Exclusive Interview: Keshet International’s Alon Shtruzman

PREMIUM: Keshet International (KI) CEO Alon Shtruzman discusses with World Screen the major strategy shifts at KI as the company navigates the changing distribution business.

WS: What have been the major strategy shifts at KI as you navigate the changing distribution business?
SHTRUZMAN: If you look at KI’s evolution from its foundation about seven years ago, the company has shifted massively into production. We identified that to make the most out of IP, we also needed to produce. That gives us better creative control and better participation. The way the market operates today is very different. It’s much harder to sell the same piece of IP to multiple countries. One of the pillars of our business in the past was selling formats like Prisoners of War (POW) and The A Word to multiple countries and producing them in different languages. Today, one of the effects of the OTTs is there is more of an appetite to take all rights. Most of the big platforms or broadcasters have global footprints and they are all looking to exploit the shows globally. When Heroes Fly was sold to Netflix worldwide. A decade ago, a show like POW had multiple revenue streams. POW became Homeland, which was a massive hit in the U.S. and worldwide. The Israeli POW was sold as a tape to 60 or 70 countries and became by itself a pretty significant revenue generator. And the format was produced in many countries—Russia, India, Latin America. So we managed to monetize POW on multiple platforms in multiple ways. Nowadays, most of the big shows are being sold in one big global deal, which means it’s impossible to monetize this IP in other countries. So we increased our pipeline, and we generate and create much more IP today. The appetite of the market is so big and the ability to sell the same IP to multiple platforms is so hard, you just need to have more pieces of IP! We’re developing IP in Israel, in the U.K., in Germany, the U.S. We’ve expanded our slate massively.

WS: What benefits do you derive from being affiliated with a market-leading broadcaster?
SHTRUZMAN: It’s a huge advantage. It allows us to commission our own shows. It allows us to have a finger on the pulse and have a daily dialog with a massive focus group so we can test our shows. It allows us to air the shows in Israel and go to key markets like the U.K., U.S. and India with proven concepts.

WS: You’ve acquired companies in Germany and the U.K. Are you looking at other opportunities as you continue to scale up your production capabilities and IP pipeline?
SHTRUZMAN: The U.K. was our first production territory. Since then we methodically built production in key markets. In the first few years we built organically. At some point, in the interest of speed, we decided to start buying. The company was growing with more cash flow, and we had more tools to engage with talent. So it was natural to move to acquisitions. Building a production company is a complicated craft. It’s not only about personnel. It’s putting together a team that can create the magic of television. We’ve done it successfully in the U.K. and the U.S., but it took time. So we decided to step up and identify good companies and acquire them. The first was Tresor, which was an amazing addition to the KI family. Tresor for us was a perfect acquisition. A great company in a huge territory, Germany. Tresor has grown since then, getting into new spaces. They’ve entered the drama space. The integration has created benefits for both of us. We have an outpost in Germany that can take our shows to the market. And for Tresor it’s access to more money, more IP and to the drama expertise. And then Greenbird was the perfect match for us. It brought volume. It’s an umbrella of 11 great independent companies. Each company has a slightly different field of expertise. The Greenbird volume and talent was unbeatable. Suddenly we had a flow of tape and IP from the U.K., which pretty much doubled the slate.

We see M&A as a tool to accomplish our strategy, which is pretty simple: expanding globally and getting into production. We’re looking at markets in Latin America. India is a great market. In Europe, Spain, France and Italy are very interesting. From our perspective, we see three barometers to buy a company. We want to see great management. We want great creative. And we want to see a company with very clear trajectories and growth. We’ll keep looking into other companies. M&A is going to be a key engine in KI’s growth in the next few years.

WS: The OTTs are spending a lot of money to lock in talent deals. Does that make M&A even more critical, so that you can retain access to content from leading producers?
SHTRUZMAN: Getting access to talent is a must in today’s competitive TV landscape. We see talent as a priority. Every show that is sold is a combination of great IP and great talent. Whether it’s Howard Gordon who reimagined POW to create Homeland, or Peter Bowker, who made The A Word his show in the U.K., M&A, JVs and first-look deals are all tools to engage with top talent.

WS: Why was it important for you to expand beyond drama and entertainment formats into the kids’ and factual arenas?
SHTRUZMAN: It’s a game of quality and quantity. You can’t be a distributor unless you have a big library. Absolutely we believe in diversity—in general in life and content! Our Keshet network is by design very diverse—it has different kinds of target audiences and it has every genre, from game shows to dramas. At KI we do have benchmarks for quality and we won’t take just anything for distribution, but in general, we are very open and flexible. We launched a kids’ division. We are expanding into documentaries and movies. Nowadays if you want to be a significant player, you have to be diverse, you have to become a super market and be able to provide something for everyone.

WS: How did your $55 million scripted financing fund come about?
SHTRUZMAN: Funding is becoming more and more sophisticated now. The drama space is becoming more prolific. Funnily enough, it’s becoming more challenging to set up a show. We used to say we’re selling a show. Now we’re setting up shows. It’s a much more complex structure. We saw that it was imperative for us to take greater control of our destiny and take a bigger chunk of the shows we make. We were lucky enough to see one of the greatest shows of our time, Homeland, become a massive hit—both critically acclaimed and also financially successful. If Homeland came today, we would want to own a bigger piece of it. Since we became a major player in the scripted space in America and we have access to great properties, it made sense to us to own a bigger chunk of what we produce or even [what we sell] from third-party producers. It’s a volume game, and we’re looking for different ways to expand the catalog. We’re making more shows, expanding the footprint, building a strong and high-quality catalog. We realized that one of the tools in this game would be deficit funding. Since we want to be able to do whatever a big studio does, it was crucial for us to be able to have access to deficit funding. We realized that it was pretty natural to raise money. We did it in Israel, where Keshet is a household name. Pretty quickly we put together a fund of $55 million. Many investors would like to have access to TV series but don’t necessarily have the relationships. We managed to put together a fund that helps us to grow the slate. And we allowed investors to get access to the very lucrative space of TV productions.

WS: How do you see the unscripted format business developing with the global streamers?
SHTRUZMAN: Unscripted has been through a few tough years. It may be because the OTT platforms focused on drama. The drama model was very clear, and the long-tail value of drama is much bigger than in unscripted. But remember, TV’s success was always driven by unscripted. The biggest shows in the last few decades were unscripted, whether it was Survivor, X Factor or The Voice. So it was only a matter of time before the OTT platforms started to invest big time in unscripted. We see the signs, whether it’s The Grand Tour on Amazon or Queer Eye for Netflix. I’m sure they will do more. The platforms still need to figure out how unscripted should be on OTT. Unscripted has flourished on linear media, in prime time. How do you do unscripted without prime time, without live? [The OTT platforms] can do live. Will they? How would a traditional game show look on OTT? Game shows were born as a daily strip in daytime. What’s the equivalent on OTT? All those questions are challenging, but very smart people are dealing with them now. Global OTT platforms don’t just compete with pay TV. They want to compete with everything. I have no doubt that OTT in a few years will have every kind of content—news, sports, entertainment. It’s a natural development. The next few years will see a huge wave of new and exciting formats specifically for OTT.