Those Economic Storms Are Not Sinking Sales

Despite Eurozone crisis, streaming video services among factors buoying studios

With international sales playing an
even bigger role in funding U.S. network and
high-profile cable programming, the gloomy
news coming out of Western Europe would—at least on
the surface—seem to spell tough times in Cannes this
October at MIPCOM for U.S. distributors, who have long
counted on the region for the majority of their international
sales revenue. But some safeguards and trends are
helping to paint a somewhat brighter picture.

Granted, the ongoing Euro crisis has already caused a
number of researchers to cut their advertising projections
for the region. Zenith Media, for example, is now predicting
a 1.1% decline in overall ad spending in the Eurozone
in 2012 and even steeper declines in markets such as
Spain, which is expected to suffer a 12% drop.

“The macro economics are not good, and I think
broadcasters are being very prudent with their spending,”
says Jeffrey Schlesinger, president, Warner Bros.
International Television. “There is a cautious feeling in
the market. Spain is feeling a lot of pain,” and both Italy
and France are struggling.

But Schlesinger and other studio executives argue
that several trends—notably, strong demand for U.S.
programming and sales to streaming video providers—
are actually producing a relatively healthy sales climate,
which is good news for the Hollywood studios that rely
on international sales to bring in as much as half of the
revenue they get for new dramas.

For starters, the U.S. studios have output or volume
deals in many major territories, which helps protect
them from short-term market " uctuations. “We are not
doing an awful lot of individual product sales in individual
countries,” Schlesinger explains.

In tougher economic times, acquired American programming
can also offer a cost-effective alternative to locally
produced content, a dynamic that allowed a number of
studios to increase their international sales during the
deep 2008-09 global recession.

“We can offer them very high-quality programming
that they don’t have to take the risk or expense of producing
themselves,” says Ben Pyne, president, global
distribution, Disney Media Networks. “That helps in
both good markets and not-so-good markets.”

Demand for American fare also remains high, both
because of its high production values and the range
of product that the U.S. studios now bring to international
markets. “Not every American show will play
on primetime on a big terrestrial network in each European
market, but some of them will,” says Armando
Nuñez, president, CBS Studios International. “Some
will not be on primetime and some will be on cable or
satellite. But the client pool is growing, and there is an
outlet for all different types of American programming.
The business is really quite robust.”

High-profile cable network fare is also providing additional
sales, notes Marion Edwards, president, international
television, Twentieth Century Fox Television.
At MIPCOM, the studio will be bringing talent from
upcoming FX series The Americans and will screen the first material from the show. “It is exciting to launch
something like this in Europe, and screening it for the first time at MIPCOM,” Edwards says.

Meanwhile, several new channels and streaming video
outlets have entered the market, opening up new windows
or creating more competition for rights that is boosting
prices. “The entrance of multinational SVOD [subscription
VOD] players like Amazon and Netflix has created significant competition in some territories where there was not
much competition in the past,” Schlesinger says. “They are
paying grown-up money, and some of these companies
are competing for exclusive first-pay rights. So this has
become a pretty signi! cant source of revenue.”

With U.S. networks programming more sitcoms, demand
for comedies also seems to have improved. “While American
sitcoms traditionally had a tougher time finding an
international audience, [international] broadcasters now
view them as a more important part of their schedule,”
notes Keith LeGoy, president of international distribution,
Sony Pictures Television.

Meanwhile, digital distribution for online or mobile services
is providing studios with new windowing opportunities
for their product. “It has provided us with a fantastic
platform to bring TV and movies to a different audience
in different ways, and that has really allowed our business
to stay very healthy and buoyant,” says LeGoy.

In addition to selling programming to new international
streaming services being launched by Amazon,
Netflix and Hulu, Pyne notes that Disney is also looking
to do TV Everywhere deals. For example, Disney
content is available on digital platforms to authenticated
customers of BSkyB in the U.K.

Formats are another rapidly growing business for
all the studios. Edwards notes that Twentieth Century
Fox Television has produced local versions around the
world of Modern Family, My Name Is Earl, The Wonder
and other shows.

Twentieth has also taken The Oaks, a pilot that did
not get a U.S. network run, and sold the format to the
U.K.’s ITV, which has produced two seasons. “One of
the things we wanted to focus on was the studio’s enormous
development slate,” and take some of “these very
strong ideas” that may not have made it in the U.S. into
international markets, Edwards says.

Another outlet for product continues to be studioowned
channels. Sony, Disney and Fox have already
built up large international portfolios of channels, and
over the last few years, CBS has also been expanding its
list.This summer, the company announced a partnership
with Chello Media that will put CBS-branded channels
in 83 territories reaching 43 million subscribers.

“These channel ventures enhance your licensing opportunities,
give you equity in a channel and, in success,
you have channel profits as well,” says Nuñez.

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