Chellomedia’s Niall Curran on Growth & Future of Channel Business

PREMIUM: Niall Curran, the president of Chellomedia, talks to World Screen about how the company is rolling out an array of on-demand, multiscreen and social-media features to accompany its bouquet of channels.

WS: What does Chellomedia want to offer consumers?
CURRAN: Our main mission is to provide consumers with really great the­­matic TV entertainment. We do that through supporting our pay-TV platform partners, our business customers and, of course, while we are doing that, we are aiming to build value for our Liberty Global shareholders. We are primarily in the pay thematic channel business in international TV markets. We are also providers of services to other international TV operators and we’re investors in media busi­nesses, but our primary focus is thematic TV.

WS: Last year was a year of significant growth for Chellomedia. Tell us about the MGM deal.
CURRAN: Last year we acquired MGM Networks Inc. from the MGM Studios business, which was a great deal for us. Ever since we established Chello as a content business, we’ve done a whole series of roll-up deals of thematic channels, groups of channels and some individual channel businesses. From that point of view, buying the MGM channels business internationally was a typical deal for us. We knew the businesses very well because before the deal we had been joint-venture partners with MGM in Latin America and in Central Europe for many years. We also had operating partnerships with MGM in the Benelux and in Iberia. We knew the channels well, we knew the MGM library very well, so we approached the whole thing with a lot of familiarity and, as a result, a very positive view of the development potential. We have a long-term ongoing licensing arrangement with MGM and we’ve added TV Everywhere and on-demand features to the channels, which we see to be central to the future of all the channels in our portfolio. We are nearly a year on from that deal and we are very pleased with the performance of the business. Because of the style of the channels and also because we were already fairly integrated in a number of territories, it was a very synergistic acquisition for us—for our sales teams and for our operations teams. One other important feature of the deal was that because a big chunk of the business was in the joint venture we had in Latin America, it increased our exposure to Latin America, and helped us bring our businesses together there.

WS: Chellomedia also has joint ventures with CBS Studios International and with A+E Networks. How do these channels complement your portfolio?
CURRAN: On a philosophical level, if you like, we’ve always been very relaxed about partnerships as a way of developing and growing our business. In fact, I think our [joint venture] with A+E is our longest partnership. We’ve worked really well with them in Iberia. And that is based on a formula: we bring really deep local market insights and expertise and operational scale, and they bring fabulous brands and excellent programming that gets generated out of the U.S. networks. When you add those two together, it just makes for a great local yet global experience. So we’ve built a really strong channel portfolio with A+E. We’ve built a great business together.

CBS is a more recent partnership. In 2009, we formed a joint venture in the U.K. and we were trying to apply the same formula: we had the on-the-ground expertise and operating scale; they had all the amazing programming that you know and love them for, and that combination worked really well for the U.K. Last year we extended this relationship into Europe, the Middle East and Africa. We are in fairly early stages building out those brands, adding new distribution and refining the experience. But that is going really well. We also have some partnerships with some very strong platform businesses, in particular Zon in Portugal and Polsat in Poland. And again, they are based on the idea of complementary partners sharing a view about how the business needs to grow and develop.

WS: Chellomedia is in some territories that are burdened by difficult economic conditions, where ad markets are soft and consumers don’t have much discretionary income. What value proposition does pay TV still offer?
CURRAN: That’s a very good question. The good news is that the answer doesn’t dwell too much on the negative because pay TV is holding up really well in the great majority of our markets, and that is despite very tough macroeconomic conditions. I put this down to three main features: firstly, European pay-TV pricing offers really terrific value for money. It’s significantly below the pricing levels that you find in the U.S. And you know what? That makes a real difference. When individuals or families are looking to reduce their spending, pay TV doesn’t stand out as such a big target. That is one key positive in how well the business is holding up. Secondly, the pay-TV platforms who take our channels and bundle them up and sell them to these consumers in difficult circumstances are doing a terrific job of adding value to the pay-TV product proposition, and in many cases adding triple-play bundles and, increasingly, mobile offers. So they are helping make it easier and easier to stick with a very reasonably priced pay-TV offer. And the third thing is, we, along with the rest of the content-provision business, are adding a huge number of additional features, whether it’s TV Everywhere, a lot of on-demand functionality, [or] extending the brands through social media and other digital formats. All those things help give a perception that this is a set of products you want to stick with. Fundamentally, that is what we are seeing even in some very difficult markets. For instance, we’ve seen some modest subscriber growth in Portugal, which is almost incredibly counterintuitive. But I think it’s those factors coming together: very reasonable pricing, a lot of marketing, and product development efforts from both the content providers and the pay-TV platforms.

