PxPixel
TV BusinessTries toGet On TopOf the World - Broadcasting & Cable

TV BusinessTries toGet On TopOf the World

Despite threat of piracy and local competition, U.S. media industry leaders see more opportunity than ever overseas. But like anything, it’s all in the execution.
Author:
Publish date:

Complete Coverage: NYC Television Week

Few things tickle Steve Mosko, president of Sony Pictures Television, more than traveling overseas and hearing folks talk about one of his company's shows.

"There's nothing better than to go to Hungary or the U.K. [and hear] ‘I love Breaking Bad,' or ‘I love this show.' It just makes you feel good that what you're creating is actually crossing boundaries and making an impact," Mosko said. And that happened a lot during a month-long European trip Mosko took last summer.


 WHY THIS MATTERSDomestic companies have been prompted to turn toward international by a mature U.S. market, government gridlock and tepid economic growth.

It is, however, less of a rush when Mosko's 24-year-old son, who lives in Shanghai, tells him about a less-than-legal screening of one of those same shows-quickly pirated and dubbed. "There's nothing more sobering than to have him call me and say, ‘Dad, they're doing a screening of Breaking Bad just down the street.' And that's the day after it aired in the U.S. [already dubbed] in Chinese."

Piracy is the ugly downside of international renown. "So we have our work cut out for us," Mosko said. "We just have to go in there and fix the problem ourselves and be proactive. Actually, my main goal in the next 12 months is to raise awareness of this issue."

Mosko made his comments during the inaugural NYC Television Week, a multi-day event presented by Broadcasting & Cable, Multichannel News, Next TV and the National Association of Broadcasters. He was joined as a keynote speaker by a host of leaders and notables from across the industry during the event, which began the morning before the B&C Hall of Fame, on Oct. 28, and wrapped Oct. 30.

Many Reasons to Look Overseas

The upside of the international angst is the huge revenue opportunity, which has the U.S. television industry eyeing overseas markets with new intensity. They're spurred by a mature U.S. TV market, a government in perpetual gridlock and tepid domestic economic growth in contrast with a nascent recovery in Europe.

And although Americans are watching more television than ever, the U.S. TV business has grown contentious, with studios and networks battling tooth and nail over digital revenue, and broadcast and cable nets engaging in bloody fights with distributors over retrans and carriage fees. Consumer viewing habits have shifted radically, and disruptive technology threatens to rattle things even more.

For all these reasons-not to mention the hope of catching pirates-a stream of programming, network and distribution execs at NYC Television Week pinpointed growth in international markets as a focus going forward-from Mosko, to Dana Walden and Gary Newman, chairmen and CEOs of 20th Century Fox Television; to AMC Networks chief operating officer Ed Carroll; DirecTV CEO Michael White; and even NBA commissioner David Stern. Rich Ross, CEO of Shine America, talked about one of the Shine Group's core strategies of importing and exporting shows and formats among territories around the world.

"There's amazing work being done [internationally], and we want in," Walden said of the U.K.'s Channel 4, Italy's Sky Italia and SkyB and others. "I'm hoping in the coming couple of years that internationally, our company can grow our coproduction partners," Walden said, calling it a top priority for 20th shows to have global appeal "baked into the DNA. Not just the old sort of classic, ‘We'll make our shows that are right for this market and I'm sure that you'll like them,' because that is no longer the case. All of these territories are producing really great shows for themselves."

20th is at the top of its game in the U.S. with the likes of Homeland, Modern Family and new entry Sleepy Hollow. Newman noted he and Walden have seen profits grow with only "one or two very modest exceptions" for the past 14 years. Yet the business is getting more combative as it grows more uncertain.

"I think our network partners respect and appreciate that they're going to be delivered great content by our company, but they're also going to have to contend with us as we are aggressive about pursuing our rights and what will enable us to continue to grow our company and to continue to develop content which has incredible global appeal. And it's costly. And the cost of production goes up every year [along with] our overhead," Walden said.

Evolving the Worldview

Peter Liguori, who became CEO of Tribune Co. this year, said a global perspective is crucial for repositioning Tribune, which has emerged from bankruptcy protection with ambitious plans. "We want to participate in the longer tail of programming so that we could take advantage of foreign and Netflix and all the streaming," Liguori said at NYC TV Week. "Plus, we like to look at our footprint and our distribution not just for sheer revenue but almost as a distribution and marketing arm for the content we co-own or own ourselves. And it's a big point of differentiation between us and, let's say, other independent local station groups.

"Sinclair doesn't have a cable network, they don't have a studio. Nor does Gannett, Meredith, LIN, the Post," Liguori continued. "It's a good strategic advantage for us, helps us to cross-promote and cross-pollinate and better monetize the content that we're making and better monetize our distribution."

