Warner Bros.’ Schlesinger On Windowing in the Digital Age


PREMIUM: Jeffrey Schlesinger, the president of Warner Bros. International Television Production, talks to World Screen about the continued appeal of Warner Bros. programming regardless of the platform and despite economic crises.

WS: Broadcasters in Southern Europe have been severely impacted by their countries’ economic woes. How has that affected your business in those territories?
SCHLESINGER: On a macro level, we had, from 2011 to 2012, one of our biggest growth years in the last ten years. So to us, the total macro market place is very healthy. Having said that, yes, in some territories like Greece and Portugal, there has been a contraction and we’ve had to help some of our broadcast partners. Some countries in Eastern Europe have also been hit particularly hard by the fiscal crisis and the downturn in advertising.

In places like Italy and Spain, because we normally do multi-year volume deals, the ups and downs on a year-by-year basis don’t affect us as much, because we might be in the middle of a multi-year deal. When a deal comes up for renewal, the health of the market has an impact. But the one thing that we see is that in times of fiscal crisis and pressure on programming budgets, the first place the reductions usually hit are the expensive local productions. Product that broadcasters buy from us is really a very good value because it’s high-quality, professionally produced and reasonably priced compared to what it costs a broadcaster in Italy, France, Germany or Spain to produce a show locally. Normally a broadcaster will get multiple runs on a U.S. show and it becomes a sustaining asset. So even in the height of the worst part of the fiscal crisis, when our deals came up for renewal in some of the major territories, we had strong bidding and competition and were able to increase our pricing, even though the overall marketplace was under pressure.

WS: And what about the British market?
SCHLESINGER: In the U.K. market, advertising is flat or down, but they still have a strong need for keystone shows. This year, for example, shows like The Following, Arrow and Revolution, which were licensed to Sky, had multiple bidders and the prices for those shows were very competitive. The year before that, 2 Broke Girls had multiple bids and ended up on Channel 4 at a very healthy license fee. So, despite the challenging advertising market, the U.K. is still a very significant market for U.S. series. We have not seen a reduction in pricing for the shows that broadcasters really want. Whatever shows are perceived to be the hit shows at the L.A. Screenings will go for more money than ever before. But what has happened in the U.K. is the broadcasters have become more selective, so there is a stratification: you have some shows going for very high prices, some shows going at moderate prices and some at lower prices. Because many of the shows that are produced today are original series produced for cable, they target a very specific demographic. So those shows may only be suited to one or two broadcasters. And therefore, you don’t have the same competition you would see from a broad-based general-audience show. The U.K. is one market where there are no volume deals for series, so every series that comes out is a “jump ball” and when the buyers perceive something to be a hit, the bidding can go into the stratosphere.

WS: Tell us about Warner Bros. International Television Production. Are you looking to acquire more production companies?
SCHLESINGER: In 2010, we acquired Shed Media and then last year we acquired a company in Holland called BlazHoffski. We are continuing to look for complementary companies, mostly in the major territories. What we are already seeing, in the short time since we have acquired these companies, is a triangulation of IP flow from one country to another. Whether it’s a BlazHoffski format like Food CIA that Shed is now producing for Channel 4; whether it’s The Bachelor that comes over to the U.K. that Ricochet is producing for Channel 5; or whether it’s the Shed show World’s Strictest Parents that BlazHoffski is producing in Holland and Belgium, we’re seeing a nice movement of creativity across borders amongst three countries. We also have a very strong format sales group that is taking all these formats internationally and licensing them either to broadcasters or production companies in many countries.

We’ve also seen a real growth in the demand for formats for a number of our scripted products. We announced recently a version of Gossip Girl with Televisa; and a version of Nip/Tuck with Caracol in Colombia. We did a version of Without a Trace in France with TF1. And we’ve done Without a Trace and Cold Case in Russia. We’ve seen a resurgence of The Bachelor, which is doing fantastically well for RTL in Germany in prime time and it just finished its run in France on NT1 and will most likely be renewed. So this group is pretty vibrant and we are seeing a lot of activity.

