MEDIA CFO — Episode 013— Lorraine Ruckstuhl talks to Tobias Jaeger about SVOD production finance and the consistenly reshaping role of a modern media banker

We sat down with Lorraine Ruckstuhl, Head of TMT at Barclays in London to talk about her bank’s renewed and increased SVOD production finance fund, common investment banking misunderstandings, Barclay’s media banking on a project and corporate level, and her way to the top as a female banker.

Lorraine started her career in banking more than twenty years ago and joined Barclays in 2005. Lorraine and her specialized media team are working with clients in television and film production, broadcasting and publishing as well as live and recorded music, covering their clients’ corporate finance as we as project finance needs. Recently, her team made headlines again by renewing their £100m pound UK SVOD fund and upping it to £200m pounds.

“I think, well we knew there was a need for it and we knew that we had the capability and the appetite for it, and therefore by coming up with the fund and looking at the different baskets of risks and going, “Well, actually, we’re happy to do this day one, and then see how it goes, and then it was going well, hence we doubled it.” I mean, it really took off, which is what we hoped would happen but doesn’t always happen when a bank puts out a press release. What we wanted to do was really get the message out to the market that we’re here, we want to lend, we have the appetite, we understand what it is that you need, so come and talk to us. So in that respect it worked really well, because we got quite a lot of reverse inquiries and still continue to. So, for us, it’s worked brilliantly.”

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Tobias Jaeger: Lorraine, welcome to the program.

Lorraine Ruckstuhl: Thank you.

TJ: Such a pleasure to have you.

LR: Oh, it’s a pleasure to be here.

TJ: I’m looking forward to this conversation because I have a lot of questions, and as a former investment banker, I’m obviously very excited to talk to a current investment banker in the media space. But before we dive into that, I would love to know a little bit more about your personal journey, how you got here, how you got into banking, and then went into the dark side of doing media banking. How did you get started?

LR: So I kind of fell into banking, which actually is the way a lot of people end up in banking. I finished university, I originally wanted to join the foreign office, not realize quite how difficult it was to join the foreign office.

TJ: Yeah, wow.

LR: So I was a little bit, oh I’m not sure what I want to do now. And a friend of mine suggested that I might want to try finance. I kind of thought that wasn’t really for me-

TJ: Interesting.

LR: Yeah. He was kind of like, “Oh well, try it. See what you think.” So I originally joined Barclays on its graduate program, after spending a year in recruitment before that, while I was working out what to do. So I haven’t been in Barclays the whole time. So I came through Barclays’ graduate program, then, like a lot of graduates, I got itchy feet and I went to work for a Canadian bank called Scotia Capital. And that’s where I first came across media. So media and publishing. I was working out of the London office, but it was late ’90s, early 2000s, and was a lot happening within the sector. And I got involved in a number of interesting transactions and that’s when I became a relationship director working directly with clients, looking at debt finance and options. And then after a while doing that I got poached back by Barclays to do acquisition finance, step finance, across a number of sectors, but because I’d worked in media, I ended up, again, looking at more media deals. One of my favorite early ones that I looked at was when Entertainment One bought Contender back in the… probably must have been about 1999… when would it have been. The early 2000s maybe.

TJ: Yeah, the heydays.

LR: The heydays. When they didn’t realize Peppa Pig was such an asset as it is now. And so I continued doing that until a leadership job came up in our technology, media, and telecoms team. So I’ve been doing that role for almost nine years now.

TJ: Yeah, wow.

LR: But it’s changed so much in that time-

TJ: I was about to say, yeah.

LR: Yeah, it feels like a completely different role, and the media sector’s evolved quite a lot in that time as well.

TJ: Yeah, and I think also a surge of the tech side of media, I mean it must have been quite interesting to see people coming to you with more deals in that space.

LR: Definitely. I think people used to be the view that tech and media were completely separate, and in some ways they are, but actually they’re quite aligned as well, and over the years they’ve become even more aligned in terms of the way people watch media and tech and telco’s and data and everything else. It’s all started to come together and, really, it’s interesting to see that convergence between the different sectors.

TJ: So when you started with the Canadian bank, I’m assuming this was also here in London?

LR: It was, yeah.

TJ: How did you learn about the media… How did you learn about the business? How did you learn about the media and entrainment side in banking? Was it simply by doing? Or did you-

LR: It was predominantly by doing, but also by reading up, looking at different things are happening in the sector, and personal experience. But, yes, a lot of banking actually involves just getting thrown into the deep end and going from there, really. Obviously the finance stuff you can learn, but the sector piece of it you do learn by the more businesses you look at. And I think certainly in the media space, I think a lot of people who come into that space end up staying in it because it is really interesting and they want to know more about it.

TJ: Yeah, it seems like… because it is also quite an old industry, in a way. It’s been around for a very long time, there’s always this funny mix of folklore, and we’ve always done it this way, and new rules and options that are in the market to keep track of that is-

LR: Yeah, yeah. I mean for Barclays we’ve had a specific media team for over 30 years now.

