Teuton station cuts U.S. ration

ProSieben reduces spending

HOLLYWOOD — Those who thought the powerful German station ProSiebenSat 1 would morph into an American outpost after Haim Saban bought it last year should think again. It’s adopting some U.S.-style business practices, but, if anything, it’s bent on lessening its dependence on Hollywood fare.

Guillaume de Posch, CEO of ProSiebenSat 1, is in fact leading a quiet effort to forge a new relationship with Hollywood — one that not only reflects Saban’s savvy but epitomizes the newfound fiscal prudence of Europe’s top TV players.

The head of the single biggest buyer of U.S. shows and movies in continental Europe said the German company is focused on acquiring less product from the U.S. at lower prices. “Spider-Man” and “Sex and the City,” yes, he says; second-tier sitcoms and so-so movies, no.

His company has $350 million to spend in Hollywood this year; that’s nothing to sniff at, but it’s down from last year. De Posch said once the legacy from older, heftier deals with Hollywood suppliers fades, the sum will shrink further.

The talk is in keeping with Saban’s personal reputation as a tough dealmaker: He is, after all, the guy who parlayed “Mighty Morphin Power Rangers” into a global phenom and subsequently finessed Fox Family to Disney for a cool $5 billion.

“We are, of course, solid partners for Hollywood producers, but we also need to adjust to the realities of the German market — which has lost 20% of its value since 2000,” De Posch told Daily Variety in an exclusive interview last week.

In the heady days of the late ’90s, German stations as a whole dropped upwards of $800 million-$1 billion into Hollywood’s coffers, a sum that plummeted after the Neuer Markt and Kirch Group debacles three years ago.

The more conservative approach is in keeping not only with his company’s own cost-cutting under owner Saban but with the more responsive corporate culture that’s developing at media companies across Europe.

On top of this, de Posch estimated the TV ad market in Germany had slumped by E1 billion ($1.2 billion) since 2000, and has yet to show signs of a sustained recovery.

Answering to new groups

Many of these European media companies, including his own, now are publicly quoted and increasingly commercial, and there’s a growing need to be more responsive to shareholders and to advertisers rather than to government bureaucracies. (And backers of Saban such as Bain Capital and Thomas Lee do not want to see their investment squandered.)

Not that de Posch eschews things American: He emphasized that he wants the company to be more nimble in its dealmaking (“TV is a business of ideas, and we need a first-mover advantage”) and more edgy in its newscasting (“like Fox News and CNN”). To these ends, he has hired former Fox Family VP Joel Andryc as a creative exec based in Hollywood; and he’s sending two local news anchors to train at the Murdoch-owned cable news network.

“When it comes to Hollywood, we still want to acquire top features and top series, but the days of the dump truck backing up to our doorstep are over,” de Posch told Daily Variety.

He was referring to the 30-year-old practice whereby the Hollywood majors mostly licensed their product in Germany through middleman Leo Kirch, whose eponymous company went belly-up two years ago.

In the wake of that debacle, the country’s only pay TV service, then-Kirch-owned Premiere, rejigged all its output deals with the Hollywood majors.

De Posch said the new deals were inked for 40% less than similar deals in place in the late ’90s. (The Hollywood studios said the revised figure is more like 25% downwards.)

Total revenues coming back to the seven Hollywood majors from these pay TV deals totaled $118 million in 2003, the year most of the rejigs took place. Germany had been the most lucrative foreign market for U.S. product; currently, Britain is bringing in more moolah.

On the terrestrial TV front, pricing for U.S. shows has slipped, not plummeted: Like de Posch, other German buyers have said they, too, are watching their pfennigs more closely of late.

“There’s a fresh air blowing through our group, and indeed we are benefiting from a new openness between European and American partners,” the polyglot de Posch said, in excellent English.

Speaking for the first time about this new trans-Atlantic relationship, the exec suggested Europeans are doing increasingly well at producing and promoting their own shows.

Local, local, local

“Localization is key,” he said, echoing a mantra now heard from Manchester to Moscow.

He pointed to reality formats as indicative: The first wave, “Big Brother” and its ilk, traveled from Europe to the U.S.; only recently has the traffic started to flow in the other direction. Like several other major European producer-broadcasters, his own company is setting up a format unit to come up with new concepts.

