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The Business of Nollywood and Nigerian Music: Funding, Distribution, and Revenue Models

The Nigerian entertainment industry has increased in growth and appeals to audiences both locally and across the globe. It is filled with talented actors, musicians, and filmmakers who have made a significant impact both locally and internationally. The industry encompasses a wide range of creative disciplines, including film, TV, music, theatre, fashion, etc. This article, however, will focus on the TV and film industries popularly known as Nollywood and the music industry. Over the years, the entertainment industry has witnessed remarkable growth, contributing significantly to Nigeria’s GDP and job creation. It has become a major player in the global entertainment scene, showcasing the talent and creativity of Nigerian artists, filmmakers, and musicians.

According to the PwC Global Entertainment and Media Outlook for 2022–2026, Nigeria's media and entertainment sector is one of the creative businesses with the quickest growth rate in the world. In 2020, the combined contribution of music and movies to the national GDP was around $1.8 billion (730 billion Naira). The research further states that Nigeria’s film industry made up 2.3% of the country's GDP in 2021 ($660 million, or 239 billion Naira). They predict that the sector will generate over $1 billion in export revenue.

The Nigerian television shows have gained popularity not only within the country but also across Africa and beyond. From captivating dramas to hilarious sitcoms, Nigerian TV productions showcase the talent and creativity of local actors, writers, and directors. These shows provide entertainment and a platform for cultural exchange and storytelling.

The Nigerian music industry has also made significant impact globally, with artist like Burna Boy, Wizkid, and Davido achieving international recognition. The vibrant music scene encompasses various genres, including Afrobeat, Afro-pop, hip-hop and highlife. Nigerian musicians consistently produce chart-popping hits, collaborating with rich African rhythms and melodies.

The Nigerian entertainment industry has had a profound impact on the country’s culture and soft power. Through films, TV shows, and music, Nigerian stories and perspectives are shared with the world, fostering cultural exchange and promoting a positive image of Nigeria internationally.

The synergy between cinema, film, TV and music in Nigeria creates a dynamic and interconnected entertainment landscape. It is incredible to see how these industries continue to evolve, captivate audience, and contribute to the cultural fabric of Nigeria and the world.

However, the industry also faces its fair share of challenges. Piracy remains a persistent issue, affecting the revenue potential of artists and filmmakers. Additionally, the lack of adequate infrastructure, such as proper distribution channels and access to capital, poses obstacles to the industry’s growth and sustainability.

This article tackles these crucial aspects, exploring the historical context that contributed to the rise of Nollywood, and its economic and social impact, and the challenges that currently stand in its way. Examining the funding mechanisms, distribution strategies, and innovative revenue models, we can discover a path for Nollywood’s continued growth and global influence.

Distribution

The Nigerian entertainment industry is a lively and rapidly expanding area. The industry’s distribution networks are multi-faceted and have changed considerably over time. It encompasses the film and TV industry, music industry, and digital content. Each has different but sometimes overlapping distribution pathways.

Nigeria serves as a hotbed for several entertainment industries in Africa. The proliferation of consumable media, when paired with the notably lax legal frameworks present in Nigeria, creates the perfect landscape for profitable and stable legal channels as well as ample opportunity for Illicit activities like piracy. The Legal channels of distribution refer to the official, licit and verified means through which media reaches consumers.

Film and TV

The Film and TV industry, dubbed Nollywood is responsible for the vast majority of Nigerian Films and Television shows in production and circulation currently. Nigeria is notorious for the sheer volume of Films and Television shows produced locally, with widely varying budgets for each project.

More traditional channels of distribution such as physical and theatrical release are common, but digital releases through online platforms have become more common corresponding with an increase in demand owing to the introduction of local and international streaming services like NdaniTV or iROKOtv and Netflix or Amazon Prime Video, as well as the partnership between these streaming services and prominently creative leaders in Nollywood like Kunle Afolayan and Jadesola Osiberu

Traditionally Television shows are delivered to consumers through a number of TV stations like Silverbird TV, Channels and Africa magic. These channels are available through direct public broadcast as well as through syndication from larger Satellite and cable services like DSTV and GoTV. These providers usually offer robust bundles which have a large variety of films and television channels that feature both local and international content. The versatility of satellite also means that access is not as limited by existing infrastructure.