TJ: Wow.

LR: And as a bank, we generally are industry focused, but the media team was the first industry team that we put together.

TJ: Oh wow, interesting. In the whole bank?

LR: In the whole bank.

TJ: Wow! Okay.

LR: Yeah and it was formed in Soho, as you’d expect, in the late ’80s. Off the back of a lot of BBC deregulation and production financing and grew from there. But I think having a dedicated team has worked really well for us, and also for clients, because over the years you really get to understand the sector, you understand the clients that are in it, what they’re challenges are and also then how you can look at what you do and in order to change it and help them.

TJ: So what would you say, from the deals that you did in the beginning versus today, what are some of the similarities and what has changed dramatically from the type of deals you’re doing?

LR: I’ve looked at a wide variety of deals, from just a general corporate transactions for businesses to acquisitions through to production financing. So there’s a huge variety. I would say in terms of production financing I think initially, even 10 years ago, it was a lot of quite vanilla transactions to ITV or overseas broadcasters. But they were quite small, and they were quite straightforward. Over the years, those transactions have changed and evolved and become a lot more complex, and they’ve also become bigger in size. So, whereas we might have been looking at relatively small loans, less than 10 million, now we’ll frequently look at things at 10, 15, 25 million, because the nature of-

TJ: Per episode…

LR: Right, yeah. Absolutely. I mean, the nature of production and production financing, especially probably over the last two or three years, has just gone crazy in terms of the demand and the higher quality that broadcasters and SVODs want, and therefore the need for producers to create bigger, better quality productions.

TJ: Yeah. You mentioned the streamers, how is their surge or rise impacted your work? And how did you make sense of it in the beginning? Obviously now you have the fund, which we’re going to talk about, for sure. How did you approach the first transaction with Netflix, or Amazon?

LR: Well, it was interesting, I mean I think this is where understanding the industry and talking to your clients really helps, because we were talking to clients probably two or three years before we actually saw a Netflix deal about the fact that Netflix were in the market, were doing things differently. They weren’t necessarily paying on demand, and so we spent a lot of time going “Well, how can we structure it? What products have we got we can change around so that it can work?” Quite a long time before we actually saw a transaction. So when we finally got one, we’re like, “Great! Fantastic! We can see if it actually works.” And initially what we did was really our traditional loan but just over a longer tenor. So rather than repayment on delivery it was a repayment over a three year period, which was fine. That’s a traditional loan, but we had to change our own internal policies because at that point we didn’t necessarily… it wasn’t a great practice to give that sort of tenor on a loan for that type of business. So we had to get our own internal approvals. And then obviously as we’ve seen more transactions from existing customers and new clients has been a lot around the back catalog and putting together bigger catalog transactions and, again, looking over, what’s the best way to do it? It is actually through a loan? Or is it through what we’ve called our contract receivables product, where we’ve actually… we’ll buy the Netflix debt off them at a discount and then we’ll deal directly with Netflix and the client can actually take that cash and reinvest it in new productions.

TJ: Was it different for you that Netflix or Amazon are publicly traded companies, has a lot more access to financial information versus a private buyer that a producer works with?

LR: I think a lot of the buyers that producers work with are quite big companies anyway, they’re the large broadcasters or streamers, so yes, the more public information you have the better, definitely. I mean, a lot of broadcasters have public ratings, which is helpful. So, yeah, it was certainly helpful to be able to get that additional information.

TJ: Yeah, and how has it changed your… given the fact that these are US companies, the streamers specifically, versus a national broadcaster, or pubcaster that produces in the UK worked with?

LR: Yeah, I think obviously it’s getting used to Californian law, on some occasions, and ensuring that we’ve got the right team behind us to ensure that, although we’re dealing with a UK entity at our end, obviously we’re dealing with an overseas counterparty and how that works, and making sure that that works for us. I think that’s probably been the hardest bit, otherwise I think TV generally has been global in its outlook. You can have quite a small producer dealing with HBO or dealing with Nat Geo or anyone else. So we’ve been used to dealing with US businesses but probably we’ve done it more under UK law than US law.

TJ: Oh interesting. And they were amenable to that? Because usually they love to enforce their terms.

LR: Well, they’re the ones that wanted to do California law.

TJ: Oh, I see. I see.

LR: Yeah, but it worked for us as well.

TJ: On that note, talk to me a little bit about the fund you launched. Obviously there was great publicity around that and then, of course, congratulations to the upping, I guess, the renewal. How did that come about of creating, I guess, a structured product around that? Was it just the need, was it that high that you said, “Okay, let’s find a way to make this process more efficient?”

