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Richard Plepler Sees World of Opportunity for HBO Growth

HBO has HBO- and Cinemax-branded channels operating in more than 60 countries in Latin America, the Caribbean, Europe, and Asia. Richard Plepler has visited all of HBO’s international outposts them since he was promoted to CEO in 2013.

Plepler’s travels have taught him an important lesson about the nuances of exporting the HBO milieu. Having a “Game of Thrones” is crucial. Having a steady stream of top-shelf Hollywood movies is fundamental. But having locally produced original programming is the extra measure that can be a game-changer for the business.

“One thing is clear when you speak to distributors around the world: The more you can bring in an indigenous sensibility combined with an HBO sensibility to that market, the better you’re going to do,” Plepler says. “What we started to observe in the mid-2000s was that original local programming often outperformed even our best [U.S.] programming. In recent years we have added resources so we can do even more indigenous programming at our owned-and-operated networks.”

HBO’s legacy as a pioneer in the international marketplace and its growing investment in local-language production has earned Plepler the second annual Variety Vanguard Award recognizing achievements in the global television industry. Plepler will receive the kudo Oct. 16 at the Palais des Festivals in Cannes. The award presentation is part of the Mipcom television conference and exhibition that runs Oct. 16-19.

HBO was the first of the U.S. premium cable channel to spread its wings overseas, more than 25 years ago with its first forays into Latin America, the U.K. and Europe. Showtime has only in the past few years begun to establish a presence as a brand beyond America’s borders. The same goes for Starz. International growth has become a bigger focus for all the major U.S. TV groups because the domestic market is so saturated.

HBO has plenty of runway overseas as only 23% of its $6 billion in annual revenue comes from outside the U.S. “That’s very dynamic growth,” Plepler says.

HBO’s approach to the market has evolved significantly over the years, as distribution opportunities have become more varied. “We don’t have a one-size-fits-all strategy,” Plepler says. When then-HBO chief Jeff Bewkes first took the company into Latin America in 1991, HBO invested in linear channels launches in partnership with local media firms. Central and Eastern Europe and Asia have been the focus of channel launches in the past decade.

One of the benefits of an owned-and-operated channel is that it is a platform for original local productions that can be distributed across channels in the region and in some cases to HBO in the U.S. In all, HBO programs air in more than 160 countries. Much of that distribution comes from selected programs that are sold to various platforms through traditional series licensing pacts.

But in some key markets such as the U.K., Australia and France, HBO cuts a broad brand licensing deal that makes a local distributor the “home of HBO.” Those agreements call for the distributor to carry an HBO-branded program block. In these markets, the “home of HBO” channel may also pick up high-end shows from other outlets — it’s not unusual for programs from Showtime or AMC or FX series to be carried on the same outlet.

But HBO is the “anchor tenant,” as Plepler puts it, which gives the company great clout with premium TV distributors such as Sky in the U.K., Italy and Germany, Australia’s Foxtel and France’s Orange and a dozen other major territories. “Those deals for us have been high margin, low-risk revenue,” Plepler says. “We’ve been pleased with that evolution.”

The latest wrinkle in video distribution — the streaming revolution — promises to benefit HBO by making its premium service more readily available to consumers who might not otherwise pay up for a larger pay-TV bundle. As is the case in the U.S. since the dawn of HBO Now in 2014, HBO is now available to consumers as a standalone channel in Scandinavia, Spain, Brazil, Mexico and Argentina.

The launch of HBO Nordic in late 2012 was an important gauge of OTT distribution for the company — one that paved the way for HBO Now in the U.S. The conditions in Sweden, Norway, Finland, and Denmark couldn’t have been more clinically tailored to testing the viability of broadband distribution: an affluent consumer base with high demand for pay-TV services combined with a tech-savvy population that has come to think of wifi has a household appliance.

HBO Nordic had some technical hiccups in the beginning that provided a learning curve for HBO’s fleet of engineers about practical issues such as making it compatible with a broad range of devices and allowing multiple streams to serve the disparate needs of families. But after those were smoothed, the potential of the direct-to-consumer model was abundantly clear.

Herve Payan, CEO of HBO Europe, says the company is looking at the prospects for an OTT overlay in its existing owned-and-operated markets. HBO Spain, which launched last year, has had a faster ramp-up than HBO Nordic with nearly 1 million subscribers in nine months, Payan says.

At a time when Netflix and Amazon are also busy planting their flags around the world, the race is on to grab market share. This could mean OTT iterations of HBO in markets where it has the lucrative licensing and “Home of HBO” brand agreements.

“We’re following the money but we’re not following it myopically,” Plepler says. “We’re looking out at a five- to eight-year horizon and evaluating [OTT] on a case-by-case basis.”

Plepler adds HBO’s overseas leaders have been careful to ensure that the company has options going forward as markets evolve.

“We’ve built an optionality into our model to pivot to direct-to-consumer should we decide to any time. We believe that kind of flexibility is important going forward,” Plepler says. “The capacity of having OTT options is not necessarily to displace our traditional business but to augment them.”

Even more than a dedicated linear channel, OTT services have a voracious need for content. HBO Nordic also acquires third-party programming from the region it serves — so long as it’s a reasonable fit with the HBO brand — in order to keep subscribers engaged with fresh programming.

“If you don’t get something new almost every week, you’re going to see churn,” Payan says. “You have to bring in something new.” HBO Nordic has just greenlit its first homegrown original series, “Gosta,” from Swedish filmmaker Lukas Moodysson. He’s promising the show about a child psychologist who moves from Stockholm to a remote cottage in the woods will be “a mix of comedy and Dostoevsky — as funny as possible and as serious as possible.”

HBO Nordic is also supplied by the robust slate of originals that HBO’s Central and Eastern European channels. HBO’s outlets in Romania (“Shadows”), Poland (“The Pack”), Czech Republic (“Head Over Heels”), and Hungary (“In Treatment”) all have signature series that circulate across the HBO Europe group. Production and programming is spearheaded by U.K. TV veteran Antony Root, who joined HBO Europe in 2011 after working for BBC, Thames Television and Sony Pictures Television.

HBO Spain also just greenlit its first original drama, “Patria,” a study of the nation’s Basque conflict from the eyes of everyday people. “Patria” and “Gosta” are the first fruits of a $250 million co-financing pact that HBO and the U.K.’s Sky set in April to develop high-end series content through the HBO Sky Studios banner. That deal was another signal to the international TV community that HBO is open for business overseas in a big way. HBO is pouring resources into production in Latin America — where it already has a solid infrastructure built over many years — and in Asia, a newer area of focus for the company.

For Plepler, the expanded investment and level of experimentation under way in the markets outside the U.S. all comes as a another testament to the value that is derived from HBO’s reputation as a purveyor of great TV.

“In this era of expanded content production, where you have 500 series of scripted fare being produced in the U.S. alone, brands matter more than ever,” Plepler says. “Brands are the draw for people who are looking out at a plethora of options and might be understandably confused about how you can keep up with everything. What you want is a transcendent brand, which we obviously believe HBO is.”

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