mere sale format, or may include an artistic supervision with monitoring by our head writer, who headed the development of the Bible production and the format and general director of the series, in an exchange with the professionals who will be in charge of the work abroad. And also in the youth genre, we have another series in pre-production that has everything to become a format model. We cannot yet disclose the channel, but it is a business model using incentive laws to gain the funds, as “Julie e os Fantasmas”, providing that Mixer keep the rights of the work. That is, the channel has distribution rights, but in the case of format sales it is one more product that we can sell freely and reap new rewards later.”

Branded entertainment and product placement are still a misnomer in Brazil.

Brazil Corner – In this business model, we have witnessed a growing trend of brand positioning in reality shows and other non-fiction programs that sponsor productions. However, in fiction productions for Pay TV, product placement is rare. Why has this practice, already proven successful in the United States, has not grown in Brazil?

JDT – “The use of product placement on Open TV helps fund telenovelas, series and other entertainment programs, generating a fundamental income stream for the channel. However, on Pay TV, the vacuum starts by the lack of a structure in the networks which relates to advertisers. The producers don’t have  contact with the advertising community. So, it is important that the channels have executives that focus on seeking opportunities to place products in the productions in partnership with independent producers.”

Brazil Corner – This already happens in non-fiction programs. Pay TV network have departments focused on this business, but this is not the case for fiction content. Do you think that in Brazil brands are open to  invest in branded content and product placement? 

JDT – “Very little. In the United States, no marketing professional thinks of doing marketing and advertising of their products without considering product placement and branded entertainment. In Brazil there is still a classic mentality that is vested more in traditional advertising. And the marketing people are still not fully convinced in branded entertainment From the point of view of creation and production, it is essential as a business model because it brings resources to production. It is a win-win relationship. At the same time it helps finance series and audiovisual products in general, the brands presence also helps to promote the products of the advertiser. Undoubtedly, this a business model that is hardly in practice in Brazil. In Argentina, the use of product placement is already more widespread both in series and in cinema. In Mexico, Chile, and Colombia as well. But it is in fact a business model still little common in the Latin American market. A loss of opportunity from all perspectives: the advertiser, the network and the producer.”

CHECK OUT: The second part of this interview: Brazil Corner: João Daniel Tikhomiroff – On Branded Entertainment, New Financing Models and More. (Part 2) .