LR: Yeah, I think, well we knew there was a need for it and we knew that we had the capability and the appetite for it, and therefore by coming up with the fund and looking at the different baskets of risks and going, “Well, actually, we’re happy to do this day one, and then see how it goes, and then it was going well, hence we doubled it.” But I think the purpose of the fund was really to capture… Well, to be honest, it did better than we thought it would in terms of coverage, which is great. I mean, it really took off, which is what we hoped would happen but doesn’t always happen when a bank puts out a press release. So it definitely did better than what we thought, but I think what we wanted to do was really get the message out to the market that we’re here, we want to lend, we have the appetite, we understand what it is that you need, so come and talk to us. So in that respect it worked really well, because we got quite a lot of reverse inquiries and still continue to. So, for us, it’s worked brilliantly.

TJ: Just to protect you from too many emails because, you’re right, in the media industry every time you say someone has a fund, you’ll get a lot of inquiries. Talk to us real quick, what is the fund doing and what is it not doing?

LR: So really what the fund does is looks at how much… puts a certain side that we’re happy to lend to streamers. I mean, we’re willing to talk to pretty much anyone. I think the key is really that you have a signed agreement with one of the streamers. If you come to it… I guess the biggest misconception with banks is that we do gap financing, we do equity financing, whereas actually we do debt financing. So in that respect, once you’ve got your production green lit and you’ve got a commission, then come and talk to us. Even if you’re still working out with the T’s and C’s. I guess the biggest thing is when you say you’ve got a fund people think it’s an equity fund, not a debt fund.

TJ: So how was that process internally? Because obviously a bank as big as Barclays, there is a certain degree of politics and company policies and my experience is that media and entertainment… there is at least one or two areas where it’s colliding with existing policies. How did you navigate that process and how was that?

LR: A lot of it was education. So I mean, we were lucky that our credit colleagues were on board with what we were looking to do, because with having such a long established team, and a good track record of how we analyze these businesses enabled our credit colleagues to get comfortable that we knew what we were doing, we knew how to analyze the risk, we were coming up with a reasonable structure. However, we did have to go to our credit risk management committee and say, “Look, this is what we’re looking to do. We might have previously lent this amount but now we want to lend a higher amount.” And if you don’t necessarily understand how production finance works, it is an education process. In some ways it’s not complicated, but it’s very much… If you’re looking at it from the outside in, it’s very much a single-debtor risk which, from a bank perspective, to put a large amount of money out on a single-debtor repaying you does take an education as to why that works and the symbiotic relationship between a producer and a broadcaster. In so far as, with a lot of businesses, is the debtor really going to pay up? We’ve found, with TV productions, that obviously the producer wants to make the right quality product, but so does the broadcaster. So they’re involved, they want to make sure it’s delivered on time to budget because they’ve got a gap in their schedule they need to fill, so it’s not necessarily… The relationship is quite connected between the producer and the broadcaster, which, over the years, has proved to be the case in terms of ensuring that actually the productions do get made, even if there are hiccups along the way. Whereas, that might not always be the case with some sectors.

TJ: So how long did it take you, overall, from start to finish, to set up the fund?

LR: Probably about six months.

TJ: Oh wow. That’s lightening fast.

LR: It was pretty fast. I think because we’d had quite a lot of talks and we’d evolved the product itself slightly before that, which then enabled us to react quite quickly and getting the fund in place.

TJ: And the renewal or the upping of it now, was that complicated or was that simply just getting another signature from the floor above?

LR: As with everything there’s always committees involved and we have our new reviews on committees and so we took the point of which we would do in our new review of it anyway, to actually up it at the same time because then it was already a pre-established process. Because the hardest part is getting all the right people in the room that you need to be involved in the decision.

TJ: Now when you talk about the life inside the bank, I know from personal experience that there’s always some misunderstandings of how a bank works and what banks do, especially, I mean, independent film producers are probably the best at finding ways to get something done, which sometimes collides a bit with what you can do as a bank. What do you think are some of the misunderstandings of what a bank does in this industry?

LR: I think the biggest misunderstanding, as I mentioned before, is that difference between what is debt funding and what is equity funding. Because a lot of TV or film producers initially think, “Well, I’ve got most of it, so can’t you just do that other bit? And then that’ll make it all work, and then all the funds will come back.” But having to explain that that gap piece is equity, it’s not debt, is probably the biggest misunderstanding. The other misunderstanding is if you’re an independent producer you can make quick decisions, you can act really quickly. As a financial institution we’re a heavily regulated organization, therefore to do anything we have a lot of hoops to go through, including your customer and all the regulatory pieces to get accounts and get things moving. Now we work pretty hard to make that as slick a process as we can, but there is still a process and I think if you’re running your own business where you can make quick decisions, understanding the mechanics of a beast like Barclays can be quite hard.

TJ: Now is that something you wish potential clients, or maybe also existing clients, would keep in mind a little bit more when they want to work with you?

