Programmers Reach Out for International Revenue

Scripps Networks, CBS join rush for channels in new markets
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Media companies are increasingly looking overseas for new revenue and profit.

During this quarter’s round of earnings calls by programmers, Discovery Communications was probably the most outspoken about the benefits of doing business overseas. And even given the Euro crisis impacting stock markets worldwide and foreign currency fluctuations diluting dollar denominated revenue, most companies in the industry talked about how they planned to do more on the international front.

For Discovery, international generated about $250 million in revenue four years ago and last year hit $650 million, accounting for about 40% of its total and the biggest share of its second-quarter growth. “This year, it will be dramatically more than that, with real meaningful, I think, strategic advantage,” said CEO David Zaslav. “Our content works well. We have more channels than anybody else. We have local teams on the ground, so building on that strength is a key strategic initiative for us. In addition, it’s an important hedge [because] the U.S. has slowed down.”

Investigation Discovery, the fastest-growing network in the U.S. is being rolled out around the world, following on a global expansion of TLC. Increasingly, Discovery’s channels are selling their own ads in fast-growing markets such as Russia and Brazil. “Overall, we feel strongly about our growth trajectory around the world,” Zaslav said.

Time Warner is enthusiastic about its international business even after shifting operations in Turkey and India, resulting in $160 million in charges. “In each case, when it became clear that we were not on a path to succeed, we moved quickly to shut our operations to enable management to focus even more on our strongest properties,” said CFO John Martin. “We’ve had great success in many international territories, and we continue to expect international networks to be a key driver of our long-term growth.”

CBS, once a very traditional domestic broadcaster, has been embracing new streams of revenue. It’s already latched onto international markets as a lucrative place to sell series such as Hawaii Five-0 and Blue Bloods that it both produces and puts on its schedule. “We’re now selling these shows for millions of dollars an episode before they even air in the U.S.,” said Leslie Moonves, CEO of CBS Corp.

On top of that, the company is establishing CBS-branded channels around the globe. It started in the U.K., Australia and India. International now accounts for about 15% of total revenue at CBS, including about $1 billion in exported content. And thanks to a new deal with Liberty Global’s Chellomedia, CBS will be expanding into Eastern Europe, the Middle East and Africa. The arrangement limits the cost of expansion to CBS.

“We already have the model worked out that we’ve done with them in the U.K., where we have four channels with them where our content acted as our equity,” Moonves said. “And once again, it’s content that wouldn’t necessarily have been sold anywhere else. And it’s worked out extremely well. So because of that deal, we’ve expanded into 83 new channels. Once again, we haven’t put up a dime. We’re putting up library content and some existing content that wouldn’t be sold into territories such as Eastern Europe, the Middle East and Africa. And we own 30% of these 83 channels that they previously owned.

“There’s only upside for us in this,” Moonves added. “If they work out as well as the other four did, it’ll turn out to be a very good venture.”

Scripps Networks Interactive acquired Travel Channel International in May for $103 million to go with the U.S.-based Travel Channel it bought in 2009. “We’re already planning to air some Travel Channel U.S. programming on Travel Channel International this fall,” said Scripps Networks CEO Ken Lowe.

Lowe also noted that Scripps Networks owns Food Network channels in the U.K. and South Africa that are showing double-digit audience increases.

“On the international front, we continue to have productive conversations with various partners around the globe, exploring a variety of potential business opportunities,” Lowe said. “Our international team and partners are off to a great start, and we expect there’ll be other exciting international developments in the coming quarters. So stay tuned, as we say.”

E-mail comments to jlafayette@nbmedia.com and follow him on Twitter: @jlafayette

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