Newman said that secular shifts in consumer habits are also a motivation. "We're going through one of the biggest transformational times that's happened in the last 25 years, which is the nonlinear viewing of programming," he said. "It is something traditionally the studios have capitalized on through DVDs in particular, [subscription video-on-demand] in recent years and now networks feel as if they need to because they're losing their audience to nonlinear viewing. So we're really all sort of battling and competing over what is a fair way to carve up that particular pie."

Mosko said casting is key in helping content flourish overseas, like the star of Sony's Masters of Sex. "We talked about how we were going to cast it. We talked about getting Michael Sheen, a well-known film star, huge in the U.K.," he said. "Casting Michael Sheen, as big as that was inside the U.S., it was huge outside the U.S. As we look at every show, it's always, how can you maximize great people, but also how are you going to make a global business. Casting Michael made a huge difference for us in terms of being able to sell it around the world."

Bigger Buys

Networks have been moving international with a spate of high-profile acquisitions, most recently AMC Networks' purchase of Cellomedia, a group of about 65 networks in 13 countries, from Liberty Global for just over $1 billion. With a handful of crazy popular hits on its hands, the company is leaving too much money on the table without an international outlet.

"If you are in the content game, and we are ramping up our hours on all the networks- Sundance, WE, IFC, AMC-then it makes sense to be able to distribute shows not only domestically but internationally," said AMC's Carroll.

Diversification is also key, especially for a standalone, publicly traded company. About 95% of AMC's revenue comes from North America, so the Cellomedia deal makes sense.

"[DirecTV chief] Mike White before us was talking [during a NYC Television Week Q&A session] about DirecTV's experience in Latin America," said Carroll. "It does make sense to expand. When the Cellomedia deal closes, we will have about 25% of our revenue coming from outside the U.S. So you're not beholden to one economy, one ecosystem." DirecTV's massive bet on Latin America that Carroll referred to represents a huge chunk of the satellite company's business.

That region, in particular Brazil, hit a speed bump recently as subscribers grew less than expected in the second quarter. But White is upbeat on the market where, unlike the U.S., he said there's still lots of room to grow.

"In Latin America, I think total pay-TV penetration's only 35% and our market share's 28%. So there's upside both ways in my mind....And I see tremendous upside in countries like Colombia, Chile and even Brazil. In the long run, you've got a young population. We've got a great brand and great service. You've got tremendous natural resources down there, including oil. So I'm still bullish."

Stateside White described a situation for distributors that's pretty much impossible with retransmission fees rising 50% this year from last, sports costs skyrocketing and consumers increasingly balking at monthly cable and satellite bills of $100 or more.

The push and pull may have reached a crisis. The "solution" for consumers may lead to cord-cutting, and while that won't happen in a sudden rush, there's little sense in denying the steady drip, drip, drip.

"Cord-cutting as I see it is not a technology phenomenon driven by all the cool stuff you can get online. It's an economic phenomenon driven by the lack of affordability of the traditional model for more and more households, and they're being driven to alternatives," said Craig Moffett, founder and senior research analyst of MoffettNathanson LLC. The combination of Aereo, if it's ultimately deemed legal, and Netflix, he said, may offer the more viable alternative to cable.

Moffett said programmers had counted on 10% revenue growth for years "almost as a birthright"-about 5% distribution growth and about 5% pricing growth.

"But 5% pricing growth was just too fast to be able to be sustained by the ecosystem," he said. "You see the census data and household income [where] the bottom 40% of U.S. households, after food, shelter, transportation and health care, are already under water to the tune of $100 a month." It doesn't appear the industry is pulling together to solve the problem.

"What's the solution for no longer getting quantity growth because you're raising prices too fast? Raise prices faster, right? The media industry's response to [raising] prices too fast is to raise prices faster. It is the equivalent of being in a car that is hurtling toward a cliff and the only solution is to step on the accelerator harder and harder and harder as you get closer," Moffett said.

"It's not an accident," said longtime NBA commissioner David Stern, who plans to step down in February, "that we opened an office in Africa and we just played exhibition games in Shanghai and Beijing and Istanbul and Manchester and Bilbao and Rio and Manila and Taiwan-because we believe that content is going to show its strength in the U.S., but increasingly in the global arena."

Hoping Against Hope

If the U.S. economy perks up soon and creates many millions of new jobs, it may ease the pressure. If the government didn't risk shutting down every few months over budget or debt ceiling negotiations, that would help too. But for now, the clearer signs of recovery appear to be in Europe. The region is pulling out of recession into an economic renaissance, led by Germany and the U.K.

Lionsgate CEO Jon Feltheimer, speaking during his acceptance speech at the B&C Hall of Fame dinner on Oct. 28, urged the industry to work together and move ahead:

"I would say to all the different constituencies in this room tonight, let's find ways to be creative and ingenious about building new partnerships that make our business bigger and better.

"Let's remember that there's no distribution without content and no content without distribution. And let's remember that ours is a magical business and we are the wizards }of that magic," he continued. "That's why I love this business, not only because of what it is today, but because of what it will become tomorrow and the day after and the day after that."

Related