However, in the case of Film, larger scale productions receive wide release in cinemas nationwide, usually for a period of two or more weeks. While it is not the norm anymore, some films go on to have physical releases on Blu-Ray and DVD. Small scale, independent, or low budget productions usually opt for limited physical release and often times are uploaded to online platforms for ad revenue rather than direct sales.

Additionally, many films, independent or otherwise, are sent in for consideration at several local awards shows and film festivals, like the African magic viewer's choice awards (AMVCA), or the Africa International Film Festival (AFRIFF). This increases the reputation and notoriety of the industry locally and internationally.

Music

Nigeria also boasts a significantly influential and notable music industry that has garnered critical acclaim both within and outside the borders of the country. Traditionally music reaches consumers through radio broadcast, specialized TV channels, and through physical media like CD’s and records.

Physical sales of CDs and tapes persist even after the advent of digital technology mostly in rural areas. Street vendors and local markets provide most outlets for these sales although this has gone down. Digital purchase has also been an option for a long time but has never been particularly popular within Nigeria.

In recent years however, music streaming has taken off in Nigeria and has become the dominant model for consumption for the average consumer. Music streaming is facilitated through specialized services such as Apple Music, Spotify, BoomPlay and so on. They provide a large variety of music from extensive libraries. These platforms are also, in part, responsible for the international attention and recent popularity of Nigerian stars like Ayra Starr, Burna Boy and Davido.

Radio and Television, however, still play a large part in the distribution of Music distribution. Local music is played on numerous radio stations countrywide making it a reliable channel for music transmission. Music programs on MTV Base Africa, Soundcity TV and other channels help popularize Nigerian artists as well.

There are a large number of Radio stations in Nigeria, with Lagos alone having more than 60 currently operating. These radio stations often serve as a means for new and upcoming artists to gain popularity through the reliable and relatively cheap reach of Radio.

New media

The growth of the internet has also drastically affected the ways Media and entertainment are shared in Nigeria. Social media offers novel ways for conventional media to be distributed and allows for new formats which would have been impossible. Platforms like YouTube, X (formerly called Twitter), Instagram and Facebook are widely used by Nigerians; they serve as the perfect means to promote and distribute content online. These platforms also allow for the barriers to entry associated with media, such as production and distribution costs to be removed, as these platforms allow and even encourage short form content, that is cheap to produce and likely to be promoted to large numbers of people.

The advent of the internet has also allowed for new forms of media to exist. Now there are blogs, podcasts, on demand entertainment and so on.

Issues in distribution

As mentioned earlier, there are several issues that face distribution in the Nigerian entertainment sector especially in the film and music industries. Issues like piracy continue to be a major problem facing the entertainment industry. It affects all segments of it, especially music and Film. Unauthorized reproduction and distribution are eating away potential earnings for filmmakers and musicians.

Film and music files are often leaked or sold by insiders for a price, after which it is illegally reproduced and sold for cheap through street vendors. Piracy undermines the revenue models of the industry and is harmful to its growth. Despite legislative measures, piracy continues to run rampant due to high demand and weak enforcement.

Also, there is the lack of infrastructure and poor monetization strategies. Digital content distribution is not effective due to lack of well-established infrastructures particularly in rural areas. Poor internet connectivity and electricity shortages are among the obstacles. Monetizing digital content may be difficult because ad revenues are low, and a huge number of views is required to make substantial income.

However, even with these issues, opportunities for growth have emerged. For the first time ever, Nigerian entertainment content can reach global audiences through the digital revolution. Netflix, YouTube, among others enable access to international markets thus creating opportunities for wider recognition and revenues.

New ways such as pay-per-view or direct-to-consumer sales via social media platforms that empower creators to maintain more control over their work while also increasing their share of profits have been evolving. These models facilitate increased control by creators over their works as well as a much higher percentage on returns from sales made online via social media outlets.

