FX "Probably" Won't Continue 10/90 Show Strategy, CEO Says

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FX Networks and Productions CEO John Landgraf also says the Fox unit is ready to "truly compete with Netflix and HBO"

FX Networks and Productions CEO John Landgraf told an investor conference Wednesday that "we have really now achieved a scale that allows us to truly compete with Netflix and HBO," predicting further ratings and financial upside for his group that is part of Rupert Murdoch's 21st Century Fox.

Speaking at the Bank of America Merrill Lynch Media, Communications and Entertainment Conference in Beverly Hills, he also said the company will likely stop acquiring shows under so-called 10/90 deals, such as Anger Management with Charlie Sheen, George Lopez's Saint George and Partners with Kelsey Grammer and Martin Lawrence. The model works like this. If the first 10 episodes of a show hit certain audience targets, it gets a guaranteed renewal for 90 episodes.

"The business of renting programming is nonsense," he said in explaining how the company has been looking at content before going into the 10/90 model. "Charlie's show has been solid, but the other two not particularly solid. And nothing has been really a juggernaut. To tell you the truth, I look at this as probably an experiment we won't continue in the long run." Instead, the company will focus on its premium brand, he said.

Landgraf also promised that his team would in the future work to "raise the bar at FXM" after focusing on putting FXX on the map over its first year. He didn't share immediate details on the strategy for FXM, or FX Movie Channel.

Discussing subscription VOD, Landgraf once again said that FX has had some concerns about Netflix's lack of branding shows it licenses, which means that FX hit Sons of Anarchy is "becoming essentially a Netflix original series" on the streaming service. "We need significant branding," he said, adding that Netflix chief content officer Ted Sarandos "is starting to come around."

But he said compared to Amazon and Hulu, Netflix has had more power. "They are bigger, they are more stubborn" and "a little tougher about promoting us," he said.

Asked about growth drivers for FX, Landgraf said most will come from affiliate fee increases, while he sees advertising as "slow-growing" revenue. Content revenue will also be a good growth contributor thanks to, for example, growth in transactional home entertainment, he said.

Asked about parent company 21st Century Fox's recent bid for Time Warner, which it later dropped, Landgraf said he understood the rationale, saying it could have created a company with "unique, really unparalleled scale."

Asked about the benefits of being part of Fox, he cited talks with pay TV giants. "Distributors are tough and bigger. What really makes you must-have is when you have Fox News, regional sports networks" and the like in the same group. "You can actually have a conversation about the value of a channel."

Email: Georg.Szalai@THR.com
Twitter: @georgszalai