Q&A: Viacom’s Philippe Dauman

PREMIUM: With some of the most popular brands on television, including Nickelodeon and MTV, Viacom has a strong connection with young viewers. Philippe Dauman, the president and CEO of Viacom, talks to World Screen about international expansion and the importance of making content available on multiple platforms, provided the company is properly compensated. 

WS: Which Viacom shows have been the most successful?
DAUMAN: As we looked at our brand strategy, the one thing that we focused on during the last few years was on defining the brands very clearly and using original programming that ties into the brand image. Because there’s so much content available, on television and elsewhere, it’s important to have content that is fresh, that has immediacy to it. Young people in particular, who are the largest part of our audience, are very sophisticated and if you’re not offering them something that really resonates strongly with them, they’ll just tune out and move on.

We give free rein to our programmers; we take a lot of chances and try different genres. We have a lot of people devoted to market research to really understand our audiences. As a result, we are achieving higher ratings with MTV shows than we have had in its entire history. Jersey Shore has pumped up the entire MTV audience. Jersey Shore is a top-five show across all of television. Teen Mom has done really well, so has 16 & Pregnant. There are a lot of new scripted and reality shows in development for MTV, including the scripted show Teen Wolf. And we’re bringing back a fan favorite, Beavis and Butt-Head!

On Comedy Central, we have the incomparable The Daily Show with Jon Stewart and The Colbert Report. These shows are becoming an increasingly important and relevant part of the conversation, and in the case of Jon Stewart, even impacting legislation. TV Land did scripted shows for the first time with remarkable results. The network originated as a 100-percent repeat channel and now we have Hot in Cleveland and Retired at 35. TV Land still has classics, but having the fresh shows helps drive viewership on the repeats, as well. Nickelodeon is going from one success to another. BET is enjoying all-time-high historic ratings.

Across our networks, we’re producing more and more original programming and that’s resulting in greater brand vitality, more monetization for advertising and it also gives us an unparalleled library of content that can be used for international and digital distribution.

WS: What’s been the strategy for providing content online?
DAUMAN: Our strategy has evolved as we’ve seen how consumers like to enjoy our content. We also want to ensure that our digital distribution deals with new platforms are compatible with our more traditional distribution relationships through which we derive a lot of revenue.

Technology should be our friend, but we have to use it wisely. Let me use Jersey Shore as an example. On our own sites, we have a lot of activity taking place when Jersey Shore airs. Kids and adults have an almost unlimited thirst for gossip about the characters and they want supplemental material. We get a lot of traffic that drives great viewing every week. Across our company, including at Paramount, we use social networks like Twitter and Facebook a lot. We found they really drive the conversation around our films as well as our TV shows.
We want to make sure that when we put our current shows online, we get appropriately compensated, so we are windowing our content. Some shows, like The Daily Show, are very topical and every day you have a fresh episode, so it doesn’t hurt the viewing of our show on television if we put last night’s episode online today. On the other hand, there is Jersey Shore, which we repeat throughout the week, so we don’t make it available online right away. We’ve been testing various models to determine what are the right windows for different content. We recently did a deal with Hulu’s new premium service, Hulu Plus. The Daily Show and The Colbert Report are available in a short window and we have some current shows with a minimum 21-day window. During those 21 days, we feel that we can fully exploit the shows on air, so it’s okay to release them online where the Hulu audience can consume them in a different way.

There’s also a vast new mobile world that’s developing. We’re following it to determine when and how we can show video on the platform in a way that people can really enjoy it.

That’s how you maintain all-time high television viewership: increasing the consumption of your entertainment overall by making it available on new forms of distribution. We want to make sure that we get appropriately compensated from these new platforms.  

WS: Cable has been somewhat safeguarded by its dual-revenue stream, hasn’t it?
DAUMAN: Dual or more. Think about Nickelodeon. Nickelodeon has a significant consumer-products-licensing revenue stream, which we intend to grow dramatically over time as we secure more franchises. We did a deal with an Italian company called Rainbow, which has the Winx Club franchise—a very popular franchise in Europe—and we’re going to be introducing that property in the U.S., Latin America and other parts of the world. We took a 30-percent interest in Rainbow because we think it has a lot of potential to grow and we wanted to share in that growth with the creator of the company. That’s a great new opportunity for us

It’s nice to have those multiple revenue streams, and they can be replicated if you have the right brands and new forms of distribution. For example, we just did a deal with Hulu. One of the appeals of that deal was that it creates dual-­revenue streams online where we now receive a combination of advertising revenue and subscription fees. It works well in the cable world, and there’s no reason why models that work well in one form of distribution can’t work well in another.

WS: In today’s fragmented market, what do advertisers look for in Viacom’s portfolio?
DAUMAN: They look for several things. One, they look for the passion that our viewers have for our brands and our shows. If you are a toy company, you must advertise on Nickelodeon. If you want to reach kids and their parents—there’s a lot of co-viewing on Nickelodeon—it’s a must buy. If you are opening a movie this weekend, you have to advertise across a broad swath of our networks because we reach and connect with young demos. In fact, we have over 20 percent of all viewing on basic advertiser-supported cable in the U.S. If you take the 12- to 34-year-olds segment, we have about 30 percent of all viewing. So, if you are trying to reach 12- to 34-year-olds, then you want to advertise on our networks. We also garner a large proportion of the under-12-year-olds audience.

We have a lot of opportunity with advertisers who have not historically advertised on our networks. For example, we underperform traditionally in the automotive category. That’s an area where we can grow and we are growing, particularly now that the U.S. auto companies have been revamped. The auto companies today are putting out models that are more geared toward young people than the models they were putting out before, so they need to reach this audience.