The final point I would make is that we’ve been in these markets, Spain, Portugal and some of the Central European countries, for a long time. We enjoyed operating in a period of subscriber growth and advertising market growth. We have a longer-term perspective on the markets. None of these places are down and out, they are all having temporary—serious, but temporary—setbacks on the macro front, and our businesses are very well positioned to benefit from an improvement, whether it’s in the advertising market or in the upside of pay TV when consumers are feeling better off. I’m feeling pretty good about it.

WS: What potential for growth do you see in Latin America?
CURRAN: We’re very excited about Latin America. Over the last year, we made three deals to buy out partners from businesses. We had three different partnerships in Latin America, one being MGM [the others involved Pramer SCA and Canal Cosmopolitan Latino America]. That was so we could consolidate those three 100-percent-owned businesses into a newly formed Chello Latin America, which we announced a few months back. I definitely view this as a platform for further growth. It’s not the end game; it’s just the start of our more consolidated involvement in the market. As you know, Latin America is home to some of the most exciting and vibrant national economies, and although it’s a very competitive environment for programming, I’m sure there is room for our approach, which is quite distinctive and locally focused when it comes to programming and branding. So we are very keen to find further scale in the market. We are looking at the normal formula that we use when we are looking to grow our business: it’s a combination of organic growth, territory launches, acquisitions of businesses and channels, if those are available, and joint ventures on the content-owner side and the platform side. So, yes, we are really excited about Latin America.

WS: A few years ago Chellomedia acquired a 40-percent stake in OBN, a Bosnian free-TV station. Some other media companies are diversifying their portfolio of pay-TV channels by acquiring free-TV stations. Are you also looking to acquire other free-TV stations?
CURRAN: In 2011, almost two years ago, we did invest in OBN. Before then and since then, we’ve looked at several free-to-air businesses—both traditional broadcast and new DTT businesses. And the fact that in the whole period we’ve been looking, we only made one move, and a relatively modest one at that, compared, say, to a Discovery or Turner, really demonstrates that we are relatively cautious about the space. Partly, that’s down to a judgment on the macroeconomic climate, because I think in difficult macro times, having a robust subscription business is just such a great place to be. And that has really biased our investment thinking. OBN, by itself, is a good business. One of the things that attracted us to it was that it gives us the opportunity to work with a strong local partner and build pay-TV businesses in conjunction with that free-TV business. We also benefit from longer-term development in the local advertising market, which is very underdeveloped. I’d say we remain interested but probably relatively cautious. We think that having done the OBN deal is a good experience for us and puts us in a better place to evaluate future free-to-air opportunities as they come up.

WS: Is it becoming more important to offer TV Everywhere, on-demand and second-screen features?
CURRAN: Yes, absolutely. What’s happening is, at a very fundamental level, the channel business is being redefined. Nowadays, when we think of being in the channel business, it means being in place to offer on-demand, multiscreen, TV Everywhere, social media, and making them absolutely integral to the experience of the linear channel brand. For us, and for how we think about product and product development, we can’t really think about linear channels aside from all of those other features. From that point of view, being part of Liberty Global has really helped us get ahead of the curve in understanding how world-leading platforms think about these developments and how to integrate them into the pay-TV offer, because clearly all the content you are working with has real value. No one is trying to see the world where technology becomes an excuse for giving content away for free. Being part of Liberty Global has really helped us develop an integrated view with major platforms about how we can productively work together to introduce those features and add value to the pay-TV experience. I think they are really positive changes for the industry and for the Chellomedia business rather than being threats to the business. The way to future-proof the pay-TV business is by really embracing on-demand, TV Everywhere, second screen and seeing the brands live outside the straight linear channel experience.

WS: Many American channel executives are concerned about maintaining their networks’ relevance, as viewers watch so much on demand. Do you share that concern?
CURRAN: It’s definitely something that is on my mind, but not so much of a concern, not at this point. There is no doubt that there are many more entertainment options for consumers to focus on, and you are in a battle for attention in a more intense way than you’ve ever been before! But I think the quality of the offer that is available, the pricing, the fact that there are other operators that are making it easier and easier to experience content in ways the consumer wants to use it, all are really adding up not to eliminate that concern but certainly alleviating it.

WS: As you begin to introduce the concept of TV Everywhere, how is it being received?
CURRAN: I think it’s being received very well. One of the things we are very conscious of as international operators is that not everybody who is using our services is an under-25 with an iPad, in an urban environment, constantly consuming TV in different places. So I’d say the actual take-up of TV Everywhere is very encouraging where operators are pushing it out. I’d see it as an evolution rather than a complete revolution of the pay-TV product.