Changing Channels

Changing Channels/The rapidy shifting global TV industry has American distributors facing an increasingly challenging international market



By Steve Brennan



Most everything will look the same at MIPCOM this year. La Croisette will flap with banners advertising American TV product, as usual. The squat Palais building on the shore will resemble an ant's nest as thousands of buyers and sellers, producers, advertisers and brokers of TV product swarm the floors, as usual. The Americans will continue to complain about the smoking habits of the Europeans, and the Europeans will ignore them, as usual.

But behind the scenes, things will be far from normal.

Colossal changes in the global-TV industry have created a paradigm shift. In years past, the Americans came to this market with packages of programming that had been created for the U.S. networks. It was always a seller's market, and the international buyers could basically take it or leave it. The world-TV market needed American movies and TV series. The giant media companies of France and Germany, Italy or the United Kingdom battled each other in their individual territories for the privilege of paying hundreds of millions of dollars for American product.

Now, the French and the Germans and the British, in particular, are making much of their own local programming. In response to this swing toward programs with familiar local stars and personalities throughout Europe and Latin America, the big U.S. studios have begun to produce huge amounts of local programming in the overseas markets. In addition, many are developing branded channels for their product in these markets.

These changes have been overtaking the market over several years to the extent that Columbia TriStar International Television is now producing more than twice as much local international product than domestic. With each successive MIPCOM come signs of more change, more shifts, more adaptation to the new landscape. And this year will be no different.

It is almost impossible to define this year's market by any yardstick of past MIPCOMs. Depending on whose viewpoint you care to listen to, it will be a buyer's market or it will be a seller's market.

"We expect the market to be very good in some respects and difficult in others," says Marion Edwards, executive vp of Twentieth Century Fox International Television. It's a statement that just about sums up not only the way MIPCOM is shaping up, but also how the overall international TV scene is evolving.

"Our mix of programming is much broader than in previous years. At this point we feel we have something for everyone, everything from action-adventure series to comedy to reality and wildlife documentaries," continues Edwards, echoing the strategies of all the major sellers.

But catering to a wide range of customers means harder work for the program salespeople, unlike the good old days when you cut a deal with one of three or four customers in each major territory and went home to celebrate. Now suppliers must serve a veritable potpourri of new programmers coming onstream as well as the traditional buyers.

Despite these changes, Armando Nunez, president of CBS Broadcast International, believes that nothing has emerged yet to match the kind of megabucks the traditional broadcasters once poured into the studio cash boxes -- and continue to do so -- as long as those long-term output deals signed years ago remain in place.

"The digital platforms and other emerging customers have yet to come close to the dollars paid in the past by the broadcasters," says Nunez. "If you look at our client base today and you compare that to five years ago and then to 10 years ago, you see we have many, many more clients. But it doesn't take a genius to figure out that substantial revenue still comes from the broadcasters. You would be hard-pressed to find an alternative and comparable revenue source from a digital platform. For the time being, the opportunities from the digital platforms are more in terms of bulk library sales."

To Jim Griffiths, president of worldwide distribution at Metro-Goldwyn-Mayer Television, the proliferation of buyers is largely a positive development. "In one sense that means that we are no longer captive to one buyer," he says. "That was a downside. If you did not make the deal with the buyer, you were out of the market in some cases."

In fact, Griffiths has written up movie sales to digital platforms around the world worth hundreds of millions of dollars, and is quick to point out that competition still remains strong for movies in the international marketplace. He is currently in negotiations with two competing French terrestrial broadcasters for movie packages that include "The Thomas Crown Affair" and the latest James Bond film, "The World Is Not Enough."

Gary Marenzi, president of Paramount International much optimism about digital platforms. "We are not seeing the tremendous amounts of cash coming down yet as we saw with the traditional broadcasters," he observes.

