Hollywood Raises the Bar

The Hollywood studios want to build on the success that U.S.
shows have been enjoying around the world.

May 2007

By Bill Dunlap

As a new international TV selling season draws buyers to Los
Angeles this month, executives at the big Hollywood studios are hoping, and
cautiously suggesting, that the current seller’s market is more than just a
cyclical phenomenon.

They say the popularity of U.S. series around the world
during the last couple of years isn’t just a trend. Rather, it’s the result of
the Hollywood majors putting big money and feature-film talent into television
series, especially dramas, something that local producers in smaller countries
can’t do.

Keith LeGoy, the executive VP of distribution at Sony
Pictures Television International, says the studios and U.S. networks had to
respond to increased competition from new channels and entertainment options.
“All the studios decided we’re going to raise our game,” he explains. “We hired
movie directors. We hired movie actors and producers to make epic television
shows. You’ve got the quality of writing, direction, production and acting
you’ve come to expect in a movie theater. And the networks stepped up with the
price tag that [level of quality] requires. What you get is a level of
storytelling and emotional engagement in a series that is incredibly high.”

LeGoy also notes that reality shows have lost audiences in
many territories. “The reality bubble was overinflated and it burst,” he says.
“A lot of broadcasters had some pretty big holes in their schedules.”

A “perfect storm” scenario, but in a good way, is how Laurie
Younger, the president of Disney-ABC Worldwide Television (formerly Buena Vista
Worldwide Television), sees the market. “We have the premier content paired with
a healthy market, and that doesn’t happen often,” she says. “Plus, it’s a
growing market. We’re growing geographically with emerging markets like Central
and Eastern Europe, India and Korea. And there are new players in all the
markets, in all the various technologies. It’s all the free TV, the cable
channels, the VOD, the new-media opportunities. Having all those things
together is pretty much as good as it gets.”

But still, Younger says, it is the quality of the shows that
is the prime driver behind the recent successes. “Back in ’03 and ’04, there
was something of a creative breakthrough in the States,” she says. “CSI was probably the first, and we came in right behind
it with three shows in one year—Lost, Desperate Housewives
and Grey’s Anatomy—that
seemed to punch through. Prior to ’03, I’d say all the inter­national
broadcasters were going heavily to local content. They came to find it’s hard
to do. They realized you can’t just produce it all yourself.”

Younger says she first sensed that there was a real
groundswell building when Desperate Housewives was shown at the 2004 L.A. Screenings. “Nobody here thought it was
going to be the phenomenon it became,” she says. “But, to a customer, Desperate
Housewives was the talk of the Screenings.
I went back and told the ABC guys, ‘For what it’s worth, this thing is blowing
everybody out of the water.’ That was the first time I had experienced that.”

Marion Edwards, the president of international television at
Twentieth Century Fox Television Distribution, says Hollywood is in “a bit of a
golden era” when it comes to television drama. “And that has translated very
well internationally,” she says.

Edwards, who has sold the serial-like thriller 24 in more than 200 territories, says she initially
underestimated the impact of the show. “The script was interesting, but you
didn’t really have a sense of how it was going to play out until you saw it,”
she says. “I think these shows look fantastic. Many of them look like little
movies rather than like television series. And there is always an opportunity
to end up with something that is a big surprise, like 24.”

QUALITY CONTROL

The quality gap between Hollywood production and local
production is a wide one, says Jeffrey Schlesinger, the president of Warner
Bros. International Television. “For a while, American shows were out of favor
in deference to local production,” he says. “To a certain extent, local
production of fiction was somewhat of a novelty, so shows that weren’t great
were successful because they were local. People saw their own stars in their
own locations with their own scripts. What they found later was that the shows
had to be good, and the miss-to-hit ratio was high.”

The stumbling blocks, not surprisingly, are budgets and
production values. “Nobody can spend the kind of money and produce the kind of
quality shows that we can,” Schlesinger says. “At the same time, we went into
an era of producing more globally appealing shows. Big glossy productions like Lost worked. Something unique and distinct like Desperate
Housewives worked. Some broadcasters were
willing to try them again in prime time, sometimes putting two episodes
together in what was a movie slot.”

If in fact it is a money and talent advantage that has
created the current strong market for the studios, that suggests to some in the
business that the market’s strength should be sustainable.

