Turkish Delight

This article originally appeared in the MIPCOM 2012 issue of TV Europe.

 

Turkish television is booming. Inside the country, broadcasters are enjoying significant advertising growth, while outside, the appetite for Turkish-made drama seems to be getting bigger. With a new regulatory regime coming into effect, foreign players might finally be able to become major players in what looks like one of the most attractive markets in the world right now.

 

In March 2011, the Radio and TV Supreme Council (RTÜK) relaxed the law on foreign ownership of media assets. Previously, the direct foreign ownership in TV or radio was capped at a 25-percent holding and did not allow ownership of a stake in a second media company. Now, the limit is 50 percent, with a maximum of two TV or radio channels. And there is no limitation on indirect ownership.

 

Turkey’s own broadcasting market is fragmented, with 247 terrestrials—25 national, 15 regional and 207 local—93 cable networks and about 200 satellite-TV channels. However, the five main channels take about 63 percent of the prime-time audience and command a 53-percent share of the total broadcast audience, according to a recent Bank of America Merrill Lynch report.

 

Turkish advertising spending jumped 20 percent last year to $2.4 billion, of which television took a 57-percent share, according to the Turkish Association of Advertising Agencies. Ad spend is forecast to rise 15 percent this year. And programming exports, which have soared over the past few years, are getting even stronger. Leading Istanbul-based distributor Global Agency estimates the volume of Turkish production being sold overseas annually at about 4,000 hours.

 

In January 2013, Dubai TV will start airing North South (Kuzey Güney), a new Turkish drama series from Kanal D, across the Middle East. Turkish drama is the hottest genre in this region. In the past, Dubai TV’s rival MBC had many of the big Turkish series, and competition is now getting fierce. “The Hollywood studios would be shocked to know the license fee we got for North South,” says Ozlem Ozsumbul, Kanal D’s head of acquisitions and sales.

 

In early August, a Russian network started airing a Turkish series for the first time. CTC is showing Kanal D’s Fatmagül (Fatmagül’ün Suçu Ne?), which has been sold in numerous territories worldwide.

 

The country’s main content sellers are also finding opportunities in new markets by selling the format rights to their popular dramas. Kanal D, for example, is in the final stages of closing a deal to sell the format of one of its shows to the Middle East for an Arabic-language version for the first time.

 

“There are many opportunities to co-produce and many offers are coming in,” Ozsumbul says. “We have discussions in progress with the Middle East, Europe and Latin America. We are close to a deal for one of our formats to be made in the U.S. for the international market.”

 

Global Agency, meanwhile, has sold the format rights to the Ay Yapim-produced series Forbidden Love (Ask-i Memnu) to Telemundo for a U.S. Hispanic version.

 

As distributors celebrate the opportunities available for Turkish content today, they are quick to note that this has been a fairly recent development.

 

“When we first started to produce our own series at Kanal D, there was no thought of the foreign market,” says Ozsumbul, who used to attend trade shows like MIPCOM only as a buyer. “Then, in 2007, the Middle Eastern regional channel MBC came to us to buy a few series. The first two were not successful. But the third one, Silver (Gümüs), was a smash. Perhaps the switch from dubbing in Egyptian Arabic to the Syrian dialect helped. Whatever the reason, the show became a social phenomenon, hitting audience levels of 75 million across the Arabic-speaking world, where it was known as Noor.”

 

The Middle East also kick-started Turkish drama sales for Global Agency, according to CEO Izzet Pinto. “Four years ago it started in the Middle East. Then we pioneered the expansion into Europe in Bulgaria and the former Yugoslavia. Our shows are being broadcast in 50 countries at the moment—and they are not just on the air, they are hits, even number one in some cases.”

 

Turkish series are not only hits throughout the Middle East and the Turkic republics of Central Asia, but also in Serbia, Croatia and Bulgaria, and even in Slovakia, farther west.

 

“The price of Turkish series [in those markets] is many times higher than for American series, literally 20 or 30 times higher,” Pinto says. “This is because our shows are for prime time, and that is where networks make their money. American series are now daytime programming.”

