Scripps Head of International Lifestyle Channels on Growth Strategy, Why Content Travels (Q&A)
Derek Chang also discusses new distribution models in foreign markets, the role of local programming and China.
Scripps Networks Interactive in April elevated Derek Chang to the new role of head of international lifestyle channels after serving as managing director, Asia-Pacific.
He continues to report to Jim Samples, president, international, and continues to directly manage the Asia-Pacific operations after relocating to London this summer in addition to building the strategy for expanding the lifestyle channels around the world, including Latin America and Europe, the Middle East and Africa.
Chang previously served as executive vp, content strategy and development at DirecTV, where he was responsible for all content acquisition, original productions and programming operations. Before that, he held senior executive roles at the likes of Charter Communications and The Yankees Entertainment & Sports Network.
Chang spoke to The Hollywood Reporter about Scripps' approach to making its lifestyle channels, including HGTV, Food Network and Travel Channel, even bigger players in international markets, why the company's U.S. content travels well, how important local programming is in foreign markets and how Scripps is using innovative distribution models abroad.
When you left DirecTV more than three years ago, you took over Scripps’ business in Asia. What were some of the main things you did there to boost the company's presence in the region?
We bought a regional channel called the Asian Food Channel and really used that as a foundation for our business in Asia. We have grown our footprint for the Asian Food Channel, for Food Network and Travel Channel. And we tried to create this cohesive business unit out of Singapore, the same thing we have done in the U.S., where we have our portfolio of lifestyle channels covering home, food and travel.
The other thing we did in December 2014 was launch HGTV in Singapore and then across Southeast Asia. That was our first launch of HGTV outside of North America. We have since launched in Malaysia, Indonesia, the Philippines, Taiwan, Thailand, Maldives, Mongolia, Australia, New Zealand and most recently with BeIn in the Middle East and North Africa. We are set to launch HGTV in Poland in early 2017.
Is there more international upside for HGTV?
I think you are going to see us drive HGTV globally and continue the overall expansion of our global lifestyle networks.
Which channel is your most widely distributed one outside the U.S.?
Travel Channel is our most widely distributed brand, followed closely by Food Network. Gaining distribution of HGTV, our third global flagship, continues to be a key priority for us in the new year. We also distribute Fine Living across Europe, Middle East and Africa and Asian Food Channel across the Asia-Pacific region.
When you launch a channel in a market, does that typically create demand for your other channel brands?
Absolutely. The pitch we make to traditional pay TV platforms is we cover the entire lifestyle portfolio.
Talk a little bit about the content strategy on your international lifestyle channels and how well your U.S. content travels.
The basis of all our networks is our content from the U.S. We create 2,500 hours of new content a year.
It does play well with different audiences, and I think that really comes down to the stories that are told, the emotions that are evoked and all that. People have this question sometimes: "Is HGTV going to do well in Asia or whatever market?" The perception is everyone in Asia lives in a small home and the shows are about big American homes. But when you watch our channels, they are not about the house itself, but the stories and attachment and all that sort of stuff. Those things are parallels wherever you are in the world. For most people, their home is the biggest investment they have.
If you talk to any of the platforms in Asia where we have launched HGTV and our partners who kind of took a chance with us, they are feeling it has paid off for them, because of what it has done with respect to their viewers and audiences.
How do you brig together your core Americana and local tastes?
The heart of it is we produce great content. That's a huge advantage. As you think about how you make that work locally, if you look at our workforce in Singapore or London or Latin America, it's not like we have shipped a bunch of Americans there. I went to Asia and built a local team with expertise throughout the region. The same goes for London, where we have expertise across Europe, Africa and the Middle East. And in Miami and Sao Paolo, we have expertise for Latin America. That's how you can bridge a lot of that. You got people who understand the local sensitivities.
The other thing we do is get our senior leadership out to the regions, so they can understand things better and see the challenges and opportunities. Our leadership embraces this. It's a little bit of a longer flight, because from Knoxville you always have to fly to Atlanta or New York or Chicago or L.A. to get out of the country, but they find it worthwhile.