It’s likely, he said, that his group will create its own version of “The Apprentice,” not a clone of the Donald Trump show but one that reflects the new-style Teutonic businessman.

His company also passed recently on a deal with Warner Bros. that would have included the “Harry Potter” and “The Lord of the Rings” franchises. The bidding simply got too rich, de Posch said.

Hollywood distribs point to that WB deal, which eventually went to Teutonic producer-distributor Herbert Kloiber for $200 million over three years, as a sign that Germans do step up when they really want the product. They generally think pronouncements from foreign media execs like de Posch are “posturing” or “a negotiating ploy.”

Still, there’s been a subtle shift in the relations between Hollywood and its foreign clients. The latter now are referred to as “our partners” and Hollywood’s emphasis is increasingly on “the service we can provide them.”

Speaking matter-of-factly of ProSieben’s new-style fiscal prudence, de Posch said prices for feature films acquired from Hollywood should be based on German theatrical admissions, not on U.S. B.O. grosses and other less pertinent or more arcane formulas. (Such a move toward valuing movies according to their local perf already is becoming more common in several European territories. De Posch said he’d like to see all his company’s movie deals adhere to this model, which, he argues, “better reflects the underlying value of a given movie.”

The Belgian De Posch, who formerly was vice general manager of Gallic satcaster TPS, joined the Saban-owned Teutonic commercial station group last year and replaced Urs Rohner as CEO in March.

The ownership of a major European station group by an outsider, and an Israeli at that, is an anomaly in Europe. Overhauling it so quickly and appointing a plethora of outsiders is almost unheard of in what was until quite recently the stodgy, slow-moving Euro broadcast biz.

But things have changed there.

Saban has cut costs at ProSiebenSat 1, pinkslipped much of the old management team, placed a number of outsiders (including former BBC director general Greg Dyke and former BSkyB boss Tony Ball) on the supervisory board and boosted his ownership stake to 75%.

The company reported first-quarter net profit of $50 million, continuing the turnaround trend from 2003 even though the German ad market has yet to recover from its three-year slump. De Posch told Daily Variety his management team had slashed costs by E210 million in 2003 and promised shareholders another 4%-6% would be trimmed this year.

The company has taken some heat back home for canceling or not picking up several high-profile local program projects as well as for its firing of key execs. De Posch said the company is “revisiting the economic model” for series and probably will do fewer in the future. He has replaced three out of four heads at the company’s four distinct stations, retaining only the head of the news station N24.

De Posch has been in Hollywood for the last week at the head of a 10-member team sifting through the latest crop of U.S. primetime series at the L.A. Screenings. They are flanked by 1,300 program buyers from other stations around the world who are assessing the latest studio output of TV shows.

Over the weekend the Teutonic group went through their notes to determine the series they want to select from the suppliers with whom they have ongoing output deals, and to assess whether they want to go after other series that are on the open market — or have been overlooked by their rivals. Ruediger Boess, the veteran leader of the team, could not be reached for comment Monday.

Company has ongoing output deals with Paramount, Sony and Disney and a small package of movies from Warners as well as relationships with indies New Regency and Spyglass.

Much of the Hollywood product ends up on ProSieben, which de Posch describes as “a Fox-like station.” It airs a number of current U.S. series, including Disney’s “Alias,” Sony’s “Joan of Arcadia” and Paramount’s “NCIS.” The other general-entertainment channel, Sat 1, is “a cross between CBS and NBC,” he said.

The group also recently picked up “Reno 911” from Comedy Central and “The Simple Life” from Fox.

De Posch, who comes across as affable and quick-witted, said his personal programming tastes are “eclectic and diverse” and include “Sex and the City” and “The Simple Life.”

Of the shows debuting Stateside in the fall, he reckoned he had seen nothing “revolutionary — no obvious no-brainer sure hit,” but he was not dismissive, either.

The company is obliged to take on average two hours of series from its three key output deal suppliers — another indication of how much the deal structures with key foreign clients have changed for the majors.

On Monday de Posch said his team had picked up Disney’s new drama “Desperate Housewives” and would finalize its selections from its deal with Paramount this week.