So, that’s the appeal of our networks, and the same is true internationally. For a global marketer, we can offer compelling opportunities across many of our networks around the world.

WS: Where are the opportunities in the international market?
DAUMAN: The international opportunities for us are great. We recently reorganized our international-media networks group, so that Bob Bakish, who was running MTV Networks International, is now running a group called Viacom International Media Networks, which reports directly to me. We have a very strong and growing presence, and some of our brands are pretty ubiquitous around the globe. MTV, certainly; Nickelodeon, not yet, but it’s in more than 50 countries and we have plans to expand. Comedy [Central] is rolling out into new territories, as is BET. We also have the general-entertainment network Colors, which started in India and now is rolling out in other parts of the world. There’s opportunity for the Paramount brand as a cable channel. We might take Spike TV, which is primarily a U.S. brand right now, into other countries. There’s no question that international is a big opportunity for us.

Along with the opportunities, there are challenges in the international marketplace. Some countries don’t allow you in. But technology offers a great opportunity for us because it allows us to bypass some of the regulatory restrictions that may exist for foreign-owned media companies.

For our film studio, the international marketplace is becoming increasingly important. The U.S. market is finite—the theaters are pretty well built out—whereas movie theaters are being built at a much greater rate outside of the U.S., and that creates more opportunity for theatrical releases.  This is why our focus on franchises that resonate with global audiences is an important part of Paramount’s strategy. There are more and more films released today that derive significantly more box-office [revenues] overseas than they do in the U.S. 

WS: What is Viacom’s relationship with Netflix?
DAUMAN: We have multiple relationships with Netflix. We did a deal between Netflix and our joint venture EPIX, which was for film content.  In that case, we created a new window within the pay window, making movies available 90 days after the pay window opens. That deal was really an inflection point in monetizing content online because it was the first time that an online-only company was paying anywhere near that amount of money for content.

We do have some content from our television cable networks on Netflix. Up to this point, it’s been the library content—at least 18 months old—but that’s worth a lot to them because there’s usage of those shows. We try to find as many ways as we can to make use of all this great content we own.

WS: How can Facebook and Twitter be harnessed to help channels and even individual shows perform better?
DAUMAN: We have huge fan followings for our networks and our shows both on Facebook and on Twitter. We have had tremendous success integrating Twitter feeds into some of our major live events, such as the MTV Video Music Awards, which drives viewers to the show on television as well as to our website. And both of these platforms are great tools when it comes to marketing movies. For example, it was our use of Twitter to market Paranormal Activity that really got people’s attention. When we did those midnight showings of the first Paranormal Activity, we placed computer terminals at the theaters, so people could tweet about it as they came out of the theater. At 2 a.m. there’s relatively less Twitter traffic, so Paranormal Activity quickly rose to the very top of the trending topics, which drew a lot of attention.

It’s a very symbiotic relationship between our content and brands and social networks, because the passion that their users have for our shows drives traffic to them. So, it works for both parties, which is usually the best kind of relationship. 

WS: What is Paramount’s reputation among the creative community? Is it a director’s studio? How does it balance original films against franchises?
DAUMAN: Paramount under Brad Grey’s leadership has established itself as a great studio for talent. They are very focused on the pictures they make and they’re at the top of the pack in terms of marketing movies. Brad and his team have great relationships with the leading director talent of the day, and it’s a mix of people like J.J. Abrams, Martin Scorsese, Michael Bay and Ethan and Joel Coen. We also have a lot of newcomer talent and we have relationships with acting talent.

A studio today needs to have the right blend of films. Our strategy is anchored in franchises with great casting, great special effects, great stories.

We can have the franchises and then we can do something like True Grit with the Coen brothers. It’s now at $160 million in the domestic box office and counting, which is certainly way beyond our expectations.

Having the business strategy of releasing fewer movies allows for greater creative success and greater marketing success. It’s hard for any studio to really be successful at putting out 30 or 35 movies a year. You just don’t have the capacity to give each picture the attention it deserves in the development and production phases, as well as on the marketing side. Paramount has found the right mix. 

WS: Facebook has some $2 billion in revenues and is being valued at more than Time Warner or Viacom. Do you get the feeling that this is AOL all over again? Is this another Internet bubble?
DAUMAN: Well, even in the last Internet bubble, there were certain companies that survived and continue to be successful today. So a few companies will endure and many others will not. I’m not

in the business of predicting how individual companies will do, and we haven’t positioned Viacom to be dependent on any one company or form of distribution to survive. What we strongly believe is that if we do what we do well—which is to produce great content that’s difficult for others to replicate and to create enduring brands that people will follow—we will do business on the right terms with all comers.

A lot of technology companies at first thought that they could build a model that doesn’t rely on professional content. Then they realized, “We can’t just put dreck up there; we need the good stuff.” That’s why you’re seeing real money being paid by online players. The same was true when other generations of technology came along, such as satellite companies or telcos. Some of these companies that have very high valuations today will have disappeared five years from now. Others will become really strong, stable companies that will be a part of what we do every day.

Technology is a tough business. In many ways, it can be tougher than what we do. Don’t get me wrong, it’s tough to come up with hit shows and hit movies. It’s very hard to quickly replicate a creative enterprise. It’s hard for us who are in the business to turn around a broadcast or a cable network overnight. It takes a lot of lead time. In technology, some new device or platform can suddenly appear and have a transformative impact over­night. Valuations rise quickly, and it’s great for those who are able to cash out. But it also means that you’re always vulnerable. You can be a $50-billion-dollar market-cap technology company and then somebody else comes up with a slightly better way of doing it, or a new algorithm, and a few years from now, you’re gone.

The good news is that Viacom will be able to ride through whatever waves there are because of the tremendous consumer demand for our content.

WS: Because content is king?
DAUMAN: Or queen