News Corp. COO Chernin ponders piracy

Exec defends screener ban, mulls mergers

News Corp. chief operating officer Peter Chernin defended Monday the MPAA’s screener stance, insisting “there is no business” if piracy isn’t nipped, despite all the awards in the world.

“I come at this from a fairly unpleasant and Presbyterian point of view. I inherently have more sympathy with the piracy issue,” Chernin told a group of media execs at a breakfast discussion in Gotham sponsored by Daily Variety and Booz Allen Hamilton. The solution — sending out a smaller number of VHS tapes — “is only a one-year fix,” he said. “Either it will prove to be efficient in controlling piracy, in which case you’ll expand distribution with more controls. Or you’ll move back to a total ban.”

Chernin, interviewed by James Citrin, head of the global technology, communications and media practice at headhunter Spencer Stuart, also mused candidly on the pros and cons of media mergers (they ensure survival but stifle creativity), on what makes a good studio chief (curiosity, life experience and literacy) and how showbiz can weather new technology threats (he hopes to be gone by the time it all hits the fan).

Enemies of creativity

Clout and control over vast assets — attributes that come with size — are “ultimately the enemies of creativity. Creativity doesn’t care about leverage, or that you cut $250 million in costs. I think it behooves all of us to think about how you manage the creative process,” he said. “I don’t expect a writer for a TV show to care about the greater good of News Corp.”

It’s helped to split the movie division into four smaller units, 20th Century Fox, Fox 2000, Fox Searchlight and Fox Family Films: “It works better than a pyramid leading to one person. You don’t want one voice, or filtering 25 movies through one individual,” he said.

Fox Searchlight was moved to its own building. “A funky little house on the lot, with crummy little offices. But they’re by themselves … You want to create an environment where people can feel brave and protected. There are no easy answers besides instilling those values in your executives,” Chernin said.

Capping specialty pics at $15 million limits the pressure — and the damage, he said. Chernin said he reads all scripts for movies costing $25 million-$30 million and over.

Traits of a studio chief

Responding to a question from Citrin, he said there no defined pattern of experience for a good studio chief –producer, agent, lawyer, MBA. “They come from all over the place. But there are a few broad character traits” — curiosity, worldliness and “some narrative experience,” which is mostly a function of reading.

Chernin, the former head of Fox, said he used to joke that “I was being paid for being in touch with the zeitgeist of the American public.” But, “If you had a blank piece of paper and had to design a job that was the opposite of being close to the zeitgeist,” it would be a studio head. “You live in a house behind a gate, work in a studio behind a gate. You’re so removed.”

In the media biz overall, he said potential — as in “your potential to play a role defining the future, your curiosity, what kind of a consumer you are” — more than experience will be the measure of exec success.

As an example, Spencer Stuart is currently conducting a search to replace Tony Ball, CEO of News Corp. subsid BSkyB. Rupert Murdoch wants his youngest son James, 30, to take the job. The appointment of James, who runs Star TV in Asia and is well regarded, would be a triumph of potential over experience, according to Chernin.

A report in the Sunday Telegraph said Spencer Stuart has narrowed its search to James and one other candidate after interviewing six executives.

Running before tide

According to Chernin, personal video recorders, which record shows and let viewers zap the ads, are the most serious issue facing media companies over the next seven to eight years. “How do you create a new economic model faster than the old ones are destroyed? … How do you create earnings and scarcity value in a world where consumers have control?” he asked.

It’s “terrifying but exhilarating,” he said. “If you can create content, there is near ubiquity in distribution, and you will find a way to monetize it.” He said he sometimes jokes with fellow execs: “If I can only get out in time. If I can only finish and get out before all this hits.”

Meanwhile, he predicted media congloms will continue to bulk up, for defense and offense. Getting bigger follows the cold war theory of mutual assured destruction, he said, and “allows you to protect some of your weakest brands.”

“I’d be very worried being an independent provider of programming … Do you want to be an MGM? I don’t think so. A Hallmark Channel? I don’t think so. It’s pretty scary to be isolated.”

That said, synergy may be overplayed. It’s just about common sense, he said, like movie promos on TV shows and visa versa. But each division should be held accountable for its own performance. “You can’t say, ‘We missed our numbers but we really helped those folks at the movie studio.’ ”

On content sales, he said, “If you don’t have a fair bidding process, in the end your exec says I missed my numbers because I bought that crappy TV show you shoved down my throat.” He noted that Fox has been accused in several lawsuits of being less than objective. “The worst thing is to take a lousy show and run it on multiple outlets.”

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