LR: I think once you get to know people they do, and we try to be really upfront with clients when we’re first talking to them about what our processes are, what information we need, roughly how long it takes, so that they can factor it in to what they’re doing. And also with some business where they know that they’re going to need a lot of production accounts we’ll try and open some shell accounts beforehand, so we’ll try and be proactive and get things… and then they can change the name to whatever production it happens to be. So we’ll try and think of ways to make the process more straightforward.

TJ: With all the activities you’ve described, how does a day in the life of LR actually look like? I mean, you have so many internal and external stakeholders, I’m guessing no day is alike. But how does it, on average, look like?

LR: You’re right, no two days are the same. It tends to be a mixture of juggling internal, external, managing my team, meeting clients. Obviously meeting clients always comes first in my book and understanding businesses and working with people. But if I have to give anything up it’ll be the internal meetings I’ll push back, not the client side. Though, there are times where you just have to do the internal pieces. It is a mixture of strategy around the sector, especially as it is constantly evolving, whereas in some sectors the stunt of products and just continue to use them. What I’ve found certainly over the last three or four years in the media sector is we’re constantly looking at our products, looking at what’s happening in the market and going, “Okay, now we need to look at this. Okay, we’ve created contract receivables but now we need to look at, what else can we do? Can we make the whole process? Can we create some sort of umbrella facility where we can make the legal process quicker?”. And we’re constantly looking at how can we refine and change what we’re doing in order to meet the changes in the market. So the strategy piece can be quite high. And then I’ll see, I’ve got a team of relationship directors who I work with, so it’s making sure that they’re all right and their client’s happy and that side of things. And then client meetings or external events. I was in Belfast this week talking to potential new clients, giving the rise of the production sector out there. So it’s a mixture, but it’s fun. I really enjoy it.

TJ: So you try to do the impossible every day.

LR: Try to.

TJ: So what’s your personal system to make sure you don’t get distracted by the hands that go up or the little fires that somehow happen versus a little more long-term activities you described, of thinking about product for example?

LR: If fire happens you’ve got to put it out, so that can often put you on the back foot, but I try and leave one day a week without meetings so that I can use that day to really catch up on anything that I haven’t been able to do during the rest of the week. Enables me to, as you say, sit down, think a bit more about where are we on the strategic pieces we’re working on? Once I meet with my team and we talk through what’s happening in terms of transactions, also talk a bit about strategy, set ourselves goals for what we want to get done by the next week. So we’re actually holding each other to account in terms of what we’re trying to achieve and moving it forward.

TJ: So one sane day a week.

LR: Yeah.

TJ: You mentioned working with international clients as well. Obviously you’re based here in London, but a lot of the attention in the industry always goes to Los Angeles, because I guess that’s where the center of gravity is. How do you manage to stay on top of what’s happening, being based somewhere else? And how do you make sure you don’t get absorbed by the buzz and the noise that’s happening there as well?

LR: I think maybe that’s where being over here can be helpful in terms of not getting too caught up in the buzz, but we do have colleagues out in New York who go to LA more often than we do, so they’ll feed back what’s happening on the ground that maybe we should be aware of. Obviously we have clients that are constantly going backwards and forwards as well, so they can give us the low down on what’s happening. And occasionally we will go out if there’s a good business need and we need to go out there and talk to people then we will do, but I think to be honest the nature of what we do from a finance side, I don’t think we need to be in LA to understand what’s happening. London being such a major center you will find all of the major… whether it’s film, or TV, business have pretty big operations out of London as well. So, that enables us to cover the whole market.

TJ: How would you say has that changed over the last years? With obviously the production landscape as well becoming a lot more global. Have you seen significant changes there?

LR: I think our US colleagues are probably much more interested in what we’re doing now, whereas before… I don’t mean that in a bad way, just I think to a certain extent it didn’t necessarily, unless you were in LA and doing very specific film financing, that wasn’t as obvious to our colleagues as perhaps it was to us. Whereas now, because there’s been that real shift that obviously film is still really important, but a lot of TV productions are the same size or bigger than a lot of film productions. And the way they’re financed is probably more bank-friendly than film. I think that’s resulted in our colleagues being much more interested and they’re very engaged and really helpful in helping us, either with contacts we want to make here, we work with them in terms of the relationships they have out of the states. So I’d say from a finance perspective, we’ve become really joined up, which works really well.

TJ: I mean it used to be the case that if you didn’t have an address in Los Angeles you didn’t exist. A bit like if you put your name in Google and nothing comes up, you must not be a real person. It’s quite interesting, because I think, and I would love to get your take on this, that a lot of the finance aspect of the industry have become a little bit more institutionalized. While maybe even 10, 15 years ago everything felt a little bit more once off unique deals things have become a little bit more structured. Do you feel that’s the case?

LR: I think there is a bit more structuring, probably maybe because of the size. But I think from our perspective, we still try to be the spoke where we need to be and I think we’ve got the flexibility within our product range to try and create the right solution for a client. But if there’s a number of… I guess by being more structured enables people to respond more quickly to what’s needed. But if you want something a bit more of a spoke obviously, I guess as a producer that can make it harder. But from our perspective, we try to be flexible where we can.

