Time Warner’s pursuit of Netherlands-based reality powerhouse Endemol has media analysts asking a big question: Are other major media congloms looking to make similar deals?

The answer: Beyond this example, there aren’t many sizable reality TV production companies available. But the goal remains the same for many U.S.-based media companies like Time Warner — grabbing market growth from international expansion. News Corp., Sony and NBCUniversal in particular have invested significant bucks in expanding their production-distribution footprint in key growth territories, like Latin America and Asia.

David Joyce, media industry analyst for Wall Street brokerage Miller Tabak + Co., says for Time Warner the proposed $1.3 billion cash deal could quickly expand its presence in the reality genre to some 30 countries where Endemol operates. Endemol’s big U.S. shows have been “Big Brother” on CBS, “Deal or No Deal” on NBC and “Extreme Makeover: Home Edition” on ABC.

Time Warner has also been said to be in pursuit of Turkish TV/media group Sabah-ATV.

“Time Warner has been actively growing its international operations,” says Joyce, adding that it has also taken a stake in another producer and broadcaster, Central European Media Enterprises (CME).

Time Warner has been a big provider of scripted comedies and dramas for years — typically expensive TV programming.

“They can bump up the number of (reality) series with little financial cost or risk,” says Thomas Dey, CEO of U.K.-based About Corporate Finance, which does investment banking for media companies.

Additionally, Time Warner could also quickly gain a foothold in the big international area of format deals for reality shows. Warner Bros. TV has been expanding in the unscripted arena in recent years through its Warner Horizon division.

“It is not all that different than when Coke and Pepsi got into the water (product) game,” says Chet Fenster, managing partner and director of content creation for media agency Group M’s MEC Entertainment.

Reality shows can provide key access to local networks around the world for big media companies. Fenster says, for example, Endemol controls about 3,500 reality show formats. While most won’t see the light of day, he says when partnering with local TV production companies on even one or two well-rated shows, Endemol gains leverage with many local TV networks and stations.

Financially, it’s important to move now. “Reality TV budgets are rising,” Fenster says.

In 2010, Time Warner bought a 55% stake in U.K.-based Shed Media, producer of “Supernanny,” which aired in the U.S. on ABC.

Earlier this year, Electus, the Ben Silverman company owned by IAC, bought Engine Entertainment to establish an inhouse global TV distribution arm.

Deals in 2011 included News Corp.’s $674 million acquisition of Shine Group, run by Rupert Murdoch’s daughter Elisabeth. At the time, Shine was the sixth-largest TV production company in the U.K. A couple years ago, Shine bought Reveille, Silverman’s former company, which produces “The Biggest Loser” for NBC.

Early last year, Hearst Corp. bought a 50% stake in reality producer Mark Burnett Prods., producer of CBS’ long-running “Survivor” series as well NBC’s “The Voice” and “Celebrity Apprentice.” With that in mind, Dey anticipates upcoming companies that generate a modest cash flow in the $50 million to $100 million per year range might be good bets for acquisition — especially if in the earlier stages of growth. “Many of these reality show ideas come from creatives at small production companies.”

Here’s another reason to consider small reality TV companies: Many have direct dealings with advertisers and marketers for branded integration deals on the likes of “The Biggest Loser” and “Big Brother,” earning extra revenue. “Brands can get a lot more attention at smaller companies,” says Fenster.

Aside from format deals and financial stakes in local TV production companies, big media may be looking to buy creative talent — but those creatives may not stay for long.

“The cultural differences can be huge,” says Gary Lico, president-CEO of Cable Ready, which sells U.S. programming internationally. He adds that many small TV companies can be quicker in making programming deals, not always possible as a part of a bigger media company.

While reality show producers have been hot prospects — gaining revenue on international format deals — they continue to suffer when it comes to selling shows as part of library program deals: Reality episodes don’t have much afterlife.

“These business are fundamentally hit-driven,” says Laura Martin, senior analyst of entertainment, cable and media for Needham & Co. “You need constant cash flow. If they don’t have one for a long time, you run out of money.”

NATPE 2012
Congloms chase big footprint | Syndie concerns grow as daytime yakkers stack up | Distribs, stations guard firstrun syndie shows from web | Worthy successors | What’s coming to market | Comedies hit syndie paydirt — for now |