“As long as there are shows that have great production
values, great storytelling, great actors, there will always be an interest in
them,” says Belinda Menendez, the president of NBC Universal International
Television Distribution. “That’s what buyers are looking for around the world.
As long as we can keep providing shows that can give that to them, they’ll
continue buying.”

Heroes and House have been hot properties for NBC Universal. “The
launch of Heroes around the world
has been exceptionally successful,” Menendez says. “It’s launched already in
Australia, New Zealand, the U.K., Spain, Singapore, Scandinavia and Latin
America. In all the territories it’s seen tremendous success. That obviously
helps our sales in the balance of the world.”

Armando Nuñez, Jr., the president of CBS Paramount
International Television, also thinks the strong market may be more of a
long-term shift than a cyclical boomlet.“The trend continues in terms of strong
demand for U.S. content around the world, particularly Western Europe,” he
says. “Maybe it’s more than just a trend. The way the industry is moving, I
suspect it is. It all bodes well for what we do and what our clients are
looking for. At the end of the day, the fact is that there are a number of U.S.
shows that are being programmed in prime time that are ratings successes.”

CBS Paramount’s Jericho
has been widely sold, and in Australia, where it launched almost simultaneously
with its U.S. premiere last September, it has performed well. The Australian
premiere on Network Ten won its time ­slot in all major demos with a 41-percent
share in Ten’s core 16-to-39 demographic.

Disney-ABC’s Younger suggests that the Internet has
permanently changed the playing field. “People overseas now are hearing about
shows immediately,” she says. “People are blogging about them. Putting up
websites. There’s chatter about them. There is this immediacy. It used to be a
show would be on in the States in October and people might hear about it in
print, but they had no way to see anything. It would be six months later, at
least, before it went on overseas.”

Among new Disney-ABC shows this season, Ugly Betty, Brothers & Sisters and the cable series Kyle XY have been widely sold, Younger says. Ugly
Betty launched in January on Channel 4 in
the U.K. where, in recent years, the only U.S. series to draw a bigger premiere
audience were Desperate Housewives
and Lost.

Brothers & Sisters
launched on Seven Network in Australia in February to an audience of more than
1.4 million viewers and will premiere on Channel 4 in the U.K. in June. Kyle
XY has been sold in more than 120
territories.

BETTING ON A PILOT

This spring, studio sales teams were eagerly awaiting the
announcements of which pilots got network pickups and looking forward to the
L.A. Screenings. They were anticipating continued strong international demand
for their shows, but weren’t planning any change in sales strategy as a result
of that demand.

Schlesinger has little or no sympathy for buyers who have
complained that competitive pressure forces them to make commitments to shows
based on little more than a pilot and before any audience reaction can be
observed. “Nobody puts a gun to buyers’ heads,” he says. “The British used to
wait until November and pick shows that had been on the air for a couple of
months, but competition means you have to take risks. In reality, excluding the
U.K. and Canada, in most territories many distributors already have deals in
place, whether they are first-look deals, volume deals, output deals, some sort
of commitment, so that not every show is up for auction in every market. In the
U.K. and Canada there tends to be more of a free-market jump ball.”

The current season wasn’t kind to new shows from Warner
Bros., with a number of series not getting even 13 episodes made, Schlesinger
says. “A lot of the buyers are disappointed because they liked the shows we put
forward [last] year that didn’t make it. They liked The Nine. One of the big successes of this year has been the
resurgence of ER. Shows like Without
a Trace and Cold Case are still going strong. While we’ve gotten a renewal
on Men in Trees and we are
hopeful for a renewal on The Class,
most of our other big shows haven’t achieved the success on the U.S. networks
we would have liked. The big shows that were competed for were not the shows
that worked this year.”

The best example of that was Sony’s Kidnapped, which inspired spirited bidding in key territories,
and seemed to have “hit” written all over it, but didn’t work on NBC’s fall
schedule.

“Kidnapped, despite
the fact it didn’t do too well here, got a fantastic reception around the
world,” Sony’s LeGoy says. “People would have loved to have had 22 episodes and
a second season, but the people who have the 13 episodes are happy they have
them. What helped is that the story closes as it should close. It reaches an
amazing climax in the 13 episodes. I think a lot of people will get the benefit
of that as they play it in the next six to 12 months.”

The big change at the Screenings, LeGoy says, is that people
are coming to buy shows for their prime-time slots. “The product that is shown
at the Screenings is a lot more important to those buyers than it was four or
five years ago, because it plays a greater role in their schedules. With that
difference comes a whole new level of attention and focus.”