TJ: Obviously producers can be very creative in the way they do business or they structure things. How do you manage to bridge that gap between what you can do, based on the products you have, and what they need or how their needs change? You mentioned obviously bankers a bit like a big tanker, you can’t just suddenly change course, whereas a jet ski can.

LR: Yes. Yeah, I think what we try to do is just be really honest, really open, keep a good dialogue going, understand what the challenges are and try and react accordingly. I think as long as you’re open with people and tell them what you can and you can’t do from the beginning, and also potentially if we can’t do it who could help you do it, then I think people appreciate that honestly. And I think things can go wrong in production and I think that’s where we have proved ourselves to be flexible and understanding that actually occasionally things do go wrong and you need to alter your terms and change the profile. And we’ve done that, but by understanding the sector and having a close dialogue with the producers, means that if something does happen we can respond quickly to that and it’s not a surprise. For me, as long as you’ve got good communication you can bridge that gap. For us, we don’t need to be involved in the whole creative side, they don’t need to be involved in the whole finance side, but the key is there’s that bit in the middle where we just need to make sure we’re talking.

TJ: That’s actually a great argument. “Look, I’m not editing your script, so please don’t mess with the numbers here”. I want to talk to you about completely different issue. Obviously, and this is getting discussed, I guess, more and more. There’s very few women in leadership positions in, well banking first of all, but also in the media industry, especially on the business side of it. How did you experience that discrepancy in your career?

LR: Well as you pointed out I work for banks, and corporate banking in particular unfortunately is still quite male dominated. I think it’s changing and it’s improving. And when I was a graduate, I can’t think of a single female that was in a leadership position whereas now I do look around and I see more female counterparties and I see more women in leadership roles. There’s still a lot of work to be done, but I was thinking, from my perspective, what I’ve always tried to do is do a job that I really like and if you like your job and you do well then actually that’s probably the best way to get promoted and get into a leadership role if that’s what you want. Because ultimately it starts with do you enjoy what you do? And if you do, then that’s the first step. You also need to find good people to work with. I’ve had some brilliant managers. I’ve had a couple of not so good managers. And those are when you realize you have to exit yourself from that situation, because-

TJ: We’ll list their names in the credits.

LR: You’re never going to get anywhere without someone who’s supportive of you either and who’s going to champion you as much as you champion yourselves. So you do need a little bit of… You need luck, or be able to recognize those people who will support and help you as well as those people who really won’t. I made some tough decisions along the way in terms of leaving roles because I didn’t think I was going to get that support and I needed to go somewhere that I felt that I could grow. So I think don’t be scared to take a sideways move or do something different if you think that in the long run that’s going to help your career. But I think the workplace as well needs to change. I think it’s become more flexible. It needs to continue to be flexible in the way that it allows its employees to work, male and female, because I think men and women both want flexibility for whatever reason they want. But the more flexible the workforce can be the more it encourages everyone to think that they can do every single role. So I’ve got a six year old daughter and changes in technology and everything else has made it much easier for me to do my job now than it might have done 20 years ago in terms of being able to be connected with the office even when I’m not in the office.

TJ: Maybe sometimes too much?

LR: Definitely too much sometimes. Sometimes I do have to remember to put the phone away. But I think it’s finding ways to make people think that actually the nature of what you… It’s about what you do and how you approach it and it’s not necessarily, as it probably was before, which unless you’re always seen in this place at this time, then you’re not going to get ahead.

TJ: I never understand the concept of face time. I mean it’s great to be there and as far as the just next door to people that come in and ask questions. So is that how you navigated the process one by, obviously just doing jobs that you like thus being very good at them, and then hitting the stop-loss when you didn’t feel you got the support, looking for a different avenue?

LR: Definitely. I think you have to, because if you’re in an environment where you don’t think you’re going to grow and you’re not happy, you’re not going to do well. So you do have to say, “Right, what’s next?” And I’d love to say I had this big long-term vision, but I didn’t. But what I did always make sure is that I always enjoyed what I did and when I felt I was no longer being stretched or enjoying it that that was the time to move on and move to the next job and the next challenge. And if you keep challenging yourself, at some point I think you then end up in that leadership role because that then becomes the next challenge.

TJ: Do you think there’s anything else besides obviously creating the flexibility for everyone that the banking space or also the media space could do to bring more female leaders forward? Besides getting rid of people that have been in the news often enough for misconduct.

