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Sky's video games joint venture will help it level up significantly



United Kingdom

Sky recently announced that it had formed Skybound Stories, a joint venture formed with Skybound Entertainment, the company behind the post-apocalyptic comic book turned multi-award winning TV series "The Walking Dead," to create video games.  While broadcasters have made investments into games developers for several years, most recently in eSports, this joint venture is quite novel and appears to redefine what is traditionally a binary relationship between broadcasters and production companies.  This is clearly Sky hedging its bets - with the mobile games industry estimated to account for 51% of the total games market by 2021, there is now a much broader audience for Sky to appeal to, and to generate revenue from (even if the show the game is based on is less than successful).

When we say binary, we are referring to the industry standard arrangement where either the broadcaster obtains, or the production company retains, video game rights along with other ancillary rights in a television property.  Production companies' common complaint is that the broadcasters warehouse those rights but don't have the expertise or bandwidth to exploit them properly.  Broadcasters, particularly those not savvy enough to negotiate for a revenue share, complain that they publicise the property and the producer goes on to exploit that property even if the show is cancelled.  Production companies counter that they need those revenues to plug deficits. And so on…

Interestingly, there is another binary relationship at play – for a long time producers have seen video games as revenue sources, while broadcasters have seen them as marketing tools and been content with achieving audience-based ROI.

This new effort by Sky effectively bridges, if not nullifies, that gap.  The Skybound Stories joint venture means that Sky can legitimately require that it be part of the development team and in the writing room to ensure that plot, characters, etc will translate into video games and that those games are designed to market the property and generate revenue.  The traditionally deeper profits of a broadcaster can also mean that the joint venture can capitalise on interesting games and marketing ideas instead of having them fall by the wayside due to a lack of funding.

This also means that gaming rights will be much less of an afterthought, left to the end of the primary negotiations or dealt with separately. Much more sophisticated discussions can be had around the organic development of a project across the most revenue-friendly media.

Whilst the traditional binary approach will still be available, broadcasters (and producers) should be keen to explore joint ventures along the lines that Sky has. Broadcasters can enhance their ability to stay ahead of the curve and firmly embed games into their creative and commercial decision-making whilst expanding their influence in a growing market.