The Nigerian entertainment market is expanding rapidly with more local and international investments coming through. This growth opens several opportunities for both content producers as well as distributors.

Funding

Over the years, the Nigerian entertainment industry has adopted several funding models, from the traditional to the new innovative ones. This section discusses these funding models, their advantages, and disadvantages, and how they impact the type and quality of content produced in the industry.

Traditional methods of funding

This refers to the conventional way artistes, filmmakers, and other creatives in the entertainment industry sourced funds to finance their various projects. Such techniques mostly involve approaching well-established organizations or people who offer support in terms of financing, sometimes, with some amount of managerial control over the project. This method includes individual investors, government funding and grants, corporate sponsorship, and advance sales.

Individual investors, also known as patron or angel investors, are private individuals who invest their personal funds into the production of entertainment content such as movies, music or stage plays. This model has been a significant source of funding especially during the earliest stages of the Nollywood industry. For instance, the late Nigerian businessman Chief Kenneth Nnebue who funded the making of one of Nigeria’s most iconic home videos, Living in Bondage which was released in 1992.

Government funding and grants are also another traditional method of funding the Nigerian entertainment industry. The Nigerian government, through various cultural and art such as National Endowment for the Arts (NEA), Nigerian Film Corporation (NFC), Nigerian Copyright Commission (NCC), Ministry of Information and Culture, and other state governments’ art and culture departments, offers grants to support local creatives.

Additionally, corporate sponsorship is a significant source of funding for the Nigerian entertainment industry, allowing brands to reach a large and engaged audience, while supporting the creation of entertainment content at the same time. An example is MTN’s sponsorship of the popular TV show Who Wants to be a Millionaire?, and even brand integration with music artistes, as in the case of Coca Cola and Tuface Idibia.

Advance sales and distribution deals are agreements made with distributors before the project is complete. These deals offer the initial capital which is useful in financing the production processes. They also guarantee that the content will have a market to get to once they are out. For example, Jenifa’s Diary (2015) and Hustle (2016) generate revenue through distribution deals with streaming platforms such as Netflix and IrokoTV. Music artistes like Wizkid and Davido also generate revenue through preorders and sales of their albums.

New funding models

In the entertainment field, there are new ways projects are being funded. They have been enhanced by innovation through technology, as opposed to the past, when they were financed by grants or bank loans. The new funding models for the Nigerian entertainment industry include crowdfunding platforms, film festivals, and partnerships.

Crowdfunding is a method that is used to raise funds for a specific case or project by asking a large number of people to contribute money. This is usually done on social media, and there is a specific amount the person in question aims to get. Usually, crowdfunding can be used for different purposes, such as business startup, tuition, health, filmmaking, and other personal expenses. Tombay A. Obenson, the founder of AKOROKO LCC, an African cinema platform, opened a GoFundMe in May 2022 to raise money ($75,000) for this cinema platform. Currently, people have donated up to $35,000.

There are two main types of crowdfunding: donation-based funds and investment funds. A donation-based fund involves individuals financially sponsoring a project to get some percentage, whatever the project's outcome is. For example, if a person sponsors a movie, he automatically becomes the executive producer. An investment fund simply involves seeking capital or selling ownership stakes online in the form of equity or debt. Crowdfunding platforms include GoFundMe, Kiva, Kickstarter, and Indiegogo.

A film festival is an organized event where different films are presented in cinemas or screening venues. These events are a good place for creative minds to communicate and for everyone to sell themselves to potential partners and investors. Also, keep in mind that film festivals focus on specific genres of film. At events like this, grants or awards can be given to the winner, if there is any award to be given. The awards and cash prizes given to film makers and producers can subsequently be used to fund productions.

When individuals with the same goals come together to achieve something, it is called a partnership. In the entertainment industry, sponsors, investors, and even companies can partner with a film maker to produce a film. Partnership helps to put resources together and share risk together. Different types may include co-production arrangements and brand collaborations for placement.