LR: I think the hardest thing to get over, and we’re trying to do this in the bank, is that habit of hiring in your own image, in terms of ensuring that during the recruitment process you have different voices being heard about who’s the right people to hire. And maybe taking a few more chances on people that don’t necessarily have exactly the experience. But unfortunately, you can’t help that unconscious bias unless you tackle it head-on and have different people in the room going, “Well, yeah, there is that, but what about this?” And I’m an are about positive discrimination, only because you can… on one hand, I don’t like it, on the other hand you think it’s going to take so long to get any form of equality that you feel that it should be something more. So whilst on one hand, I don’t agree with positive discrimination, you do feel that it’s going to take such a long time to get any form of equality that you at least need to have different voices in the room when hiring decisions are made to make sure that different qualities that candidates have do come out. And it’s not just people looking for the same thing all the time, because different people have different things to give, and to be honest, one of the most rewarding teams I worked in was pretty much 50/50 male female, and it wasn’t actually until I left the team that I managed to pinpoint what it was that was so good about it. And actually it was the fact that you were getting all of those different opinions coming through on an equal basis. And actually, as a result, it was a great atmosphere to work in, and actually we delivered really good results as well. So from my perspective, diversity and bringing more people, more women, through into leadership and into all roles is actually good for business as much as anything else.

TJ: You mentioned going into banking; the graduate program. What do you think you would be doing if going into banking wasn’t an option?

LR: I thought about this, it was an interesting question. So I came up with the two things that came into my head which first was a diplomat, which I mentioned before was something I’d thought about. And then the second would probably be a florist, so totally different. So one quite creative and the other… I probably developed a lot of the good negotiating skills you probably need to be a diplomat, actually, through banking, but yeah, a diplomat or a florist.

TJ: Interesting, interesting. A florist just because you love flowers and-

LR: I love the creation piece that you can have, the fact that you can start with just a bunch of flowers and then you can create something that can be quite beautiful. And how flowers can make you feel. How a bouquet of flowers might make you feel when you see them or receive them.

TJ: I mean it always lifts up the spirits, and just it’s impossible to have a bad day after somebody gave you a bunch of flowers.

LR: Absolutely.

TJ: Especially when they’re arranged nicely. On that note, if you had a chance to meet 20-year-old LR, what would you tell her? Time machine back, you’re right there.

LR: I would tell her to believe in herself and to maybe take more chances. And don’t worry so much, just go for it.

TJ: It’s very interesting because this is a question I ask everyone, and I think that’s 90% of the case, is that people say, “I should have believed in myself more, I should have trusted more, and I should have worried less.” But on the other hand I’m always thinking, “Yeah, you’re right.” But, of course, also a motivator or something that makes you… check again and then maybe find another thing you need to adjust.

LR: And also maybe change roles maybe a year or so before you actually do. Push yourself up a little bit more, because I’ve found that I stayed in my comfort zone for that little extra period of time whereas actually you could have probably pushed yourself forward.

TJ: Yeah, because I mean the path you described, of starting here and then going to another bank but then coming back, I feel like if you were starting today, people would look at it and like, “How come you’re just three different… like two different organizations.” In this case. It’s almost on vogue that you have to change jobs every three, four years.

LR: Absolutely.

TJ: Like the latest, you know?

LR: Yeah, whereas I’ve probably five or six years in each role. I mean I guess that’s the thing about a big organization is you can change the job you do within them, which is probably why people end up staying slightly longer.

TJ: If someone’s listening interested in going into banking, obviously especially here, we’re not going to show it, but there are a couple others, especially in this little patch of earth here. What do you think is some of the things that distinguishes Barclays or also your team from others that you know?

LR: I think in terms of Barclays as a whole, I think they’re a really good employer. They offer a lot of opportunities in terms of different career… You might come in thinking you want one career and end up on a slightly different career. I have friends who came in as graduates with me who didn’t end up in corporate banking, they may have ended up in marketing or HR, or somewhere else. So I think as a graduate if you’re looking for somewhere to go, it gives you a lot of possibilities if you’re not quite sure exactly where you want to be. I think if you’re in corporate and you like the media sector, the reason why I would recommend Barclays is the fact that we have a fantastic team of people that are really passionate about what they do, whether it’s TV or music or publishing or films. They really love what they do, and they actually combine the best of understand banking and how to help clients with a real passion for the sector that they’re in as well, which I think comes across when you talk to clients. That you’re not just there going, “Oh, here’s some banking products.” They’re genuinely interested in the sector and the development and what those business are doing. So to be part of that is quite exciting. We get a lot of graduates come through our team as part of their rotations and they’re always wanting to come back. We often do get them back, which is great, which is always a good sign when people do their two or three rotations and then say, “We really want to come back and work with you guys.” And I think because we’re always developing the product as well, it’s quite exciting place, you’re not just doing the same thing, it’s changing.

TJ: Speaking of change, what are some of the things you’re watching now in terms of trends or things that are changing in the industry?

LR: I think at the moment there’s two main things. Obviously continued consolidation of producers and broadcasters, which seems to be never ending. It just continues to consolidate. And then the other side obviously has to be the SVODs and the streamers. Looking at what Apple’s going to do, looking at how Disney Plus and the impact that might have on Netflix. And also looking at consumers and their changing habits in terms of how they’re consuming content, whether it’s on the phone, via a laptop, occasionally on a TV. So just understanding the impact that can also have on producers and the content that they’re making. I think we’ve had one of our clients was making something for Snapchat and, again, so from really long content to also very bite-sized content. And in terms of just the changing demands of consumers.

