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Studios' Deals Refashioned.

Three studio execs output their view

Buyers don't want to be stuck with programs they can't use just to get programs they want. In 1999, such resistance fueled a widely disseminated myth that the output deal was dead. If it was dead, it returned in grand fashion from Warner Bros. on August 27 last year when a major output deal was struck between the network's International Division and Germany's theatrical-giant-turned-media-conglomerate, Kinowelt Medien. The deal provides free TV rights for Warner Bros.' 1996, 1997, 1998 and 1999 theatrical releases, and all television series, telefilms and miniseries from the 1999-2000, 2000-01 and 2001-02 seasons, as well as selected documentary and library programs. Additionally, the Munich-based Kinowelt can, in turn, sub-license the programming to television broadcasters throughout Germany.

Michael Grinden, president of Columbia TriStar International Television, explained the deal, "Every pay-TV business in the world has a number of television output deals with major motion-picture studios that are based on delivery of premium movies. Broadcasters buy them blind because they know they need a fresh supply of feature films."

David Grant, president of Fox Studios, added, "While pay services are happy with their output deals, international broadcasters are not." Grinden agreed, citing the recent lawsuit lodged by Germany's KirchGruppe against Universal Studios alleging that the studio hasn't lived up to the spirit of its agreement. Taking no stance on the litigation, Grinden generalized that "whenever you have agreements with large suppliers, there are always issues that you have to address and work through. Sometimes a client has an agreement to buy a particular show but finds it either isn't working, or worse, they bought 'program x' when they really needed something like 'program y.'"

Gary Marenzi, Paramount's president of International TV noted, "But many customers -- if left to their own devices -- may say, 'Well, I'll just take your top movies and TV shows and leave the rest to somebody else.'" He stressed the point that studios are making an investment on a slate basis of 10-20 films and 10-20 TV shows.

"We know some of them will be hits and some of them won't be but when you're running a production studio, you're making investments in a lot of different ideas. If the marketplace only buys a few films or TV shows, it's going to make it difficult for us to produce the same kind of top quality movies and TV shows in the future. The relationship between the seller and the buyer has to be looked at as a partnership in investing," Marenzi remarked.

So, can studios hold back product from an output or package deal if that product has the potential to be a boxoffice blockbuster? Marenzi accentuated, "Paramount has an obligation to its shareholders and producers to get them top dollar for their product. We do output deals and we do packages. We try to match the product for the people who are going to position and program it properly, together with paying us the most money. If I have a film that's available today and a film that's available in three years, I may sell you the film that's available in three years and not sell you the film that's available now, for strategic reasons.

The relationship between the studio and the buyer is crucial. Marenzi's philosophy is, "If a customer wants to buy only one or two specialized items, he or she is not operating in a spirit of partnership. There's a difference between going in and buying one specific product, or buying a package and saying 'We want to do business with you over several years. We want to buy multiple products.' Saying, 'I just want your number-one box-office hit from last summer,' is not a relationship." Having said that, Marenzi summarized, "The bottom line is, we at the studio want to keep tight control over our product. And that control, as far as Paramount is concerned, also pertains to who we talk to about the product, and who we officially offer the product to. We do business with the people who want to do the most business with us."

On the flip side of the coin, a big issue that looms over the international marketplace is increasing competition from local producers. Grant emphasized, "The bigger territories are more able to produce programming for their individual markets and thus, companies within these regions are more selective about the non-domestic product they acquire."

Grant speculated that the pendulum will swing the other way as non-U.S. companies mirror their American counterparts through media mergers and discover that they have a voracious need for programming. "[Inrernational] broadcasters can't yet afford to produce an hour of quality programming for a new digital channel. It would bankrupt them. But programmers can afford to buy the rights to American programming." Grinden articulated, "When broadcasters find good suppliers to match the kind of product they're interested in, they tend to buy in volume. And if they have a producer they like, they tend to make commitments for [future] product."

So what, then, are the biggest challenges today for international programmers? From Grant's perspective, it's learning how to balance the projects in which he can get international partners involved from the "get go" versus having them stripped through normal distribution channels.

As for the proliferation of the dot-com companies affecting the business, Grinden envisions them debuting in the TV market as another distribution channel within the year: "Not much further than that. As far as the effect the dot coms are having now, they are spending an enormous amount of money on television advertising, giving our broadcaster clients more money to spend on programming."
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Publication:Video Age International
Article Type:Brief Article
Geographic Code:1USA
Date:Apr 1, 2000
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