And you've got to treat international markets a little bit differently. You can't go with a one-size-fits-all approach. We customize the look and feel for each individual market. ... The basic core of what we do and the programs we create in the U.S. do resonate outside the U.S., but market by market you need to customize a little bit — meaning, creating some local content to complement what we have and creating promos and interstitials to customize the look and feel to local markets.
Any markets where local original fare is more important for Scripps?
Creating local original content is a priority for us as we look to localize our channel offerings. We have quite a few successful original productions, including Siba’s Table, Paul Hollywood City Bakes for the U.K. and Europe, Middle East and Africa, Cooking for Love and House Hunters Asia for the Asia region, and Bizu and Cozinha na Laje for Brazil.
We are in the process of filming some of our first local originals for pan-regional Latin America. Part of it is to see what works when you start to localize, whether it's some of the tried-and-true franchises or new concepts or new talent. There is some flow of international talent and content that is starting to show up in the U.S.
Are network brands or specific shows and stars more important audience drivers for Scripps?
In the U.S., we really place huge value on the brands themselves. And I think our viewers place huge value on that. They come to our channels for the brands, not necessarily for each individual show. They know what they are going to get. We deliver consistency of ratings. It’s pretty phenomenal. We also have our stars and personalities, not like George Clooney or anything like that, and viewers like them. But people come to us for our brands, they are not coming for the hit show that happens to be on that season. That’s the sort of experience we are trying to replicate internationally. In some places they consider some of our programming to be the default programming. It’s comfortable to watch — I know it and I enjoy it.
Our programming in the U.S. is watched live over 90 percent of the time still. That’s almost counterintuitive, because most people would think that’s programming that you would record. What we try to replicate internationally is the power of those brands. The difference that you will see internationally is that whereas in the U.S. we are strictly a pay television business, when you go around the world, pay TV sits at varying stages. And there are some markets where pay TV may never really fully get off the ground, because you've got emerging technologies and distribution models. We aren’t as entrenched in certain markets, so we have the ability to go at it in a different way if a traditional pay TV model isn’t available to us.
Can you give some examples for setting up different kind of distribution models in international markets?
Food Network we launched in Asia five or six years ago after launching here in the U.K. We launched it in Brazil a few years ago, the rest of Latin America in 2015. We did a deal last year in Australia with big broadcaster SBS, where on one of their digital broadcast channels we launched SBS Food. So we have a branded free-to-air channel in Australia.
We also took a bunch of our home content and did a deal with Nine Network in Australia for a digital lifestyle channel called 9Life, where we have branded evenings of HGTV. In Australia, where pay TV provider Foxtel is a monopoly, they didn’t have much interest in carrying our programming, because frankly we competed with channels they actually owned, so we had to find another avenue and ultimately we did on a free-to-air basis. There’s that model that has potential. We also have a free-to-air channel in Italy, Fine Living.
What are the benefits of free-to-air channels beyond getting distribution where you may not get on pay TV? I assume there also is a bigger audience and advertising opportunity?
That is right. In the U.S., the delta between free-to-air and pay is pretty insignificant, because pay TV is almost 100 percent penetrated. In markets like Australia, pay TV is 30 percent or less penetrated. So the advertising model, the dual revenue stream, isn’t quite the same. If we forego the affiliate fees with the free-to-air model, we have to make it up with advertising. In certain markets, there is still pretty good free-to-air advertising, because pay TV doesn’t reach enough eyeballs.
On your international lifestyle channels, do you air programming in English or dub it into local languages?
We’re predominantly in English. In most of the Asian markets, we subtitle. In certain markets, we have to dub, like Brazil. It’s market-dependent based on what the norm is. We air in 30 international languages.
Who are some of the big Scripps stars — on-air talent popular across the world?
Guy Fieri, Ina Garten, Andrew Zimmern.
How do you position yourself versus, says, Discovery Communications?
