INVESTING IN NIGERIA MOVIE INDUSTRY
Nollywood, which is valued at $6.4 billion, is by far the most popular movie industry in Africa, but attracting funding from foreign investors continues to be a challenge. But some experts say it could be an opportunity to do things differently.
Streaming giant Netflix, in a recently released report, showed that it invested in South Africa more than five times the amount of money it injected into the Nigerian market from 2016 to 2022. Netflix invested a total of $125 million in South Africa, compared to $23.6 million in Nigeria, although Africa’s most populous nation had more titles (286) than its South African counterpart (186) on the platform. With the launch of Netflix and Prime Video, Nollywood originals have been included on these video streaming platforms with increased collaboration with Nollywood directors and producers. In 2022, Labari Africa Productions, a newly launched Nigerian film production company, set up a $3 million fund to finance Nollywood.
Whereas movies were shot on a relatively low budget in the early 90s, during the inception of the Nollywood industry, the trend has changed. Films are grossing an incredible amount at the box office with jaw-dropping production budgets, leading to Nigerian content being recognized in European film festivals and elsewhere. This has attracted more investors who are churning out funds to sponsor content while ensuring outstanding overall production quality to compete for global recognition and awards.
The 1992 Nollywood blockbuster hit, ‘Living in Bondage’, primarily credited for revolutionizing the Nigerian movie industry, was shot on a budget of just $12,000 (N118,920 at the time). Tunde Kelani, a veteran movie director, revealed that the production budget for his 2022 movie ‘Ayinla’ was N41 million. That’s a huge margin of difference between both movie projects. There is no doubt that it costs a lot to make a good movie at the moment, taking into account the various elements that bring a film to life.
So far, the economy has benefited from these investments as the industry employs more people to meet its increasing demand. Many Nigerians are impressed with the improved quality of films and the ease of accessing movies from the comfort of their homes. “Back then, producers were concerned about quantity over quality. Things have changed; there is improvement in sound, lighting and production design,” said Imosili James, an avid lover of Nollywood movies. Movies such as Blood Sisters, Far from Home, Anikulapo, Shanty Town and others are shifting the discourse, making gains and positioning the industry for global success.
Currently, the Nigerian film industry is not showing any signs of slowing down, as thousands of films are produced each year.
The Nigerian entertainment industry, comprising Nollywood, music, media, and content creation, is gaining global prominence despite historical challenges. Recent investments, notably from streaming giant Netflix, are driving substantial growth, contributing 2.3% to Nigeria’s GDP in 2021. However, persistent challenges include funding constraints, infrastructure deficiencies, and piracy issues. To capitalize on this momentum, Nigeria needs to invest in internet infrastructure, establish a supportive regulatory framework, and encourage collaboration between the government and private sector. The ultimate objective extends beyond economic gains, aiming to showcase Nigeria’s rich culture and history through a thriving entertainment sector.
The Nigerian Movie industry: The world’s next big Inveestment market
Filmmaking in Nigeria (which later evolved into “Nollywood”) originated in the 1960s becoming one of the world’s most successful and influential industries with an annual output of over 2,500 movies. The Nigerian music industry is also a thriving and dynamic industry that offers a unique platform for the country’s creative talents. With over 30 million monthly listeners worldwide, 500 music producers, 1000 record labels, and 50 radio stations operating in Nigeria, it is clear that the industry is full of opportunities for musicians, entrepreneurs, and other creative professionals.
Nollywood has always been evolving with great growth potential, but challenges like lack of funds, lack of equipment, adequate infrastructure, and limited global recognition have prevented the industry from reaching its full potential. However, a recent surge in investments is helping Nigeria’s entertainment industry to enter a new era of growth.
According to PwC Global Entertainment and Media Outlook for 2022-2026, Nigeria’s media and entertainment industry is one of the fastest-growing creative industries in the world. It holds the potential to become one of the country’s exporters, with a projected annual consumer growth rate of 8.8% (CAGR). PwC noted that in 2021, Nigeria’s film industry contributed 2.3% to GDP, equivalent to $660 million (239 billion naira) and projected that the industry will increase its export revenue earnings to over $1 billion. The motion picture and music combined contributed about $1.8 billion (730 billion naira) to the country’s GDP in 2020. Nigeria’s television and video market grew 7.49% to $806 million in 2020, up from $732 million in 2018, with a further projected increase to about $900 million in 2023. The Nigerian entertainment industry is growing and undergoing a transformative phase, opening its doors wide to investments fueled by global recognition, the rise of digital platforms, the expanding middle class, and crucial governmental support. Beyond the spotlight on artists and creators, this surge in investment holds the promise of unlocking socio-economic benefits for the nation.