WS: And what about the Branded Services unit. Technology is offering new platforms and screens every day. How do you decide where to place your product?
SCHLESINGER: That’s a good question. With Branded Services we have two linear channels. We have The Warner Channel in Latin America, which is doing phenomenally well and we have The Warner Channel in Asia, which has been on the air since 2010 and is growing. And we still have a number of branded services that are SVOD zones that we’ve done with many digital platforms. But what’s really changed things is the entrance of big multinational SVOD players like Netflix and Amazon. The money that is being paid for our product on an exclusive basis in SVOD is so compelling that our strategy has been changing from one of creating and scheduling branded SVOD areas with our product to licensing our product to these major players for very significant amounts of money. So the Branded Services agenda is really in a state of change because of technology, competition and deep pockets.

WS: So while a linear channel may feel that Netflix is a competitor, for you it’s another outlet for your product.
SCHLESINGER: Yes, Netflix is absolutely a new buyer in the chain of buyers. In some cases they are going to be at the back end of the line, but in other cases they are going to be at the front end. In Scandinavia, when our first window pay deal with C More came up for renewal, we had very frothy bidding between Netflix and C More and in the end Netflix won. So our films in their first pay window in Scandinavia are going to be on Netflix, not on C More. In that case Netflix has become a competitive force. Certainly the entrance of Netflix and Lovefilm in the U.K., as a competitive force to Sky, has been very good for us as sellers of content because until that point Sky was our only pay outlet. Now both Netflix and Amazon [Lovefilm’s parent company] have acquired first pay window product. So we see them as a very healthy addition to the marketplace and in some cases they will be first window, in some cases they will be second window. In some cases they will be the last stop, but the interesting thing is they are willing to play in all positions in the value chain.

The entrance of the SVOD players has really shaken up what was a very clear chain of windowing and because they are inserting themselves at different points, it’s created a lot of confusion but also a lot of opportunity and vibrancy in the market.

Every five years you tend to see a change in our business, either due to technology or regulation, and each time it allows new players to enter into the marketplace. When new players enter into the marketplace there is increased competition. And when you are a company that has a strong output and a large library, you love seeing new players come in because they all have to buy their initial inventory of product and then compete for a slice of what’s new that they can market and promote to create points of differentiation. We are at one of those inflection points where we are seeing a rush of well financed, multinational new players come in who are shaking up the landscape and causing the traditional rules to be re-written. Where that all shakes out will be very interesting. We’ve seen many times when the competition creates a broadening of players, which is usually followed by consolidation—and only the strong survive. It’s a pretty good time to be in this business with great output. There are a lot of places to sell it and there is a lot of appreciation for high-quality American programming all over the world. It’s very, very different now than it was 10 or 15 years ago.

WS: What kind of input does Warner Bros. Television want from your division?
SCHLESINGER: Money! First of all I think Peter Roth [the president of Warner Bros. Television] is the most talented television executive that I have ever worked with. He is a magnet for talent and delivers us high-quality, globally appealing shows every year. But, let’s remember that first and foremost, Peter is making programming for the needs of the U.S. networks. However, there is a recognition of the international market and while it’s not that a show will or will not get made because we think it will or will not be successful internationally, the attractiveness of the show internationally will have an impact on the amount of money we are willing to spend to cover the deficit. Where we come in is mainly in the financial structuring of the show, which may impact the casting or how much action can be done. We are always looking to put as much money on the screen as we can, so if we feel confident [about the sales potential of a show], Peter will then have more ability to create a bigger, better, stronger, show by enhancing the casting or action sequences.

WS: Your division also sells animated programming from Cartoon Network. Many companies are struggling in the children’s market. What is your view?
SCHLESINGER: I would say children’s animation is a challenged marketplace because many of the traditional terrestrial broadcasters who would run animation on their channels have now shifted it over to their digital channels. In a number of territories we see animation not airing on main channels very much, so that presents a challenge in terms of getting broad exposure, which is necessary to drive your consumer-products business. We make very high quality animation and we while still do get it on the air, it does not air as much on traditional terrestrial television. However, between the Cartoon Network, the terrestrials who still run it on a limited basis and their digital channels, we see a fair amount of exposure. There’s also been compression of license fees because there are many [distributors] who will give away programming just to have it exposed. We are in a unique position in that we produce high-quality animation based on proven franchises such as Looney Tunes, Batman and Scooby-Doo. But admittedly, it’s a challenge to get that balance between recouping the production costs and getting the exposure you need to drive your consumer products.