The growth and sustainability of the ever-evolving Nigerian entertainment industry depends on effective funding models. Both the traditional and new funding methods are effective methods. However, they both have their advantages and disadvantages

The Traditional models have been the go-to model for sponsorship before the emergence of new funding models. Traditional funding models use elements like individual investors, government funding, corporate sponsorships, and advance sales. According to Adegoke, Individuals may hold creative control but give more financial freedom thereby influencing artistic creations in a project. Most times Government funding comes with bureaucratic problems leading to delays in the project timeline. Corporate funding may give important resources but hinder creative freedom as they may want the project to align with the brand's image. Advance sales have the risk of underperformance, impacting profitability but may generate upfront revenue.

On the other hand, new funding models like crowdfunding, venture capitalism, film festivals, and diaspora investment are now changing the entertainment funding environment. Crowdfunding is a funding mechanism that gives room for creators to converse with their audience directly, but success rate depends on a strong fan base.

Venture capitalism can dilute ownership and creative control but involves growth capital into projects. A film festival is a highly competitive avenue to display one’s work but usually has a global audience or stage. Diaspora investments involve investment from interested parties outside Nigeria. This international connection requires effective collaboration.

Impact on type and quality of content produced

The model one decides to adopt has a significant impact on the outcome. It can affect the type and quality of content produced in Nigeria. Government funded project would involve cultural preservation and storytelling that shows Nigeria's rich heritage. Cooperate sponsorship would highlight company goals to suit the brand's objectives. Crowdfunding gives room for more experimental and diverse storytelling while addressing a niche audience.

Funding models are particularly important for investments as it helps in shaping growth in the entertainment industry. Traditional models have been important in the industry's growth, but with the emergence of new funding models, the industry has grown further.

It has provided opportunities for creators to access capital and realize their creative visions. As Nigeria's entertainment sector continues to grow, funding sources will be important in order to drive innovation, foster talent, and propel the industry into an international stage.

Revenue models

A revenue model can be referred to as a strategy or plan that outlines how a business or, in this case, an industry generates income from its products and services. It may include a business’s pricing strategy, sales channels, and marketing processes. Some specific types of revenue models are the advertising model, the subscription model, the mark up model, and the e-commerce model.

The Nigerian Entertainment Industry is a growing sector, and its ability to survive and thrive depends on the sustainability of its revenue model.

Currently, the Nigerian Entertainment Industry generates revenue via the following means:

• Box Office
• Television broadcast rights and Pay-Per-View Purchases
• Merchandise Sales
• Streaming Services and Digital Rentals
• Advertisement and Product Placement

Box office

Nigerian filmmakers generate revenue by distributing their films to theatres. The release of these films in the theatres could be Platform, Limited, or Large-scale. Most of the profit is generated from the ticket sales in the theatres, depending on the pricing strategy adopted, which could be standard, premium, or discounted. Theatres keep an agreed percentage of the profit while the rest is divided between the distributor and the producer. Revenue is also generated from the sales of concessions like snack and drink and also Merchandise sales.

This model is most profitable when filmmakers adopt strategies like releasing films during holidays and maintaining an exclusive theatrical release window, meaning that audience must first go to the theatres to watch the films.

Television broadcast rights and pay-per-view purchases

In this model, a media company or broadcaster secures exclusive rights to live events by signing a deal with the event organizer, sports league, or content creator. Sport federations and organizations negotiate exclusive contracts with television networks and streaming platforms to grant them rights to broadcast their games and events for a specific period or a specific number of games/events.

These media companies pay a licensing fee to acquire the rights to broadcast the event exclusively, requiring viewers to pay a fixed or tiered fee to purchase access to the broadcast via streaming platforms or traditional cable and satellite television.

The fixed-fee pricing strategy requires viewers to pay a one-time fee to access the event. This fee is usually determined by the production costs involved and the popularity of the event. On the other hand, the tiered pricing strategy allows viewers to choose different packages depending on the level of access to the event they want. For example, a premium package with tiered pricing may offer access to behind-the-scenes content.

