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Sky to Continue Boosting Spending on Originals in 2018 (EXCLUSIVE)

Sky will sharply increase its spending on original content again next year, CEO Jeremy Darroch has told Variety. The entertainment giant has moved heavily into original programming with drama series such as “Tin Star” and “Riviera,” which it has renewed for a second season, and plans to up its spend by a quarter again next year as the race for quality content continues to heat up.

Darroch’s first 10 years at Sky saw the U.K.-based pay-TV operator expand across Europe and branch out further beyond sports and movies. As the 55-year-old exec enters his second decade as CEO, his company faces an existential challenge from U.S. streaming giants and tech firms getting into TV, and the corporate challenges associated with a possible takeover by 21st Century Fox.

In today’s fragmented media landscape, Sky’s success relies on offering something for everyone. To do that, Darroch says the company is spending nearly £7 billion ($9.2 billion) on programming this year and cranking up its production of original shows in order to become a content powerhouse. That eclipses Netflix’s spending of about $6 billion and HBO’s of about $2 billion.

A hefty chunk of Sky’s outlay is on sports rights, especially soccer, but the company is upping its budget for original programming as well. In 2018, it plans to release four original drama series every quarter to help bolster its base of over 22 million subscribers across Europe. Among the new offerings will be “The New Pope” and “Das Boot,” adding to a slate that includes “Riviera” and “Gomorrah.”

“The idea that we can keep growing and developing just by doing the things we did in the past seems to me for the birds,” Darroch says. “We’re going to spend 25% more on originals this year, and we’ll probably spend a similar amount more next year. We have big ambitions.”

But in an era of spiraling costs, Sky knows it can’t fulfill all those big ambitions on its own. The company has teamed up with HBO, turning a distribution agreement for the U.S. cabler’s programs into a $250 million co-production deal. The first joint project is nuclear disaster miniseries “Chernobyl.” More collaboration is in the works with rival broadcasters and streamers: German pubcaster ARD was a partner on “Babylon Berlin,” the most expensive series in German history; Amazon is a partner on upcoming drama “Britannia.”

“It’s not restricted to HBO,” Darroch says. “There are others we will work with, and we can do it at multiple different levels because we produce and create a lot of content.”

Netflix and Amazon have drawn widespread attention with a smaller number of big-budget local originals such as “The Crown” and “The Grand Tour,” which Darroch says reflects their status as newer entrants in the market. “It’s always going to be a bit different for us because we are more established, and those singular moments tend to be for the new kid on the block,” he says. “I think there is a difference in being a leader in each of the markets and being mass-market.”

Darroch also dismisses a warning from BBC director general Tony Hall that the rise of global streamers like Netflix and Amazon endangers the survival of uniquely British programming. “It’ll be lost if we let it be lost,” Darroch says. “We don’t see that threat in the same way as the BBC.”

Sky wants to forge a path that runs between the mostly American fare emanating from the SVOD players and the mainstream local programming that the terrestrial networks serve up. A “Sky type of show,” as Darroch describes it, is one “where we can take local content that’s relevant to the markets we’re in and we can produce it with a particular Sky twist, which might [include] bigger sets and production. It might be a bit more intense, and that will create a space where we can work with the very best people in the industry.”

Fitting into that category: upcoming Benedict Cumberbatch starrer “Melrose,” Idris Elba comedy “In the Long Run,” buddy cop show “Bulletproof” and fantasy series “A Discovery of Witches.”

Not that Sky is about to abandon its staple sports coverage. A multibillion-pound auction for English Premier League rights looms next year. “[Soccer] is central to Sky Sports’ offering, and I don’t see that changing,” Darroch says. “Equally, what I’m not trying to do is build a business on one property alone.”

He’s also looking for new ways to distribute content. Despite its satellite pay-TV roots, Sky moved into Spain and Switzerland earlier this year with streaming-only services. “I was very keen with those two markets to do things a bit differently,” Darroch says. “From that we have an emerging playbook on how to enter new markets and the options we have.”

As for Sky’s news channel, it has recently become a pawn in the debate over 21st Century Fox’s takeover bid. Sky has warned Britain’s Competition and Markets Authority, which is evaluating the proposed $15 billion takeover, that it might pull the plug on award-winning but loss-making Sky News if the deal is not approved. Whether the threat is real has been debated.

Darroch is clear that Sky wants the deal to go through, saying it would take the company to another level. But he’s ready whatever the outcome. “Like any business, we can’t simply have one plan,” he says. “Sky has its own stand-alone plans that are attractive. There’s no reason we can’t be successful as a stand-alone business or as part of a broader entity as well.”

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