Hard to pinpoint profits from channel surge
It’s all very well thinking that digital technology and the growth in cable outlets worldwide will translate into endless sources of revenue for TV distributors and producers, but one shouldn’t jump to conclusions. The road to riches, as is often the case, is paved with potholes.
That was the cautionary note sounded Wednesday during an AFM seminar called “The New Gold Rush: Independent Television Distribution at the Millennium,” held in Santa Monica’s Miramar Sheraton Hotel. Panelists pondered the central question of whether the 500-channel spectrum is real, and how best to harness its opportunities.
“Everybody is looking for things that the consumer will pay for, and the theory right now is that pay-per-view is one of those things,” said James McNamara, president of Universal Television Enterprises. “If you look at the number of deals that are being made, ultimately it will be an important part of our business.”
But not yet.
“The gate is not totally open, partly because the technology isn’t there,” said moderator Todd Leavitt, chairman of the Alliance Television Group. Once the delivery systems are in place, the largest future markets will most likely be in Latin America, Asia and Europe, but American producers should not assume, he said, that audiences in those regions will buy up anything that comes out of Hollywood or New York.
“It tends to be feature-driven, unless you’ve got something like Howard Stern’s naked wrestling match,” Leavitt said, laugh-ing. ” ‘ER’, for instance, is the only American program on primetime TV in Japan.”
Turning to the rest of the five-man panel, Leavitt asked, “What does a European station do with all those useless American sitcoms?” He was referring to programs that studios force on buyers as part of output deals that center on features.
“It’s true that we don’t want that stuff,” said Heinz Thym, the Luxembourg-based head of international acquisitions and sales for CLT-Ufa, Europe’s largest entertainment enterprise. “In Germany, maybe 60% of the output deal you don’t use.” In effect, it means that what does go on the air ends up costing much more than it should.
Regardless, Thym said, most of the business in Europe still comes from terrestrial broadcasters who are funded by advertising revenues and, in some countries, license fees. The advantage is that many consumers are accustomed to paying at least partly for what they watch, so it is not a great leap to entice them to pay-per-view options. “There are 760 million people in Europe,” he said. “There’s enormous potential.”
Thym warned the packed ballroom, however, that it is too early to tell whether pay-per-view and pay TV channels will boom there. Neither France — where 88% of the population can access only four free TV channels — nor Germany have had much success so far, although Belgium is saturated with cable/satellite customers. “To make it attractive compared to video, you have to have a very wide range of offerings,” he said.
The scene is brighter in Japan, where there are 11 pay channels, eight of which cater to foreign theatrical films; the remaining two show domestic movies. Michio Toyohara, president of distributor Mi-PiC Corp., a Mitsui subsidiary, said Rupert Murdoch’s JSkyB would have in excess of 300 channels in Japan in the next seven months or so.
The rest of Asia and the Far East is harder to predict, although it undoubtedly is an emerging market. While digital TV is making inroads, particularly in places like Indonesia, economic constraints have put a crimp on purchases. Then there are the differences in cultures.
“It’s very hard to get 10¢ on the dollar in Taiwan when they negotiate with you with a revolver on the table,” said Tony Watts, vice president of Sundance Channel Intl., who formerly worked for Sky Movies in England and for Star TV in Hong Kong.
“In the U.K., you have a mature market that’s used to paying for what they see. In India, they have no idea why they should (pay), and in any event they have better things to do with their money.”