As hot as Kidnapped
was a year ago, the surprise hit of the season, Heroes, from
NBC Universal, was almost overlooked, and was sold to the SCI FI Channel in the
U.K. Later, after the show started to take off, a second window was opened for
BBC Two, which will take over the show this summer.

“We’ve done a deal like that in a couple of territories
where there may not be the deal available with the broadcasters,” Menendez
says. “It’s a great way for us to showcase the property. House in the U.K. actually was managed in the same way
initially.”

In general, though, Menendez plans no new strategies at the
Screenings. “We’re always keen to do as much business as possible,” she says.
“If there is competition and the opportunity presents itself, we’ll close a
deal at the May Screenings. We look at the market conditions, the show, the
offers we have, and then we make the determination deal by deal.”

Younger expects business as usual at the Screenings,
including possible deals like the one for Heroes in the U.K. “We made short-term cable sales on Felicity and Alias
several years ago before signing free-TV deals for the shows,” she explains.
“Now we do it wherever we can. It’s a model that’s taken off in a number of
places.”

the $2-million
question

What’s different lately, Younger says, is that there are
more buyers at the Screenings. “It’s not just free TV. All the cable guys come,
too. As a seller, you hope you have a program that more than one buyer wants.
In the places not preordained by long-term deals, you hope you get multiple
interest.”

Nuñez of CBS Paramount says high demand at the Screenings
“makes us become even more aggressive in terms of our expectations. We try to
give our clients as much information about our shows as possible, not just
screen them—[we give them] the vision for the shows, [and have] executive
producers coming in and talking with buyers about story arcs and story lines.”

With more buyers, strong demand and relatively steady
supply, naturally come higher prices. Just how much higher, no one wants to say
on the record. Or almost no one. “Desperate Housewives is currently sold in over 200 countries and
generates more than $2 million an episode in international syndication,”
Disney-ABC Television Group president Anne Sweeney told a Merrill Lynch
media-investor conference last fall.

Last year, there were published reports that Kidnapped was bringing in that kind of money, including an
$800,000-per-episode price from Channel 4. Sony’s LeGoy neither confirms nor
denies those reports.

Younger concedes that Sweeney had put a high bar out there
for her. “Prices are up and that’s good,” she says. “But there is no ‘one size
fits all’ out there. Unique circumstances have occurred for Lost and Desperate Housewives. You can’t always replicate those kinds of
situations. There can be a feeding frenzy, which, as a seller, you like. The
hard part is when you sell great upfront and then the show doesn’t work. A lot
of money gets left on the table.”

LeGoy believes $2 million an episode is achievable, but it
requires renewals and continued ratings success in the U.S. and overseas. “Over
time, the value increases because you can see that this is going to be
something with longevity,” he says. “When something catches fire, you’re going
to have an opportunity to build a brand. That’s very valuable.”

“It’s a healthy, competitive marketplace,” says Nuñez, but
he calls $2 million per episode an aberration. “In Lost and Desperate Housewives, you’re talking about two of the most successful
shows on television. To get near that price level, you have to have a
successful franchise show that goes out over a number of seasons. You have to
do extremely well in the U.K., Canada and the rest of Europe.”

Nevertheless, buyers will always complain that the prices of
U.S. shows are too high. Some even say that if they get any higher, it might
just be less expensive to produce their own shows. Fox’s Edwards is quick to
knock that argument down. “I have a hard time believing that in most markets in
the world, it would be cheaper to produce [locally]”, she says. “First of all,
producing a show that looks like an hour of 24 or Lost is not so
inexpensive anywhere. It certainly is very expensive here, and in terms of what
you are getting [compared to] what you are paying it is a remarkable value.
There have been some cases like the auction in the U.K. for Lost and Desperate Housewives where things do pop up to a level that is
jaw-dropping, quite honestly. But that is so rare. That doesn’t happen in every
market on every show. For the most part, these shows are remarkable value for
money.”

At this year’s Screenings, while maintaining a business-as-usual
attitude, studio executives are hoping their new shows will wow international
buyers even more than they have in the last few years. Now that the bar has
been raised on quality, and U.S. dramas have not only gained acceptance, but
have proven they can also deliver high ratings, the challenge is to keep buyers
coming back for more.