 

ATV is looking to tap into this new demand for Turkish dramas with its MIPCOM slate, which is heavy on period series, according to Ziyad Varol, the deputy manager for content sales at the Turkish broadcaster. “Nowadays, period drama series are very popular in Turkey. Our expectations are high for the upcoming season. We will have eight new titles and two from the last season. Our cast and library are very strong.”

 

Turkey’s main exports are derived from the country’s top five commercial channels, which garner more than 70 percent of TV ad spend. In the first quarter of this year, Kanal D led the way with $76.5 million, followed by Show TV with $50.3 million and Star TV with $43.6 million. Rounding out the big five are ATV and FOX Türkiye.

 

The publicly traded Dogan Yayin Holding, Turkey’s biggest media group, is the owner of Kanal D through Dogan TV, in which Germany’s Axel Springer holds a 25-percent stake.

 

Until November 2011, the Dogan group also owned Star TV, but it was required to sell it because revenue from the two channels combined exceeded the cap of 30 percent of total TV revenues laid down by law. Star TV was acquired by Dogus Group for $327 million.

 

Determining who’s leading the market in terms of viewership is currently a challenge, as Turkey is in the midst of a hiccup regarding ratings, which have not been available since last December. That’s when AGB Nielsen lost the franchise on supplying data amid controversy over possible manipulation of its panels. TNS will be the new supplier. “The system is supposed to be ready in October, but I would not be surprised if we have to wait until 2013,” says Esra Ergun, the ad marketing director at CNN Türk. “It’s a big problem for mainstream channels, but it also affects the niche channels.”

 

Of the top 50 shows in the ratings in the latest available figures (November 2011), 27 were Turkish drama series—including Time Goes By, Fatmagül, Magnificent Century and I Named Her Feriha—seven were news broadcasts and five were soccer matches. There was only one import, a theatrical movie.

 

Indeed, domestic fare completely dominates schedules. In prime time, all of the main channels prefer Turkish series. The volume of Turkey’s domestic drama output is amazing. Each series consists of 38 to 40 new episodes per season. “We are effectively showing a new movie every day,” Kanal D’s Ozsumbul says. “These are not low-budget studio-based productions. We have big casts, we shoot on location and the production values are extremely high. Everything is produced in HD.”

 

“There is little room for imports,” says Kenan Saran, the managing director of SARAN Media, which has output deals with studios such as Warner Bros. to distribute programming in Turkey. “The main prime-time slots are filled by Turkish series, preventing imported series from finding space in the schedules. American blockbuster movies that might have been grabbed for prime time a decade ago now struggle to get air time on the big networks. The channels tend to use them when the Turkish series end their runs. A domestic show might start in September and there’s a gap in January or February for Hollywood.”

 

Even a worldwide hit like CSI can find itself relegated to a post-midnight slot. The demand for imported fare is mainly from the channels in the middle of the pack, with smaller budgets. Those channels are still buying films and sometimes series for the summer.

 

“Weaker demand impacts prices, which have been flat for imports,” Saran says. Fortunately, he also sells big sports properties such as Wimbledon, Formula 1 and the English Premier League.

 

“We have not bought American series for several years,” says Kübra Sefkatli, the deputy of program research and social media manager at the broadcaster Show TV. “Foreign content does not work for the Turkish audience. But there are many successful adaptations in Turkey. We adapted Grey’s Anatomy as Doktorlar and The Nanny as Dadı.”

 

AMERICAN INSPIRATION
According to Kanal D’s Ozsumbul, adaptations of foreign drama series usually do not work. But on Sunday nights Kanal D is showing its own locally produced version of ABC’s Desperate Housewives. And in a twist that typifies the booming distribution business, Kanal D is actually selling that Turkish version, Umutsuz Ev Kadinlari, internationally, clinching a slot with MBC.

 

According to Ozsumbul, only two imported genres work on the main channels in Turkey: blockbuster movies and formats. Local versions of Idols, Survivor and Wheel of Fortune have all been successful.

