Are overseas buyers cooling on U.S. hits?
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For years now, programmers from the biggest TV markets around the world have been signing up for $1 million-plus-per-hour deals for potential U.S. hits following the unprecedented successes of the "CSI" and "Law & Order" franchises, not to mention "Desperate Housewives." But the virtual gold rush for American shows might be slowing.
Indeed, on the eve of MIPCOM (Oct. 8-12), some key international players are wondering if everything that glitters is not gold.
Even in the U.K., traditionally one of the hottest markets for American shows, where broadcasters fought one another in knockdown bidding wars for the latest U.S. offerings, all the signs are that British buyers are questioning both the price and value of even their most popular U.S. fare.
In fact, the tectonics of the U.K. acquisitions landscape are shaking up broadcasters across all regions. For one, the BBC is currently in the process of scaling back acquisitions in a bid to provide more public-service content to viewers.
And ITV executive chairman Michael Grade recently told investors that the broadcaster would be backing domestic productions as opposed to the "value leakage" that included overpriced acquisitions. Grade might have a point: Even the top 10 U.S. imports of the year to date have failed to pull in viewers on anything like the same scale as its homegrown output.
"Acquisitions have become so expensive now that there is a real question about value," says Johnny Webb, the managing director of Virgin Media Television, which launched the new acquisitions-driven entertainment channel Virgin 1 on Monday. "With prices so high, channels are bound to look again at original production. I think that the pendulum will slip back."
While Virgin Media has signed up highly anticipated shows such as Warner Bros. International TV's "The Sarah Connor Chronicles" and NBC Universal International Television Distribution's "Lipstick Jungle" for a channel lineup that also includes the acquisitions-hungry digital nets LivingTV, Trouble and Bravo, Webb worries that some programs are being bought without being proven back in the U.S., which is a black mark against them in terms of risk.
"Commissions can be extremely risky. They used to be more proven -- you had some time to see how they had been received by a U.S. audience," he says.
That, in fact, is the crux of the problem for most international broadcasters: They find themselves at the mercy of the U.S. networks, which last season canceled programming at an alarming clip.
"I would be very concerned if I were a broadcaster buying one of the programs launching on one of the major free-to-air networks (in the U.S.) today," maintains international TV veteran Kevin MacLellan, president of Comcast Entertainment Group International. "They (international broadcasters) have no control over their own destiny anymore. They spend a fortune on programming and marketing, and at the end of the day, they could end up with two or three episodes."
MacLellan's business these past six years has been selling E! Entertainment's slate of reality and magazine programs as well as launching the E! International Network. But some U.S. executives who have been out there licensing primetime hours since the '90s don't entirely disagree.
"My reaction to comments about the market peaking would be to say that I understand what they are saying, but we have been through this cycle before," notes Marion Edwards, president of international at 20th Century Fox Television Distribution. "Coming out of the 2006-07 broadcast season, we had so many shows go down that had received big license fees. So it was a cold shower for many buyers, and they all came out, mostly in the U.K., and announced, 'That's it. We are not doing that again.' They are truly trying to exhibit some restraint. But having said that, all our shows have been licensed in the international markets again this season."
Belinda Menendez, president of NBC Universal International Television Distribution, echoes the point, saying there has been no noticeable slowdown in international business for her division, with such new product as "Bionic Woman" selling far and wide. And she adds that if broadcasters in major markets are actually cutting back on costs, then they have the limited choice of paring down either acquisitions or local productions. But, echoing Edwards' point, Menendez says that when it comes to value for money, it's hard to beat U.S. blue-chip programming.
But today, most British broadcasters do not see eye to eye with Edwards on the issue of value for money as opposed to the cost of home production.
Channel 4, which has spent handsomely on U.S. series and comedy over the last 20 years, announced in August that it was slashing its series acquisitions budget by £10 million ($20 million) in 2007 and more in the years to come in order to reinvest in cutting-edge homegrown fare.
"Acquisitions have become more expensive and less unique," says Channel 4 director of television Kevin Lygo. The broadcaster last year re-signed for Seasons 3 and 4 of "Desperate Housewives" at over £1 million ($2 million) per episode, but the top-dollar cost meant that it could no longer afford to renew its deal for "Lost" with Disney-ABC Television and saw the show go to Sky One instead.
"Really good shows like 'Ugly Betty' remain an important part of the mix, but there is a growing recognition that they are no longer delivering value for money and less likely to be unique," Lygo points out.
Meanwhile, in France, U.S. series remain a good investment for the major networks.
"American series are expensive, but they're still profitable," says France Televisions head of programming Thierry Langlois. "Our buyers noticed a small decline in quality at the L.A. screenings earlier this year, but we won't see the effects of that right away. U.S. series are still successful for us; they're still a great advertising vector."
That said, most of the French networks are seasons behind the day-and-date broadcasts of U.S. series in the U.K., which may explain their continued popularity in the territory. All of the major Gallic TV networks are investing more and more in local fiction, but are still keeping slots open for American imports, which, despite their rising prices, still don't come close to the high cost of producing French fictions. "We air American shows because they're less expensive than producing our own shows," says Canal Plus exec vp Rodolphe Belmer.
While the U.K. remains a key market for U.S. programming and a good yardstick for the general state of the U.S. international TV market, Armando Nunez, president of CBS Paramount International Television, points out, "When you talk about the international marketplace, you are talking about many different markets -- whether it's Eastern Europe, Europe, Canada, etc. We have sold 'Cane' very well throughout Western Europe. But whether it's 'Cane' or 'Swingtown' or 'Californication,' we are again seeing very healthy prices."
Nunez's confidence is born out by the fact that ratings for U.S. dramas do in fact remain buoyant in many big markets, including Germany, where U.S. programming continues to pull in viewers in significant numbers.
"House," "CSI: Miami" and "Monk" continue to set record ratings on commercial giant RTL Television, and 5.9 million viewers watched the German debut of the new season of "House" in September, garnering a remarkable 34% share in the key 14-49 demographic.
Not all American shows are guaranteed successes in any market, including the medical crime drama "Bones," which started slowly in the global market, as did "Grey's Anatomy" and even this season of "Desperate Housewives."
So despite the strong ratings for some shows in the enormous and lucrative German market, executives are giving the U.S. studios quite a bit of push back. "Any new series, U.S. or German, is a big risk right now, so all the channels are being very conservative in their acquisition policies," says one veteran German programming executive. "The last season of U.S. shows wasn't that promising, which is why you see more reality formats -- things that are low-risk because they can be done fairly cheaply."
It's talk like that which prompts MGM co-president of worldwide television Gary Marenzi to suggest that while "you hear a lot about an apex being reached, you still find that people will step up for quality product."
While Marenzi believes that a territory will occasionally become "stagnant," it's usually only a matter of time before a hit arrives in the market and the bidding starts all over again. Ironically, he cites the U.K. as a perfect example: "There was a point five or six years ago when the U.K. market was stagnant. A lot of the bidding was very gentlemanly. The gloves came off a few years ago."
Will the gloves be put back on again anytime soon? Stay tuned.
Scott Roxborough in Berlin and Rebecca Leffler in Paris contributed to this report.
MORE MIPCOM 2007 COVERAGE
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PROFILE: MIPCOM honoree Les Moonves