Q&A: NBCU Int'l president Pete Smith

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Fresh from premiering "Nanny McPhee and the Big Bang" to rave reviews and announcing the recent launch of Working Title's TV division, WTTV, NBC Universal International president Pete Smith is in an optimistic mood. The plain-speaking NBC Uni boss -- who hails from the distinctly un-Hollywood North of England town of Burnley -- says the foot is firmly back on the accelerator after a pretty bumpy ride in 2009. While regulators scrutinize the details and implications of the Comcast takeover and NBC struggles with its primetime lineup, Smith says he is focused on delivering ambitious growth targets and building an international drama production pipeline that can deliver for 20-30 local markets in the long-term. The Hollywood Reporter's European television editor Mimi Turner caught up with Smith at his office overlooking London's Oxford Street.

The Hollywood Reporter: What is your read on 2010 compared with the carnage of last year?

Pete Smith
: We're a lot more optimistic. The markets are much stronger, debt is available again, M&A is returning. This time last year we were worried about the world melting down. Now we are seeing M&A returning across Europe, seeing cable floats in Germany, seeing a slowdown in cutbacks announcements. Our TV production business is the newest and smallest part of our business, but it is looking at 25% growth in 2009-10. I see lots of signs that confidence is returning.

THR
: It has been a turbulent year for NBC Universal as a whole -- the network lineup, the politics, questions over management. And now you're dealing with being bought by Comcast. How is that affecting what you do?

Smith
: Last year, in terms of investing in the business was difficult because General Electric was focused on conserving cash and restricting their financial services. Major investment wasn't high on their agenda. This year we are being pushed hard by Jeff (Zucker, NBC Universal president) to get the foot back on the accelerator and we're targeting double-digit growth rates internationally.

THR: We're becoming a more connected, more on-demand driven society. How does that affect your strategy on getting content to the consumer?

Smith: We'll see windows continue to be challenged as studios through 2010 and 2011 react to flat or declining DVD revenues. They have no other choice. So we'll probably see people trying different models, some experiments around VOD as well as among that film exploitation cycle. We're also seeing transactional television models becoming much more important. With the last series of "Heroes" in France, we had a premium VOD release prior to broadcast, then the broadcast window, then VOD. Then there's potentially catch-up and library revenues. We'll get a lot more bites at the cherry.

THR: What are you seeing in ad markets and how does that affect your channels business?

Smith: Advertising markets have a tremendous impact on our business because the largest part of our revenues in television comes from licensing television, so we need our customers to be in strong shape. We're seeing a good recovery -- albeit from a low base in 2009 -- but we are seeing high single- to double-digit growth in ad markets. The channel business has doubled revenues over two years. We're just now under way rebranding our core portfolio of Universal channels into major brands -- Syfy, 13th Street, Universal and Diva -- and the results have been very good so far, but it's early days. Over the course of the year we have 60 channel brands internationally and there is an appetite in markets for more channels. Key to the longer term in that business is going to have to be first-run content. Deep library channels are going to having a very tough time. I just can't see a future unless they are driven by premium first-run original content that is exclusive to the channel and that's where we have to take our business.

THR
: What about audiences, how are their demands changing?

Smith: Being local is proving to be imperative for all media companies. Half of all boxoffice comes from locally produced films and 90% of content broadcast is produced locally. If you want to expand you have to grow locally. We made "Law & Order" for the U.K. locally and the series went into primetime. That would have been a lot less likely to happen for a U.S. show. It was the fifth-highest drama across all broadcasters and ITV's No. 3 rated drama. Interestingly, its ancillary value on DVD is eight times what we used to get on the U.S. series. The downstream value on local content is more valuable.

THR
: What are your investment criteria for setting up local production bases?

Smith
: We want to operate in markets where we can retain our rights as opposed to being producers on a fee basis only; we need the right people because this is a hugely people-driven business, and we need to look at whether there are local barriers to entry. If we can check off those three boxes we'll move into a market.

THR
: What is your biggest priority for the year ahead?

Smith
: Over the next 12 months I'm going to spend the bulk of my time helping to build our international TV production business. We are in the final stages of finding a replacement for Denise (O'Donoghue, the president of international television production who quit in March). We've hired a vp for the international television production business, Mike Beale, and he will help with the build out.

THR: Is WTTV going to be part of that?

Smith: Tim (Bevan) and Eric (Felner's) goals were completely aligned with corporate goals; we want to build our scripted drama assets and they want to diversify into this space -- so it was an easy conversation to have. They've got their first pilot, "Love Bites," with NBC and they have a ton of exciting ideas.
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