Discovery has some lifestyle, but its core was always factual, and then they expanded beyond that to lifestyle, reality, fiction. We have been hyper-focused — it is all about lifestyle. We have ventured outside a little bit with the investment in UKTV [which operates lifestyle, drama, entertainment and other channels] and the [commercial TV network] TVN acquisition in Poland. But the core is about lifestyle. When you go around the world, the content you see on our networks is our content.
You mentioned that UKTV and TVN in Poland are different. Are such deals purely opportunistic because you see that a brand or network has upside?
Right, or they are markets where you see upside. We are seeing good growth on an organic basic, but it still takes time to build scale. The other way you can go about building scale is acquiring it. Some of the activity you have seen from us is representative of the fact that there was a good opportunity and we pursued it.
You co-own UKTV with BBC Worldwide. Would you rather own businesses fully?
I won't comment on that specific situation. Controlling your brands is always of appeal, but you are not always in that position. We're definitely open to partnering with people and working with others.
What's the opportunity for Scripps Networks in China?
China as a market people have found difficult to really get into as foreign media companies, given how much influence they can really have and how big they can grow their business. Some folks have local partners. Some digital platforms have traction, whether it's Alibaba, Baidu or Tencent. China is an important market just because of the sheer number of people and the economics.
How you execute it definitely is challenging. So we are not in China in any significant fashion. We would like to be at some point. But we have got to do it in a measured manner that makes sense for our company.
Our content is pretty safe. There is no nudity or profanity or violence, so at least we have the type of content that nobody should really find objectionable.
What are some of your biggest international upside opportunities?
We're still early in a lot of the expansion and getting our brands out there. I think it's the lifestyle opportunity overall. Our programming has got staying power.
The people who can be aspirational are such a growing group in some markets. There is this element to our content that I think does transcend the culture, and I don't think there has been enough exposure to it in a lot of these places. And not all of our stuff is new to a market, because we have sold programming to Discovery and Fox before. So you know it does work, but I think we are still early, and there is opportunity.
What data do you look at when you analyze regions and countries, and any thoughts on which different parts of the world provide a particularly attractive opportunity?
We look at things like market size, population, per-capita statistics, pay TV as a product and its penetration and average revenue per user (ARPU). Is there a proclivity for that sort of entertainment? And you look at the infrastructure and industry structures.
Latin America continues to pose a great opportunity for us, because that pay TV business will continue to sustain. Europe is more mature. In Asia, some markets are performing well, others you wish they could perform better. In Indonesia, you probably have 10 percent pay TV penetration and relatively low ARPUs, yet it's against a massive population. And you look at India, which is a huge entertainment market, but pay TV and the entry into pay TV can be fraught with a lot of risk.
You look at these markets in terms of demos and size and all that stuff, and you've got to prioritize. Some of these markets, maybe because they ultimately require too much customization, may not be the best markets for us, because it's not a winning proposition from an economic standpoint. Maybe you think about attacking that market a little bit differently.
Overall, we think we have an opportunity to go deeper in certain markets.
Poland clearly is an example of that. So is some of the stuff we have done in Australia. You don't have to subtitle there, there is an affinity for American content, it's a big market and there was an opening in terms of free-to-air distribution — and we took it. That has become a good part of our business.
In some of the other markets, you just say, "If my content plays on its own, fine." And in some markets we can just sell programming. That is actually an important element of or business. In some markets, we are still determining whether it is going to be a program-sales or a channel market, or a combination. We produce so much programming that we can actually do both.
There are markets that we have historically only been in as a program-sales business, because that's how we started our international business. Over time, you may see us gravitate back towards that if certain channel strategies don't work out.
Are mobile and digital a key part of your international strategy?
The mobile device is pretty ubiquitous around the world, and in some markets that's all they have, because they never had fixed-line infrastructure to a great degree. So making sure that our brands are available on those devices is something we're certainly focused on.
In the old days, the only form of distribution was linear, which has changed, and we created the digital lifestyle studios in the U.S. and we are getting out on to all these platforms with short-form video for mobile phones and such. Internationally we are also trying to expand our digital presence. And in some cases where the pay TV ecosystem isn't as established, you could see us in certain markets get in on a digital-first basis with virtual [distributors] or SVOD platforms.