But Marenzi does admit that all new customers represent important shifts in the market. Referring to the recent $300 million output deal Warner Bros. made with a nontraditional customer -- Germany's fast growing distributor and rights trader Kinowelt -- Marenzi says: "You can't count on a Kinowelt in every territory around the world, but there are those companies out there. It is our job to seek those deals out when the market stagnates."

Nor is Marenzi buying fully into the theory painted by analysts that local production in major European territories has been a big disaster story for the American studios. "Yes there are fewer slots for nonlocal programming, but I have not seen this situation get any worse over the past year. I think we have reached a plateau. And, in some instances, some local program launches have not rendered the results that were hoped for," he says.

As a result, some buyers who were gung ho about local programming a year ago are now back in the market for American programming.

"We are in a decent market period now, and most of the markets are competitive," adds Marenzi. "We have buyers coming to us [with whom] we have not done business in a long time clamoring to get into business with Paramount. We are offering not just our own quality American programming but our targeted international programming, and we feel confident that it is going to be a good and buoyant market."

MGM's Griffiths also points to the $300 million Warner Bros. deal in Germany as the perfect example of how emerging new players can so dramatically shift the balance in an individual territory.

Warner Bros. had not had an output deal in place since late 1998 after its existing deal ran out with Germany's RTL. But Jeffrey Schlesinger, president of Warner Bros. International Television, was prepared to wait for the market to shift. "The truth is that I really did not know what was going to happen," admits Schlesinger. "But my intuition told me there would be changes and that if we watched the market long enough, things would start to happen."

Unlike the output deals of yore, this deal was crafted by Schlesinger with an eye on the ongoing changes in the business. The three-year deal "is short, because we don't want to be locked into something as new ways of doing business emerge," says Schlesinger, pointing to other aspects of the deal as being reflective of current market conditions, such as the fact that it does not include any Internet rights. "We reserved the Internet rights entirely because we don't know what this market is going to turn into a few years from now."

Schlesinger agrees with Paramount's Marenzi that the power shift some buyers are talking about has not hit the Americans as hard as those buyers would like to think. "For the local programmer it would be great if he could select only those programs that he wants to buy and go home and put them on the air," he says. "The fact of the matter is that a lot of the deals just don't work that way. The challenge for the programmer is to find event and targeted programming [and] to utilize other programming imaginatively."

One of the most influential buyers coming to the market is Brian Frons, senior vp of Scandinavian Broadcasting System (SBS), which has a billion dollars to spend on programming over the next four years.

Frons agrees with Schlesinger that broadcasters still have to utilize American programming included in the volume deals and output deals that exist with the studios, despite their desire to increase consumption of local product. Nonlocal programming is not going away, but in many cases the more influential buyers are forcing prices down.

"People are trying to get the price of hours down by 50% and are looking to pay just 20% of the prices they previously paid for sitcoms," says Frons. "That's a big trend at the market: How do we deal with the fact that much of this product is not movies and therefore not as valuable?"

Frons believes the big deals will continue to be signed with the studios, but they will continue to be powered by movies the broadcasters will need. As a result, buyers are likely to try and force down the value of other programming. "Local production is becoming more the name of the game particularly as the Europeans continue to deal with European quota systems in more territories," he adds.

Most programmers around the world are finding that fragmentation of their audiences has increased so much that they are actively seeking event programming that will help them stand out in a crowded marketplace. Schlesinger contends is that because most of them already have committed to big American program buys, they would be foolish not to market and promote them while continuing to produce and broadcast local event programming.

"There is so much more sophistication now and ways to sell shows," says Michael Grindon, president of Columbia TriStar International Tele- vision. "There are no set rules anymore. Take Germany, for example: All of a sudden there is a new buyer in the market. We come to each of these markets recognizing the changes that are taking place along with the different opportunities that are arising."

Grindon raises a point that buyers and sellers say has become one very important feature of recent MIPCOM and MIP-TV markets: communication. "We work closely with our customers to provide them what they need in such a competitive marketplace, whether that is in the area of co-production or supply," says Grindon. "Good suppliers have to listen carefully and provide opinions and thoughts about the areas their clients are getting into. We want to help them compete effectively in the market and advise them and give them our thoughts about what is going in their markets."