Media companies work with sponsors, advertisers, and advertising agencies to raise awareness of these PPV events and attract a larger audience. These television networks also generate revenue through subscription models and the placement of commercials during broadcasts, All the revenue generated is then shared between the organizers, copyright holders, and the distribution partner or channel.

Merchandise sales

Merchandise sales occur when a company or individual sells products that are related to a specific brand, artist, movie, or event, serving as a tangible way for fans to connect with their favorite artists and referenced entertainment entities. This allows fans to show their fandom or brand loyalty and gives them a community they can identify with.

In the Nigerian entertainment industry, merchandise is sold for the different entertainment forms entertainment including music and movies. Some examples include t-shirts, hats, wristbands, phone cases produced with artist logos, album covers, or popular lyrics, clothes, posters, or even a tech industry’s collaboration with a famous media persona for branded gadgets. Artistes like Wizkid and Burna Boy have leveraged their global appeal to sell merchandise internationally.

An example is the collaboration that Burna Boy has with Oraimo for the Oraimo x Burna Boy Space-pods True Wireless Earbuds. Burna Boy's special edition, Space-pods, lets fans experience his music with Burna's tuning mode and voice prompts. The Afrobeat inspired Moonlight edition celebrates exploration, picturing a young African music lover as an astronaut discovering endless musical genres.

There is also the record-breaking success of The Wedding Party franchise which led to the production of a lot of merchandise, effectively generating revenue and spreading the film’s reach.

Streaming services and digital rentals

The rise of digital platforms has transformed how Nigerians consume entertainment. Digital downloads and rentals offer fans a more convenient and accessible way to enjoy music, movies, and shows.

On-Demand service platforms like iROKOtv provide a wide selection of Nollywood content for viewers around the world. Also, Streaming platforms like Netflix, Showmax, and Amazon Prime Video offer their users monthly, yearly, or tiered subscription plans that give them access to all the movies on their platforms as well as personalized recommendations.

Similarly, Google TV allows its users to rent or purchase movies or TV shows, splitting the revenue derived from this with the creators of the content. These streaming services may also offer free trials, exclusive content, service bundling, and discounts to attract and retain users. Nigerian filmmakers that have their movies on these platforms generate revenue through licensing deals. This model is beneficial because it allows creators and entertainers of all respects to bypass geographical limitations and reach a global audience. It also provides Nigerian filmmakers with a stable revenue stream and helps combat piracy in the Nigerian entertainment industry.

Advertisement and product placement

Advertising and product placement (PPL) has allowed brands to leverage the popularity of entertainment content to reach a targeted audience. This specific model offers benefits for both entertainers (in every respect) and advertisers.

With the new media, Content creators, social media influencers, actors, artistes and artists can generate income by integrating brands into their content/works or through product placement deals and traditional advertising spots. For instance, popular afrobeat artiste, Davido, recently advertised Martell in his song, Over Dem, I dey sip my Martel, I pin down with my cartel.

Brand Awareness Advertisers utilize popular entertainment forms, artists, and social media influencers to gain valuable exposure to an engaged audience. For instance, a popular and successful reality show like Big Brother Naija has attracted major brands like Pepsi and Indomie to sponsor the program. Advertising revenue can help creators and entertainers invest in higher production values, subsequently leading to more engaging and visually appealing content.

Conclusion

The Nigerian entertainment industry boasts a unique blend of creativity, innovation and originality which makes it different from other entertainment ecosystems. Despite challenges like piracy, it continues to thrive and grow using diverse and innovative funding, distribution, and revenue models.

Due to this, its growth is continuous, and it continues to surpass milestone after milestone. It is no surprise therefore that it has become a hotbed for investments and collaborations. A major example is Universal Music Group’s (U.M.G.) significant investment in Mavin Records, a Nigerian record label known for popular artists like Rema and Arya Starr. Another example in the film industry is Nollywood media mogul, Mo Abudu, Hollywood actor, Idris Elba, and Seal’s collaboration on a short film based in Lagos.

By focusing on creative and innovate business strategies and also telling unique African stories, the business of the Nigerian entertainment industry especially Nollywood and the music industry continues to boom creating opportunities for economic and cultural growth in the country and internationally.