Hit Seekers

This article originally appeared in the MIPCOM 2013 issue of TV Europe.

Some of Europe’s top pay-TV and free-to-air buyers talk about spotting hits, the pros and cons of output deals and the need for nonlinear rights.

The value of imported content to European buyers is not what it used to be. A recent report by Essential Television Statistics, Madigan Cluff and Digital TV Research found that the revenues generated by the most lucrative genre, drama, “fell significantly” from 2011 to 2012. However, must-have titles continue to increase in value—the revenues from the top 20 drama titles rose by 7.5 percent, to $2.15 billion.

One of Europe’s biggest buyers of imported content is Sky in the U.K. Buying for a portfolio that includes Sky1, Sky Living, Sky Atlantic, Sky Arts 1 and 2, Challenge and the Sky-branded movie channels, Sarah Wright, the controller of acquisitions, has a remit broader than those of most buyers.

As might be expected, Wright says she buys from “a very wide range of suppliers, really from all sorts of companies, ranging from the Hollywood majors to smaller studios and all the way down to single documentaries from individual producers for channels such as Sky Arts 1 and 2.”

Unsurprisingly, she has negotiated some output deals to meet this heavy demand. In addition to the headline-grabbing HBO deal of a few years ago, she also has deals in place with both Twentieth Century Fox and Warner Bros., although she is quick to clarify that “these deals are only for movies and do not cover series or any other content.”

The portfolio of channels operated by Sky, and the fact that it is a pay service, affects Wright’s buying strategy in a number of ways, one being that Wright does not buy for specific slots. “We have so many channels catering to so many different audiences that if we see something we think our audience will love, we will buy it and figure out what to do with it afterwards. What I don’t do is buy for ‘Friday at 9 p.m.’ Sky just doesn’t work like that.”

This diverse need, adapted to the demands of a pay audience, makes it difficult for Wright to select shows that are likely hits, not just because the range of genres makes comparison difficult, but also because success is measured as much by the audience’s willingness to go on paying for a show as by the ratings. Nonetheless, when pushed on the question, Wright mentions the following shows as the most watched and appreciated by subscribers: “The Simpsons, if only because it is an all-time television classic; more recent successes include Chicago Fire, The Following, Criminal Minds and Elementary.”

Wright also acquires a wide range of rights, allowing Sky to offer content to its subscribers on a variety of platforms. She is relaxed about over-the-top (OTT) services such as Netflix, insisting that “they don’t have any significant impact on our buying strategy, not least because, from the perspective of our customers, it isn’t an ‘either-or.’ Many of our customers also subscribe to an OTT service, and so I would say that we are different services that can happily coexist.”

COMMERCIAL CONCERNS
ITV, the U.K.’s leading commercial free-to-air broadcaster, has a markedly different acquisitions strategy from Sky. The flagship ITV (recently rebranded from ITV1) “has a schedule comprised of drama, entertainment, news, sports and factual, most of which is commissioned rather than acquired,” says Sasha Breslau, the group’s head of acquired series. However, she says, “The Americans performed very well for us and if something high-end that really fits the channel’s profile came along, I would certainly look at it.”

The majority of Breslau’s buying is done for ITV2 and 4. ITV2 is “a mix of acquisitions and commissions targeting the 16-to-34 demo and housewives with kids, while ITV4 is very much a male-skewing channel aimed at over-25s. The bulk of its schedule is made up of live sports and movies.” Of her recent acquisitions, the top performers have been “Real Housewives in daytime and The Vampire Diaries in peak on ITV2, and River Monsters and Hell on Wheels for ITV4.”

Currently, no ITV channel has an output deal. “Not everything we got as a result of such deals was a fit for the channel and, consequently, we ended up with a great deal of stock on our books at the end of the deal,” Breslau explains.

Detailing her acquisition needs, Breslau says, “For ITV4 I’m looking for male-skewing factual entertainment and reality documentary series that can play 8 p.m. or 9 p.m. from 2014 onwards.”