According to Bernard MacCleod, managing director of Britain's Channel 4 Inter- national, this sort of interaction will take up a lot of meeting time at this year's MIPCOM, and even though conferencing on tactical assaults on a given market between buyers and sellers is not new to the domestic American market, it represents a new kind of relationship between the big suppliers and their customers in Europe.

In working with such new buyers of Channel 4 International programming as the Discovery Channel or the Food Channel, MacCleod has noticed that "as the channels became more targeted to their viewer, they began to understand their viewer better. This speaks to our whole central philosophy in that the more our clients know about their viewers, the more we know -- and we can be more targeted with our programming to our customers' needs. We have to be in today's marketplace."

MacCleod highlights another shift in market conditions that observers will see at MIPCOM: The traditional low-paying specialized cable channels such as Home & Garden, the Food Channel, Court TV and others are now beginning to pay bigger bucks for shows that are specially targeted to their needs and their viewers. "They are paying substantially better money than they used to, and programmers such as Court TV are moving more in the direction of original programming," he adds.

Fox's Edwards says her company is taking a similar approach to the increasingly difficult marketplace. In fact, this year at MIPCOM, 20th Century Fox International Television will have a huge library of wildlife and other documentary programming from its New Zealand natural history unit -- one of the biggest libraries in the world of nature documentaries -- selling alongside its traditional American network hits such as "Buffy the Vampire Slayer."

The reason for such diversity is simply the necessity to meet a market whose main buyers range from upstart wildlife channels to specialized documentary channels to the established broadcasters on the lookout for more expensive movies and miniseries. "We have been very aware over the past several years of the significance of many of these new outlets and the need to come to the market with something for everyone," says Edwards.

She points out that the big European broadcasters have radically changed their schedules in recent years to include many more locally made game shows, talk shows and other local programming which in many cases is repeated at night. "So it is necessary for us to continue to look for other outlets and to create and to help new channels which are wonderful outlets for our programming," she continues.

Edwards, along with most of the other distributors, is also enthusiastic about the idea of bringing well-established American program formats to the international market.

Columbia's Grindon, for example, has been so aggressive in this regard that locally made versions of such Columbia classics as "Charlie's Angels," the comedies "Bewitched," "Who's the Boss?" and "Married ... With Children" are becoming a big feature in foreign markets from Latin America to China.

On the other side of the Atlantic, major program groups like SBS are looking for standout original formats that can play on most stations and in most territories in the group. SBS' Frons points to the success of such international-format shows as the European-made "Expedition Robinson" which involves a group of real people "stranded" on an island, playing a game over many weeks that sees one expelled on each episode for some transgression. The game has become a major hit.

"We are looking for some good formats, and for me, that is one of the interesting aspects of MIPCOM -- that we can come in and find a show that will have an impact in five or 10 countries as locally made productions," says Frons.

"Everybody is trying to find the next version of 'Robinson,'" says Ken Arber, managing director of international division for media analysts Frank N. Magid Associates Inc. "[Local productions] carry so much viewer appeal that this is going to be a very big focus at the market," he adds.

Not all the talk at MIPCOM this year will be about sales. In fact, much of the behind-the-scenes action will focus on co-production deals that will continue to put American players in bed with foreign partners in order to cater to local markets. Meetings will be taking place between the big American players and some of the more influential European advertisers who are taking a tip from their American counterparts in looking to get directly involved in program development and production.

The Internet and developing media will be a focus of much attention as the major studios and other sellers take a very cautious approach to new deals that involve any possible new media rights.

"Bear in mind that this is the last MIPCOM of this millennium, and it will be reflective of these times of technological advances, massive consolidation in the global entertainment industry and increased competition among buyers and sellers alike.

Look for a very lively market," observes Arber.