Challenges faced by the industry
Entertainment in Nigeria has historically been a tough business. It was hard to get funding, and the films were often made on a low budget which resulted in productions with visible technical shortcomings like inconsistent picture quality and bad audio. Nollywood lacked the ability to tell its stories powerfully, and the movies couldn’t create genuine experiences for the audience. This affected the outlook of the industry as the movies were largely underpriced leading to a stall in the growth of the industry and limiting its global reach, unlike other industries like Hollywood and Bollywood. The industry’s struggles were compounded by a lack of formal funding mechanisms as traditional lenders were unwilling to invest in an industry seen as high-risk, forcing filmmakers to seek out alternative sources of funding.
According to the British Broadcasting Corporation (BBC), the cost of producing a movie in Nigeria averages between $25,000 – $70,000 compared to a $250 million budget for a top Hollywood film. Almost all Nollywood films are intended for non-theatrical release and tend to be of lower technical quality than Western films. Nonetheless, films can be produced within a month and are generally profitable within two to three weeks of release. Most titles are recorded in English and sell over 200,000 units (the usual break-even sales point in Nigeria). In Nollywood, many filmmakers in the past relied on personal savings, family, and friends to stretch their resources to the limit and keep their projects afloat. Notably and in contrast, the Nigerian music industry is more diversified, with funding coming from a variety of sources, including record labels, streaming services, and sponsorships.
As time went on, Nigerian entertainment began to improve and started gaining global attention but then a new problem surfaced – Piracy. This involves the unlawful and unauthorized copying and distribution of already copyrighted works like music, movies, television programs, etc. in a manner that is detrimental to the interest of the creative artists and legitimate rights owners. Rampant copyright infringement became an industry-wide plague, draining revenues and discouraging potential investors. The absence of effective copyright protection mechanisms worsened the funding dilemma, leaving filmmakers in a perpetual struggle to recoup their investments. According to the World Bank, for every legitimate copy (of a Nigerian film) sold, nine others are pirated. As of 2014, an estimated N82 billion was reported to have been lost by Nollywood alone to piracy.
The availability of streaming services
In the past, films, music videos, and TV shows were distributed through cassettes, compact disks (CDs), cinemas or television networks. However, the rise of streaming services has provided an alternative means of distribution to producers. The increasing availability of streaming services and other digital distribution platforms has had a significant impact on the Nigerian entertainment industry with streaming services such as Netflix, Amazon Prime Video, and Showmax making it easier for Nollywood films to reach a wider audience globally. Similarly, music streaming services such as Apple Music, Boomplay, and Spotify have led to increased demand for Nigerian entertainment and attracted the attention of investors both locally and globally.
In 2016, before streaming platforms entered Nigeria, the creative sector contributed 239 billion naira to the GDP. By 2020, this contribution had grown to 730 billion naira, a 205% increase. Netflix revealed in 2022 that it had invested N9 billion in the creative sector since entering the country in 2016. This investment has had a significant impact on the sector, helping to create jobs, boost revenue, and raise the profile of Nigerian content on the global stage.
These investments and growth have largely Increased the production of high-quality content and also encouraged the intervention of Venture capital firms to provide Nollywood filmmakers with the funding and support they need to produce high-quality films that can be enjoyed by audiences all over the world. An example is a Netflix acquired Original titled “The Black Book” which was directed by a Nollywood director, Editi Effiong. The film’s executive producers include African startup founders and investors like Kola Oyeneyin, Ezra Olubi (co-founder of Paystack), Odunayo Oweniyi (co-founder and COO of Piggyvest), Olumide Soyombo (Voltron Capital), etc.