 

Endemol has a local company dedicated to Turkish production. Ansi Elagöz, the managing director of Endemol Turkey, notes that Turkish broadcasters are very discerning when it comes to buying international concepts. “There is not really a keen appetite unless it is a very strong format, which has performed well internationally, “she says.” The Turkish landscape is governed by scripted product and the broadcasters take very limited chances with formats. Especially since it is very difficult to find a strong format that can compete with drama series in prime time. There is also room for quiz shows in what we call second prime-time slots, after 11 p.m., but when it comes to [the main 8 p.m. prime-time] slot, broadcasters become very selective with what they put on air. Our productions such as Your Face Sounds Familiar and Wipeout manage to hold their own very well in prime time.”

 

Does that mean the price of programs is going up? “Unfortunately, not necessarily,” Elagöz says. “But of course, when it comes to launching a strong format in prime time, which is running up against drama series, the broadcasters are inclined to spend more for better production values, so they become a bit more flexible with budgets. Production costs are holding steady in line with the yearly inflation rate.”

 

There are two pay-TV platforms in Turkey, Digiturk and D-Smart. Digiturk, owned by Çukurova Holding (54 percent) and Providence Equity Partners (46 percent), was launched in 2000. Its rights to the Turkish Super League have been central to its success. Currently it has about 2.6 million subscribers, about half of them buying its soccer package.

 

Launched in 2007, the rival D-Smart is a DTH platform owned by Dogan Yayin Holding. It offers a variety of thematic channels and holds rights to the Champions League and the UEFA Europa League. As of late 2011 it had 1.4 million users, 40 percent of whom subscribe to its pay-TV offer.

 

DTT, meanwhile, is on the way. The regulator RTÜK has said that the switch to digital terrestrial will be completed by 2015. A tender for frequencies is expected to be held in March 2013.

 

“I don’t see any more room for mainstream channels, but there is room for thematic channels,” Saran says. “The arrival of digital terrestrial delivery could mean new channels will arrive. But local production will also grow and it will dominate. I’m surprised there is not more of an interest in getting involved in the Turkish market. The cost of entry is still relatively low and the potential upside is large.”

 

Saran also points out that “the digital space is hugely attractive. Turkey has about 30 million Internet users and 8 million broadband homes. Digital advertising is showing very strong growth. We see a lot of potential for VOD and are now operating a 24/7 platform streaming content for smart devices…Piracy is still an issue, of course.”

 

All the main TV channels have established websites to distribute content online. Service providers bundling content and offering movie archives include Tivibu Web, Digiturk WebTV and D-Smart WebTV. There are over a million viewers who subscribe to web-TV applications in Turkey, indicating possible future pressure on traditional TV.

 

“The entrance of foreign ownership will be key to the health of the sector,” according to a recent note by Bank of America Merrill Lynch Global Research. “The expertise they provide and cash they will deploy, especially for highly leveraged broadcasters,” will boost the media industry as a whole.

 

Potential bidders for Turkish media assets include News Corporation, Time Warner, RTL Group and ProSiebenSat.1 Media, as well as private-equity firms such as TPG and KKR, “which have shown interest before but backed down due to ownership limitation and disagreement on valuation.”

 

News Corporation is already in the market via FOX Türkiye. Time Warner is already there, too. Its Turner Broadcasting unit recently closed its TNT television operations in Turkey after failing to hit targets. Turner continues to run Cartoon Network and the CNN Türk news channel (owned in partnership with the Dogan group).

 

Bloomberg is in the market with business news channels owned in partnership with Ciner Media. Çalik Holding is reported to be talking about selling ATV. Bidders are said to include Time Warner and the Dubai-based Abraaj Capital.

 

Endemol’s Elagöz sees a stabilization of the competitive broadcasting picture as the next big development in the Turkish television market. “ATV is probably going to be sold to a new owner, so the balance between the top four channels will be established for good,” she says. “Or at least for the next four to five years.”