Last week, John
Landgraf, president of FX Networks, announced an ambitious plan to
create a suite of three networks and to ramp up the production of original
scripted series. He explains his strategy and his view of the TV
business—everything from the need to program more broadly, investing heavily in
program spending and allowing more program access for the right price—to B&C business editor Jon Lafayette.
An edited transcript follows.
Does the TV
business need more general entertainment networks?
I don't necessarily think that being all things to all people is a useful
proposition in such a fragmented marketplace. We really believe in the FX
brand. But we don't think that brand is a demographic brand. It's a
psychographic brand. It's about quality, originality and boldness and
risk-taking and fearlessness, if you will. A way to get bigger is not to try to
pull everybody into the same tent, but to allow us to create three tents that are
related, part of the same brand, but we can really focus on that new young
adult viewer, that 18-year-old, that 25-year-old, someone just coming into the
adult market, and ultimately provide them with something more. I'd like FX to
get older. But how can FX simultaneously get older and younger? That's part of
the problem that broadcast networks have-they have to be everything, they have
to be male, female, young, old. I don't think one channel can be all those
So we'll take three
and cover a broader swath. So while you're offering general entertainment, each
channel is focused so viewers can find what they're looking for?
I think the more focused the better. Brands are really valuable. They let you
find what you want. Our biggest concern was we didn't want to dilute or water
down the brand. We wanted to do that and keep the content focused. We thought
about whether we should have three different names and three different brands.
That's the standard operating procedure within the basic cable groups. We said
no, we really believe in our brand. What we want is more specific demographic
targets. You're investing a lot on programming, expensive programming involving
big-name talent. Is that a good investment? I think it's a good investment.
First of all, one digital competitor has put one show on the air, which is good
and which they say is a big hit but they released no data. So I would hardly
call that an institutionalized programming strategy yet. Obviously they say
they're going to continue to roll them out, but they still have to pay for all
of it. They have to figure out how to pay for and amortize a high volume. Let's
imagine for a second that Netflix and even other subscription video-on-demand
channels are successful and they do build up meaningful original programming
brands. I still think it's going to be better to be bigger. Ultimately, to
remain competitive in this kind of fragmented programming environment, you need
more heft, you need more marketing, you need more shows. You need more reach.
You need all the things we're trying to build because ultimately I think in any
brand segment, the strongest, most dominant brands are the ones that are best
equipped to deal with the vicissitudes of changed marketplaces. Now would you
rather be a Coke or Royal Crown? You'd rather be a dominant brand in any market
segment. And I think what News Corp. wants is they want FX to become one of
biggest, most important names in television. That's why this is a wise
How much are you
increasing programming spending?
A lot. I don't want to talk numbers, but a lot. One thing I'm really happy with
is, when we started to talk about another channel, the ways that channels have
traditionally been launched in basic cable is because you don't have full distribution
when you start, because you don't have an established base from an advertising
standpoint, established CPMs, established ratings, and you don't have an
established affiliate rate, what do you do? Well, you establish a new channel
on a shoestring and then try to grow the programming budget a little bit and
then you grow revenue a little bit. You grow the programming budget a little
bit more and you grow revenue a little bit more. You try to create a virtuous
cycle that over the years gets you where you want to be. I don't really believe
in that strategy anymore. It's go big or go home. And I think what News Corp.
has done is gone out and gotten us a very, very hefty distribution platform
from day one and they've let us invest very substantial resources on every
level for acquired series, movies and original series and marketing all across
the board. And obviously we could have made more money earlier on if we had
scaled back the scope of our costs. But the bottom line is, why do people need
a new channel unless it's valuable to them, or unless it really has things on
it that they want to watch? I guarantee you there's never been an entertainment
channel that's launched with anywhere near the original programming budget, the
marketing budget, the acquired programming budget that FXX has.
This is also a bet
on the current cable environment. Does your digital strategy support your
TV Everywhere, whatever you want to call it, is simple in theory, but
really complicated technically. Do you want to provide a free non-advertiser-supported
experience for the consumer when you're asking him to watch ads on the linear
channel? How does the operator share information that you need to do audience
targeting without handing over their consumer relationship? So there's a whole
lot of things that need to be worked out between the programmer and the
multichannel video programming distributor in order to make this possible. And
I think we finally have the breakthrough moment. I really do. We figured out how
to do it, therefore, we're going to be able to move tons more content online.
So if you're a paying customer, your authentication number, it's going to get
you access to tons and tons of content, it's going to be available wherever,
whenever you want it, it's going to be portable, it's going to move from device
to device. And all of a sudden, what the MVPDs are going to be able to do with
programmers is provide an extremely compelling non-linear experience.
As you ramp up the
number of shows you're making, how do you maintain quality control?
Part of the challenge that the broadcasters have is they have to put shows
on the air, whether the shows are good or not. I hope we can get from where we
sit today to where I want to be in two to three years. Obviously you can see
from the quality and depth of the development we have and the pilots we're
making that we have a good shot at it. We've beefed up our development
department a lot.
But if it takes longer, it takes longer. This is the not
going to be a schedule that's made up of tentpoles and hammocks. There's no
such thing as a hammock anymore. The hammock sags to the ground. If you're
lying in the hammock, your ass is touching the ground in today's programming
environment. It has to be all tentpoles. Every show has to basically make its
own gravity, pull in its own audience. So we're just going have to hump it till
we find 25 shows that good.
Were people willing to give you the digital rights you need to make
We own all our own comedies. And we've been working toward this day on
the film side for five years. And all the way back to when we did the deal for Two and a Half Men, we got the streaming
rights. To tell the truth, we were waiting for the technology and the business
deals to catch up. I think our distribution group just finally cracked the
Participant Media is letting broadband customers
subscribe to its channel. Will there be a broadband-only version of FX?
I don't think so. I don't think Participant
matters, they're not HBO and they're not going to get a lot of usage in 40
million homes. I was worried when I read [HBO CEO] Richard Plepler talk about
that because I think HBO has been really the best citizen of the ecosystem in
that they've been really staunch about not letting people who don't buy into
the MPVD system gain access to their content, whereas other companies, Disney
for example, made a deal to allow their content to flow to consumers who are
not MVPD subscribers, even though they're so dependent on them for Disney
Channel, ABC Family and ESPN. So I really respected HBO's position in that
regard. I hope they don't change their position because that's something that
has the possibility to be very corrosive to the paying ecosystem. And that
paying ecosystem is what is supporting this golden age of programming. The
ecosystem allows the golden age of programming. The greatest content creation
engine the world has ever seen is those paying customers. I understand that
people would like to pay for only the programming that they watch. But I would
like to only pay for the roads that I drive on, and yet I'm really grateful to
live in a country where there is a road anywhere in the United States I want to