Exclusive Interview: Philippe Dauman

September 21, 2011 World Screen

PREMIUM: Viacom’s president and CEO, Philippe Dauman, talks to World Screen Newsflash about the company’s creative excellence, focused strategy, fiscal discipline and unrelenting commitment to investing in content.

From networks like MTV, Comedy Central, and Nickelodeon, to individual shows like Jersey Shore, The Daily Show with Jon Stewart and Victorious, Viacom’s brands are extremely popular among young viewers. Reaching out to them on whatever digital platform or device they may be using and offering content they want to watch, are top priorities for Viacom president and CEO Philippe Dauman. So is protecting the value of Viacom’s assets.
 
WS: You reported a 37-percent increase in profits in the third quarter. What factors contributed to such a strong financial performance?
DAUMAN: At Viacom, it’s about creative excellence, focused strategy, fiscal discipline and resourcefulness. Those factors serve as the foundation for our success. We’re an entertainment-content company, so fueling the creative engines throughout our company is always the first priority…and we have been unyielding in our commitment to invest wisely in content. That continues to help us invigorate our brands and connect with audiences around the globe. 
 
Our hit programming and the audience connections we forge make our networks a gateway to some of the most highly valued audiences around the globe. During the most recent reported quarter, we attracted new advertisers and expanded the reach of our content onto new distribution platforms and in international markets.
 
Paramount Pictures, which is owned by Viacom has had tremendous box office success this year. It is number one at the domestic box office and, by mid summer, it had already surpassed $2 billion at the international box office—five months earlier than its prior record. Paramount also set an industry record releasing six $100-million domestic box-office hits in a row, led by the global blockbuster Transformers: Dark of the Moon. All of this theatrical success bodes well for future home-entertainment releases.
 
WS: How much did emerging revenues from digital distributors like Netflix contribute to these results?
DAUMAN: Viacom has enjoyed a substantial boost in incremental revenues from new and renewed digital-distribution agreements. These digital deals—which include both media networks and motion-picture titles—come with very high margins and, fortunately for us, we own the majority of our content, so there is a lot more room for incremental growth in this area both in the U.S. and internationally.
 
Keep in mind that while big names such as Netflix, Hulu and Amazon represent entirely new partnerships for content producers, many of the traditional content distributors are also very interested in acquiring incremental digital rights. Those discussions are taking place as well, and I think you’ll see some interesting deals in the coming months and years.
 
All of this digital distribution is layered on top of the transactional revenue we already receive from platforms like iTunes or Amazon, which provide download-to-own and download-to-rent options for viewers.
 
WS: How are over-the-top (OTT) services helping you revitalize your library sales?
DAUMAN: We have always had great programming with compelling characters—both real and animated. Our brands have long-standing connections all over the world with highly targeted audiences, which tend to skew young and are some of the heaviest users of these new distribution platforms.
 
Many of our new digital-distribution deals primarily involve older content from across our media networks. Again, since we own the vast majority of that content, we control our own destiny. There are distributors of scale out there who are prepared to pay substantial dollars for library content. And our content is incredibly valuable to their future success. These arrangements also allow us to avoid some of the complexities that arise when we are making digital deals for current programming.
 
This is an area of great opportunity in the U.S., but also internationally, where for regulatory or other reasons, we haven’t been able to introduce our content through traditional television networks. 
 
WS: Some media companies see OTT services like Netflix as disruptors of their businesses. How have you made your business model with Netflix work?
DAUMAN: Let’s look back at the history of the cable-television business. First we dealt with one distributor: the local cable company. Then satellite distribution emerged and, for the first time, there was competition for our content. Fast-forward again to when telecom distribution entered the picture, which brought another buyer to the table. Each new distributor raised the level of competition in the marketplace—which is great for the consumer and great for us. The same is true today with the profusion of digital distributors. 
We know our content is valuable and we also know that it fuels the success of new distributor offerings. So we approach each new distribution opportunity armed with a rigorous financial and operational discipline to ensure that every deal ultimately provides us with incremental growth.
 
There are many digital-distribution models in the marketplace. Hulu Plus is different from Netflix, which is different from the Amazon model. Even Facebook has entered the video-rental market, and they provide a unique product as well. We are open to different models as long as they generate incremental monetization opportunities. 
 
One of the factors we consider is the nature of specific programming when determining which model to choose. For example, The
Daily Show with Jon Stewart and The Colbert Report are incredibly topical, and they produce a new show every day. We know that the digital distribution of a prior day’s show helps generate buzz and actually drives ratings for today’s show. So it’s promotional and we also sell advertising. The same does not necessarily hold true for other programs. A scripted show has a longer run and we can repeat it effectively more often. It requires a longer window before it hits digital platforms. As a result, we maximize monetization over time and across platforms. We are getting increasingly sophisticated as we evolve our digital distribution strategy.
 
WS: How are you seeing competition in digital distribution increase internationally and how is that affecting your bottom line?
DAUMAN: As I said, competition is a great thing for a content company and, yes, we are seeing more of it in the international market. We’ve seen interest in digital delivery of our content climb substantially in Canada, Latin America and Europe, and we expect to see more in Asia as well. This provides healthy incentive for competitive distribution partners to make compelling investments in quality content, and we know that our television and film libraries are very much in demand. I do expect that you will see more of these deals with a wide variety of players, big and small, throughout the world.
 
WS: Tell us about the success of some of Viacom’s scripted series and how they help Viacom build its brands.
DAUMAN: We’re developing more original programming than ever before for our media networks as well as our branded digital properties, and we are enjoying tremendous success. Research—understanding our audiences’ interests, preferences and concerns better than anyone else—is a huge driver of this programming success. And it’s helping us to build our brands in the U.S. and around the globe. Many of our most successful programs in the U.S. have grown into regional and even global hits.
 
Take Hot in Cleveland from TV Land as an example. It was an instant hit in the U.S., becoming the number one original sitcom on cable television last year. It’s now been licensed in about 150 territories around the world and is among the highest-rated shows in Canada and Australia, frequently beating U.S. broadcast network sitcoms. And it will air on our newest network, Viacom Blink!, which just launched in Poland.
 
Continuing with the TV Land example, we also have Happily Divorced and Retired at 35, both of which have helped us to expand our reach to adult audiences. 
 
At BET, we more than doubled our investment in original programming over the past several years. Scripted programming has been a huge accelerator of its success. Earlier this year, the cable debut of The Game ranked as the top ad-supported scripted series premiere in U.S. cable history, with 7.7 million total viewers. That same night, BET introduced a romantic comedy, Let’s Stay Together, and well over 4 million viewers tuned in. Both shows are coming back and they will be joined by another new sitcom, Reed Between the Lines, starring Tracee Ellis Ross and Malcolm-Jamal Warner.
 
There are plenty of other examples across our media networks. VH1 has generated an impressive jump in its ratings in the past couple of months due in part to the success of Single Ladies, an original comedy series. And MTV is building a solid track record of success with scripted programs, most recently renewing Teen Wolf and Awkward. 
 
I can’t leave out the phenomenal success of Nickelodeon. Let me just highlight one example, House of Anubis. This scripted show originated in the Netherlands and is the first Nickelodeon series to be filmed overseas. Its freshman season delivered strong ratings in the U.S., the U.K. and Australia, where it was the number one live-action show among kids. We’re now looking forward to continuing this success with season two. 
 
Investing in content is an imperative at Viacom, and you’ll see even more scripted programming on our networks in the months and years to come.         
 
 



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