TJ: How do you think that’s going to impact your job and the work you’re going to do in the next couple years?

LR: I think we’re going to have to continue to be flexible and willing to change in line with how the market changes. But I do think the one consistent has been around content and delivering good quality content. If you’re a producer and you’re working with people who have good ideas and come up with good content, the question then is where did they put it and how do they need it financing? So from our perspective it’s about working with good producers, or up and coming producers, and working with them to navigate the changing landscape and how we can support them as we do that.

TJ: So on the note of making decisions, what deals you can and cannot do, how much is that guided by the policies we mentioned? How does that process actually work?

LR: So if a client comes to see us, it depends what they want. Whether they want a working capital facility, production financing, term debt, there’s a lot of different products. But let’s just say they want some form of debt, whether that’s corporate facility or production finance. The most important thing for us is actually the management team who are running the business, how they’re running the business, what their background is, how they’ve come to where they are now, what their track record is. Because ultimately it’s the management that are going to deliver for you and they’re going to provide the cash to repay you. So the management team, definitely number one. Secondly then, if you’re looking at a production, it’s understanding what the nature of that production is. Has it been commissioned? Have they got cash flow? Who’s their production accountant? Understanding how it’s going to work in practice and what they need from us from a debt perspective. In terms of what we need from them, the other most important thing we need from a business is the cash flow for the production. Or if it’s a corporate facility, the business as a whole. But having a good and accurate cash flow’s really important to enable us to assess the lend and understand what the peaks and troughs are in terms of what they need and when, so that’s really important. Then what we do from our perspective, once we get to know the business, understand the management team, understand the nature of what they’re doing, where they’re going, is we will tend to pull together a paper that we share with our credit colleagues with whatever the request is and what we need. We then have to get to documentation, which for production is quite straightforward in terms of an agreement between ourselves, the producer, and the counterparty. If it’s more against the business then it will be a standard loan documentation which may have financial covenants to ensure that we know, in sum, how the business is doing, or with the production then it’s around the cash flow and ensuring that we have the timely payments.

TJ: And how has that changed over time and especially with, I mean, we talked about the streamers. How has that changed in terms of what you need to do for that process?

LR: I think the one change with the streamers is it’s longer term lending, so rather than maybe taking somewhere between six and 18 month view on the producer and the counterparty, we’re now taking a three, four, five year and sometimes a few, especially on the counterparty. So we need to really understand not only the producer’s ability to deliver the content but we’re looking and the longer term ability of the streamer to repay us. Which you would go, “Yeah, but they’re all big organizations.” But also, if you look at Netflix it’s also a very highly levered organization and it’s very dependent on new users to continue to be able to fund the development and obviously the investment that they’re putting into the platform. From our perspective it means we need to do that longer term analysis and really keep on top of the counterparty to ensure that we’re maintaining an acceptable level of risk.

TJ: On that note, how does the pricing work for something like that? Obviously you’re not doing this out of goodwill and charity. Is it more of a calculation of all the factors? Or based on, if it’s this, then this, and that and then that’s the final?

LR: Yeah, so we do actually take into account a number of different factors, especially if we’re lending to a special purpose vehicle, which obviously a lot of productions are done through SPVs. We take into account the producer, the nature of the program, what risk there is with the program in terms of the UK. Is it overseas filming? Any factors that can go into lengthen the risk of the production. And then we do look at the counterparty as well and look at the strength of the counterparty and the tenor in which the loan’s going to be repaid as well. So we take and we actually really bespoked our model last year to actually take into account all of these factors. Before that it was mainly looking at a bank standard producer, customer-based risk model. But we felt for production financing in particular it was really important to take into account a number of different factors. So if you’re doing a really straightforward studio-based six month production for ITV, then the cost of financing for that, understandably, will be lower than for something which is 18, 24 months in production, multi-location, dealing with a high-risk counterparty.

TJ: So when you’re going through that process, especially on the corporate facility side, is there something you observe maybe again and again where you though in terms of KPI or how the company is managed that there was room for improvement? If they just did this and this and this, then it would be so much easier, but that’s not how they ran the company. Is there something that would make this process better for companies, or easier had they done a certain thing? Is there something like that?

LR: That’s a tricky one. I think for us, it’s all about ensuring the financial management of the business, especially if you’re running a number of different productions at any one time and you’re looking for something that’s more on a corporate basis then a production financing, is making sure you have a really good back office staff that are ensuring the business runs smoothly while the creatives go out and produce lots of content.