Breslau is reluctant to get specific on either prices or budgets, although she acknowledges that “we can’t compete with what Sky will pay.” She insists, though, that “there has been no change in our acquisition budget and our prices are competitive with other U.K. free-to-air channels.”

According to Breslau, “catch-up is now a given and it is highly unlikely that we would buy any series where we could not get these rights. Also, VOD in all its forms is now quite important. It is perhaps not yet a deal-breaker in the way that catch-up rights would be, but transactional VOD and subscription VOD in particular are becoming very important.”

Despite this, Breslau does not see OTT services impacting ITV’s acquisition strategy. “In fact, we welcome these new services as potential partners with whom we can window,” she says.

GERMAN MIGHT
The leading free-to-air broadcaster in Germany is RTL Tele­vision, whose imported programming needs are overseen by Jörg Graf, head of program acquisitions at Mediengruppe RTL Deutschland. In addition to the flagship RTL, his remit includes VOX, SUPER RTL and RTL Nitro, plus the pay-TV channels RTL Living, RTL Crime and Passion.

Like Sky’s Wright, Graf clearly states that “we do not look for programming to fill slots. Our demand is for good TV product that is suitable for our channels. It is more about setting up successful lineups than just putting a format into a slot.” That has not been an easy task as of late.

“Recent U.S. output is not 100-percent congruent to our needs,” Graf notes. “So, we have to think about the best way to launch new, and sometimes unusual, product.”

Asked to name some recent acquired hits, Graf lists Grimm and Revenge on VOX, Once Upon a Time and Dallas on SUPER RTL and Bones and CSI for RTL. More broadly, Graf comments, “In terms of group-wide success, I would say the CSI franchise, and NBCUniversal’s House and Monk were eminent hits for RTL Group.”

Besides output deals with Disney, Sony Pictures Television and NBCUniversal, the RTL Group also has “output or volume deals with a number of the non-majors,” Graf says.

PRICE MATTERS
Graf has several concerns regarding pricing—concerns that he is not afraid to reveal. “Prices should correlate to both the economic situation and also the success of the product in the individual market or territory, and, from time to time, this price has to be adjusted—in both directions,” he says. “In Germany, the market is stable but the product has not been that suitable for European networks targeting a broad audience.”

He goes on to observe, “Discussions over pricing are made more complex as the scope of rights increases and this becomes more of a crucial issue. Broadcasters cannot be asked to maintain, let alone increase, prices if, at the same time, their exclusivity is being reduced.”

Graf now counts catch-up as a given and not as an extra right. Accepting that “SVOD is a separate right, no question,” Graf is adamant that “we cannot continue under the same terms and conditions as pertained before these means of exploitation existed. If we get less in terms of exclusivity and exploitation windows, then we can’t pay the same as we once did.”

Rozan Hamaker is the head of acquisitions for SBS Broadcasting’s Dutch networks SBS6, Net5 and Veronica. She describes SBS6 as “family-oriented, friendly and with a broad appeal”; Net5 as “our female-skewing channel, the key words being feel-good, guilty pleasure and relationships”; and Veronica as “our young-skewing channel—fun, daring, edgy and fast.” The group also operates an on-demand/electronic sell-through site that offers “Hollywood blockbusters and premium series as well as preview and catch-up series from our linear channels.”

GOING DUTCH
“These rights are must-haves,” Hamaker notes. “Linear viewing is declining, and for a traditional broadcaster such as ourselves securing these rights is key if we are to [maintain] the same number of eyeballs and, therefore, income.” That said, Hamaker is adamant that OTT services have not yet caused her to make any changes to her buying strategy.

“LOVEFiLM currently has no presence in the Netherlands, and [although] Netflix [has entered] our market, we have not changed our strategy.”

However, Hamaker does concede that because “the fragmentation of the audience is the key issue in our marketplace, we enable our audience to decide where, when and how they want to watch their favorite programs, and of course this has an impact on our buying strategy.”

