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Solving the distribution puzzle

Assuming you get as far as production, TV sales become critical to a show's ROI. HIT senior VP of international TV and home entertainment John Morris reckons there are about 150 paying territories, and they're all worth pursuing. But with license fees in some countries lower than US$2,000 per half hour, a successful distribution strategy depends on efficiency, innovation and good market intelligence.
October 1, 2002

Assuming you get as far as production, TV sales become critical to a show’s ROI. HIT senior VP of international TV and home entertainment John Morris reckons there are about 150 paying territories, and they’re all worth pursuing. But with license fees in some countries lower than US$2,000 per half hour, a successful distribution strategy depends on efficiency, innovation and good market intelligence.

At the upper end of the scale are the U.K., France and Germany, where license fees range between US$12,000 and US$50,000 per half hour. Elsewhere, a good figure would run from US$5,000 to US$10,000, with Australia and Scandinavia regarded as valuable from a TV and video perspective.

In South America, a classic first step is to secure a pan-regional pay-TV deal worth around US$5,000 to $8,000 per half hour. This will then cover the cost of producing a dub so that sales can be made to big Latin American players such as Televisa in Mexico, to which HIT sold Bob the Builder and Barney. Although South America is in recession, Morris reports improved sales in the region and theorizes that ‘people still like to be entertained in bad times, and they want to shelter their kids from what’s going on.’

US$5,000 per half hour is also quoted as a typical figure in larger Asian territories, but Asia’s diversity means specialist knowledge is required. In HIT’s case, Adam Selly (director of Asia Pacific, Japan, Korea, Australia and New Zealand) is the point-man, though he sometimes works with local agents in key countries.

Morris says some territories in Asia remain tough. ‘It’s easy to lose control of your property in China, where local TV stations sometimes air shows without paying. In the Philippines and Malaysia, for example, we need to release videos quicker than we would really like because of piracy. That problem doesn’t exist in Eastern or Western Europe.’

In developed Asian markets, it’s not unusual to license all rights to a local player. In Japan, Sony looks after Pingu, while ShoPro placed Bob the Builder with TV Tokyo in a wraparound sponsored by Lego. Sometimes toymakers and retailers can provide a useful entrée to a market, as can video distributors. ‘In Korea, we sell to a video company that manages the TV rights as well,’ says Morris.

In small countries like Cyprus, says Morris, selling shows ‘is only viable if you sell packages, but buyers understand that.’ However one benefit of smaller countries is that ‘they tend to sign shorter deals, so you may end up negotiating two or three life cycles as opposed to one life cycle in a bigger territory.’ Morris is also effusive about video, which makes up 20% to 25% of HIT’s distribution business at present.

So far, there’s little evidence that kids distributors have followed sports and formats players to embrace a barter system whereby producers license shows to ad agencies, which then wrap the programs with their clients’ ads and sell them to local networks. This ensures the producer is paid, and the advertiser gets exposure in a quality environment. Foolproof though this may appear to be, some networks in China get around barter by pirating feeds and super-imposing their own ads over those of paying clients, which was a problem that reared its head during the 2002 World Cup.

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