African tech players have funded film projects in the past, but the large number of executive producers on The Black Book shows that tech companies are investing in film more than ever before. In the music industry, a top music producer popularly known as ‘Don Jazzy’ is reportedly considering selling his music label, Mavin Records, for up to $200 million, according to a report from Billboard. The label is home to music stars like Rema, Ayra Starr, Crayon, and LadiPoe, among others. According to the report, bids have come from Universal Music Group, HYBE, and music asset investors in the financial sector. The deal will be handled by Shot Tower Capital and the proposed value is above $125 million and could be worth $150 million to $200 million.
These investments are helping to grow the Nigerian entertainment industry and to create jobs and opportunities for Nigerians. Nollywood is already one of the largest film industries in the world, and it is poised for even greater growth in the coming years. With the support of venture capitalists, Nollywood filmmakers will be able to tell their stories to a global audience and share Nigeria’s rich culture with the world. Increased investments in Nigeria’s entertainment industry are having a ripple effect, transforming narratives, creating jobs, boosting cultural pride, and driving economic growth. Nigeria’s entertainment industry is thriving, with art and investment working together to create success that reaches beyond the country’s borders.
Utilizing investment opportunities for success in the Movie industry
The Nigerian entertainment industry is currently in a booming, and investors are taking notice To make the most of this opportunity, the country needs a plan to nurture the industry and ensure that the benefits are widespread. To ensure this, Nigeria can take several steps, including:
More Investment in Infrastructure: In a report by Netflix showing its impact on the African market from 2016 to 2022, the streaming giant revealed that it invested a total of $125 million in South Africa and $23.6 million in Nigeria, despite Nigeria having more titles (read: movies) (286) than South Africa (186). This shows a huge gap in the investments in both countries.
On a closer look, this low investment can be attributed to problems such as inadequate infrastructure and low internet penetration. As of 2022, nearly 80 per cent of South Africa was using the internet and was estimated to increase to 90 per cent by 2027. In contrast, according to the Nigerian Communications Commission (NCC), Nigeria’s broadband usage was at 44.5 pper centas of July 2022, with a target of 70 per cent in 2025. By February 2023, broadband penetration rose to 48.5 percent, with over 92.5 million internet subscribers.
If the Nigerian government invests adequately in internet infrastructure, there will be more broadband penetration and households with internet access will increase thereby attracting more investments from streaming platforms. The government can also invest in infrastructure and training to support the development of the entertainment industry. This includes building and maintaining state-of-the-art studios and production facilities, as well as providing training programs to develop the skills and expertise of industry professionals.
Creating a supportive regulatory environment: Regulations in the entertainment industry can serve both as guardians and enablers. Nigeria needs to create a regulatory environment that encourages innovation while also protecting the integrity of the industry. Clear copyright laws and strong intellectual property protections are essential, as they provide assurance to investors and create an environment where artists can freely explore their creativity.
However, regulation is not just about rules, it is also about creating a supportive ecosystem where creativity can thrive. This includes providing financial incentives and promoting Nigerian content. By striking a balance between regulation and innovation, Nigeria can leverage the power of its entertainment industry to create jobs, boost economic growth, and elevate its culture on the global stage.
Promoting collaboration between the public and private sectors: In South Africa for example, Netflix and the National Film and Video Foundation (NFVF) announced a partnership worth $762,000 in March 2021. This partnership was aimed at funding the production of South African films. The NFVF is known to provide funding for film and television productions, international co-productions, and training and development initiatives for emerging filmmakers. This partnership helped provide funding for South African filmmakers, increased exposure for South African films, created jobs, and helped to develop the skills of South African filmmakers.
This type of partnership will also greatly impact the Nigerian entertainment industry as the government and the private sector can work together to promote the growth of the entertainment industry by fostering collaboration and partnerships which could involve initiatives such as public-private partnerships to develop new infrastructure and content, or government support for private-sector initiatives to promote Nigerian entertainment products and services in international markets.
Conclusion
Nigeria is putting a lot of money into its entertainment industry, and it is working! The government is encouraged to make rules that help the industry grow, invest in things like new studios and training programs, and work with private companies to make the industry better. The goal is not just to make more money, but also to bring back Nigeria’s culture in a big way, so that the whole world can see it. Nigeria’s entertainment industry has the potential to show the world the country’s rich culture and history and to inspire and entertain people everywhere. It’s not going to be easy to make Nigeria’s entertainment industry the best in the world, but the country is well on its way. With more money and cooperation, Nigeria can achieve its goal of becoming a leader in the global entertainment industry.