TJ: Because I think that’s always one of the challenges, especially if a production company runs multiple productions, that there needs to be enough bodies in the office to catch all the information. So on that note, one topic I always find very exciting is valuation. Whether you’re looking to sell the company or get an investor, that’s one of the most discussed things probably. From a banking perspective, you also, as you said, you want to know who you’re talking to. How do you approach this? I mean, because especially for newer companies it’s always very tricky. Older companies, they might have a catalog. What’s your take on that?

LR: So from our perspective, valuations are interesting and if companies got a fat catalog of productions I think that’s helpful, but I think from a bank perspective what we’re looking at primarily is cash generation. So we’re looking at the ability of that company to generate cash, to both invest in new productions, but also for repayment profile if they’ve gone for a corporate debt option. So it’s trying to get the balance between investment and also generating cash for bank facility repayments. So I think evaluation is important if you’re selling, but from a finance perspective it’s all about the cash.

TJ: I mean, evaluation, to me it always sound a bit like you’ve got to pick a religion and then stick to it and then argue that way. There’s so many approaches to coming to a result and they’re usually all very different.

LR: Definitely. And from a bank perspective, we don’t really ever want to be in a position where we’re having to sell someone’s back catalog. So we leave that to others.

TJ: Or on the other side of the spectrum, having a company that half of their valuation is made up of one children’s TV show, which is of course very interesting in a story in itself, but how do you feel about that when there is a company that has done really well on one property, that might still generate cash, do you feel that’s a different situation as if they were doing the same result with ten shows, for example?

LR: I think from a finance perspective, obviously, it’s lower risk if you’ve got multiple shows rather reliance on one show, because depending on what the show is, something could happen that could alter the value of that or the ability of that production to go forward. And we’ve probably seen that a few times over the last few years. So reliance on one thing, it does make it harder from a bank perspective than having a number of different programs. So we’ll still lend against it, but maybe the amount we can lend is probably slightly lower than if we had multiple productions.

TJ: So if you had to get your crystal ball out, what do you see happening in the… We talked about what’s going to happen now and in the next couple months, maybe years. What else do you see as a long-term shift that’s happening?

LR: I think a lot will be around consumers and how they want to consume content. And I think it’s hard to know exactly how they’re going to want to consume content because 10 years ago I don’t think we would have predicted where we are today. So I’d love to be able to predict the future, but it is really tricky because of that. Because I think the two key elements are… The key element is what the consumers want and how technology changes will influence that. I think there’s likely to be further changes around broadcasters and streamers. I think if you create good content, someone will buy it, and someone will watch it. So I think probably the most changes are likely to be around the broadcasters and the streamers. That’s where I think we’ll see the most changes in the next five, 10 years. What that landscape will look like is a little bit harder to tell, but that’s where I imagine that it won’t necessarily be all the same people we’re talking about today.

TJ: Well I hope we get to speak before that to adjust our predictions. In any case, thank you so much for your time and for joining us and I’m looking forward to speaking with you about the past present and the future next time.

LR: Thank you.

THANK YOU to this episode’s sponsor AXIOM Venture Capital!
http://www.axiom.vc

The media, technology, and telecoms team of Barclays can be found here: https://www.barclayscorporate.com/industry-expertise/our-sector-coverage/technology-media-and-telecoms/. If you want to learn more about Lorraine and her work you can find her profile here: https://www.linkedin.com/in/lorraine-ruckstuhl-27285a10

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CREDITS

Editor — Christina Voigt (http://www.christinavoigt.com)
Audio Engineer — Athanasios Karakantas
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Design — Daniel Cottis (http://www.danielcottis.com)
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Transcription services by Rev.com

Special thanks to everyone at Barclays, especially the team of Barclays Tower in Canary Wharf for helping to make this conversation happen.

Special thanks for their creative review go to Anouk van Ghemen, Frederik Jaeger, and Philipp Hoffmann.

For comments on the show or if you know of someone we should interview, please send us a message to mediacfo@colibristudios.tv.

ABOUT MEDIA CFO

Media CFO focuses on the finance, strategy, business affairs, and legal side of the global media & entertainment industry. The guests on the podcast range from veteran studio executives to new, disruptive market entrants.

MEDIA CFO takes a look under the hood of the global entertainment industry and talks to the unsung heroes: dealmakers, lawyers, entrepreneurs, financiers, service providers, bankers, investors, and agents. The podcast offers unique insights into the daily work and life of those, who run and build this industry by visiting them on location and having in-depth, in-person conversations.

ABOUT TOBIAS JAEGER

Tobias started his first own firm during his studies at Maastricht University in the Netherlands and has lived, worked, visited, and studied in over 43 countries on 4 continents. Tobias loves to connect people from around the World to make great things happen. Previously, he has done so at Business Associates Europe, SAP AG, StrategosPoker, Aramark, and entrepreneur academy. Today he is a Managing Partner of AXIOM Venture Capital, a family office focussed on the media & entertainment industry and Tobias serves as the Chief Financial Officer of London-based television and content studio Colibri Studios.

The conversation was originally recorded in London in May 2019.

© 2019, Colibri Studios of London