Exclusive Interview: FIC’s Hernan Lopez

The Fox International Channels (FIC) bouquet is one of the fastest-growing groups of channels in the world. Ranging in genres from scripted dramas and comedies, to unscripted, factual and blue-chip documentaries, the FIC brands—linear, nonlinear and mobile—reach 875 million cumulative subscribing households worldwide. Hernan Lopez explains the reasons for FIC’s success.

WS: The FIC bouquet has been one of the fastest-growing groups of channels. What fueled their growth and their appeal among viewers as well as cable and satellite platforms?
LOPEZ: It’s down to four things: great brands, great content, great people and good timing. Great brands because we have some of the world’s most recognizable brands in entertainment and factual, such as the FOX brands and National Geographic Channel. Great content because we supplement the best Hollywood movies and series with local original productions and global original productions that you can’t see anywhere else on television usually for a long period of time. Great people because we are lucky. We have hired very talented people in each of the local markets and in each of the larger regions of Asia, Europe and Latin America. And good timing because at the end of the day, you can do all these things but if your timing is off then it’s not going to result in growth. We were actually arguably late entering many of these markets. If you think about it, Discovery was in many of our markets many years before Nat Geo was. Turner and HBO were in a substantial number of markets before we were, so we had a lot of catching up [to do]. And we still learn a lot from our competitors about what they do better in each of our markets as well as in the U.S.

WS: You have acquired production companies in several territories. Why has that been important and are you looking to acquire more?
LOPEZ: We are not. The reason we did it is that at a certain point we realized that on the entertainment side we couldn’t rely on acquiring content from third parties. So we had to be in control of our own destiny. And we thought that one way of jumpstarting our position into original productions would be to learn from both sides of the table. It’s a lot more instructive when you can sit on the buyer’s side and on the seller’s side and you can see what makes a show successful every step of the way. It starts with a great story but it doesn’t end there. When you commission you don’t always get the same granular information as you do when you actually own the production house. Now that doesn’t mean that you need to own the production house, in fact, a couple of shows that we do commission on the factual side come from houses that we don’t own.

WS: And in this world of many different platforms there is something to be said for owning your own product.
LOPEZ: Absolutely right. We have to control all rights in order to make sure that our viewers or subscribers, in order to get our content, have to come through us or through somebody who is authorized by us. We have to think about all devices, but we don’t miss the fact that even in the U.S. still 95 percent of all the time that people spend in front of a screen, it’s in front of a television screen.

WS: The Walking Dead was quite a phenomenon. Did anyone expect it to do so remarkably well in so many different territories?
LOPEZ: The short answer is we really lucked out! We expected the show to do well but we had reservations as a lot of other companies did. AMC had the vision of finding the show and was very patient developing it over the course of two years, even after many other networks had looked at it and said, can we really sell a show about zombies. But AMC saw that the show is not about zombies.

WS: How important is it to have a bouquet like FIC acting as a co-production unit on certain projects? I imagine that gives you a certain amount of leverage, doesn’t it?
LOPEZ: It does and also it allows us to do what we did for The Walking Dead, which is to have a globally coordinated launch and to have each of our territories really invested in the product. They went out of their way to market it and create a huge buzz that was generated on a global level. That is something of value that I don’t think any other global organization can provide. And it’s something we borrowed from the movie business. Ten years ago there were long windows between the launch of a movie in the U.S. and internationally for several reasons. One had to do with piracy but another one, just as important, was that the studios realized that consumers around the world do follow with interest what happens in the entertainment world in the U.S. And if they get a show shortly after it airs the U.S. it’s actually of real value to them. In the global marketing strategy for The Walking Dead we had zombies going out in cities around the world. We did the same thing four days before the launch leading up to the premiere for the press in Los Angeles. We had so much buzz on Twitter and on Facebook and on other global platforms that by the time the show launched, AMC acknowledged that our international campaign and the awareness it had created had had an impact [on the show’s performance] in the U.S.

WS: How do you decide if you have enough channels in a given market or if you should launch more?
LOPEZ: It starts with platforms. We have to find consensus between a number of platforms about the need to cover a specific niche. We talk informally to them to see whether any of the ideas they put to us tie into our core company.

For instance we’ve had Utilisima in Latin America for four years now and it’s become our third most widely distributed channel in Latin America. There is FOX, then Nat Geo, then Utilisima. Utilisima is the only one that we have also launched in the U.S. Hispanic market. When we were talking to platforms in Brazil, it was apparent there wasn’t anything like Utilisima in their market, which is why first we launched a block called Bem Simples on the FOX Life channel and we will turn it into a 24-hour channel this year.

At what point do you stop? It’s the hardest question in the business. There is the argument that platforms want each of their channels to be stronger and they don’t want the brand to dilute its content across several windows. You can over-expand. There are many examples of that in our world. But when you have core strengths in a certain genre that have to be sufficiently leveraged, it’s always more economic to have more than one channel in the same content genre.

WS: And that gives you more leverage with the operators?
LOPEZ: It depends whether each of the channels are strong enough so that none of them detracts from the package. When you go into a negotiation with an operator, they say, “I love your channel one and channel two but channel 29 and 30 aren’t that good.” You have to give up on channel 1 and 2 in order to keep 29 and 30; then you are really adding value. But sometimes in the early part of your growth stage you need to help the channels that are growing, but at some point operators need to [pay for our channels].

WS: Do you think in five years you will still be adding channels in regions around the world to the point that what you have now will seem like a small amount? Are you bullish about the growth prospects of adding more channels internationally?
LOPEZ: I am bullish, but also selective. Even today we don’t add channels everywhere. We only add channels where we think our bouquet is strong enough so that we can look at the operator in the eye and get paid what we are worth. And that doesn’t necessarily need to be achieved through our own channels. It can be achieved through a combination of different channels like the relationship we have with NBC Universal. But we will continue to launch channels anywhere where we think there is a niche that can be served and will not detract from our power to negotiate with the operators. And where we don’t think it will be a distraction.

WS: And in what regions of the world do you see your growth prospects for the next five years?
LOPEZ: Actually those are two markets where for one reason or another we’re not as strong. In China no one is big because of regulation. In India we have a strong position but there is another News Corp. entity that has a much bigger business, STAR. But we see growth in Latin America, a market where we already have significant scale. We see growth everywhere in Asia, even in Japan, a market that has been under-appreciated by a lot of people.

And we see in growth in Europe—not everywhere in Europe because you need to start from a position that you can build upon. But we are going to see more growth in those markets where there is real strong competition between platforms. And even if we launched no more channels, we can still grow by increasing our fees to subscribers, by growing advertising revenues and by improving margins and I think we have upside in each of those buckets.

WS: You are also developing digital assets that support the channels. Online is an important part of the business, too?
LOPEZ: It is and a few years ago we quietly bought an online advertising house that we rolled out internationally. Now it is in 22 offices around the world. Our advertising revenue is a quarter of our total revenue but of that a significant amount is online revenue. And we realize that we have to be in the business of giving our advertisers the solutions they need in order to reach their consumers and those solutions are increasingly about television and online working in a synergistic way. That’s why we invested in the expertise of the online business. That’s in addition to our publishing and our websites that are mostly marketing and customer-relation tools.