Hamaker opted not to comment when asked about her budget and any movement in prices paid. While acknowledging that “we do have volume deals,” she declined to give any details as to with whom or what content they cover. In any case, top-performing purchases have included NCIS, The Mentalist and Relocation, Relocation for SBS6; Grey’s Anatomy, MasterChef Australia, Desperate Housewives and The Little Couple for Net5; and Criminal Minds, Storage Wars, Border Security and Top Gear for Veronica.

CZECH IT OUT
The Czech Republic is another market, like the Netherlands, that so far has not been affected by the arrival of OTT services. Vaclav Kvasnicka, the head of acquisitions for state broadcaster Ceská televize, says that for his station, “we do not care about these services. Our audience is mostly older viewers who do not make much use of Internet services.” Still, he says, “we do request catch-up rights as part of any deal, and we like children’s series that come with an Internet bonus such as web links.”

However, digitization in general is having an impact on Ceská’s acquisitions. “Digitization has created a new space for small, niche channels,” Kvasnicka observes. “Some of these are managed at the very edge of economic feasibility, creating a competitive environment and driving up the cost of programming. But our income, based on license fees, has not increased by a single crown [the local currency] for several years.”

An older viewer profile, coupled with Ceská’s stagnant license-fee base, largely determines the broadcaster’s buying policy. Its acquisition department, lead by Kvasnicka, buys drama, animation, documentaries and formats for CT1, CT2, CT:D and CT art.

“We avoid output or volume deals, as we are not able to absorb ordinary foreign series in afternoon slots. Also, our interest in series and features is very selective, which is why we are unable to buy large quantities.”

Acquired programming serves as “an extra supplement to in-house production, which forms the bulk of the schedules of most of our channels,” Kvasnicka says.

The series that work best for Ceská’s channels are “dramas such as [NBC­Universal’s] Downton Abbey and [ITV’s] Mr Selfridge, and the BBC’s Sherlock, along with attractive foreign documentary series, typically from the BBC, and classic features rather than more current titles.”

COMEDY IN BULK
For the Viacom International Media Networks (VIMN) channels in southern Europe, volume deals are really only of interest in comedy. “In some cases, we do volume deals,” says Amalia Martinez de Velasco, VP of comedy brands for VIMN in southern Europe, the Middle East and Africa, who buys for channels in Italy and Spain. “We mainly buy from a variety of sources: sitcoms from U.S. majors, sketches from independent producers in the U.S., U.K. and Europe and local sitcoms from local distributors.”

Lucia Nicolai, the VP of youth and music brands for southern Europe, the Middle East and Africa, eschews such output deals for her genres. Nicolai reveals that acquisitions are mainly made for the territories of France, Italy, Spain and Portugal, with content coming from “majors such as Fox, Disney, MGM, HBO, BBC, Endemol and NBCUniversal, as well as indies such as all3media, Eagle Pictures, Shine and Electus.”

As for the sort of programming Viacom is looking to acquire, Nicolai says, “In France, Portugal and Spain I am looking for daytime programming and also access prime time, while in Italy my focus is more access prime/prime time.

“In Italy we entered the public ratings system in 2012, so we had to make sure we had a very strong lineup for that reason. That also led to an increase in the acquisitions budget in Italy, while [budgets in] France, Spain and Portugal remained pretty stable.”

For comedy, Martinez de Velasco is looking for “sitcoms we can strip and any kind of funny programming that travels well.” Commenting on her budget, she says, “We have had to adapt to challenging economic situations in some of our markets, but have managed to preserve our acquisitions budgets in general.”

The Viacom executives have very different views on the impact of OTT services in their markets. Nicolai says that their arrival “makes it harder to acquire SVOD rights in third-party deals. Distributors are very aware of the business opportunity they have with platforms such as iTunes, Netflix and LOVEFiLM, which are beginning to replace home video. So, even in territories where these services are not yet available, distributors are very careful about licensing these rights.” Meanwhile, Martinez de Velasco is positively enthusiastic. “They have not had any impact on my buying strategy, but, in some markets, we are selling them some library of our own productions!”