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Those Economic Storms Are Not Sinking Sales

With international sales playing an even bigger role in funding U.S. network and high-profile cable programming, the gloomy news coming out of Western Europe would—at least on the surface—seem to spell tough times in Cannes this October at MIPCOM for U.S. distributors, who have long counted on the region for the majority of their international sales revenue. But some safeguards and trends are helping to paint a somewhat brighter picture.

Granted, the ongoing Euro crisis has already caused a number of researchers to cut their advertising projections for the region. Zenith Media, for example, is now predicting a 1.1% decline in overall ad spending in the Eurozone in 2012 and even steeper declines in markets such as Spain, which is expected to suffer a 12% drop.

“The macro economics are not good, and I think broadcasters are being very prudent with their spending,” says Jeffrey Schlesinger, president, Warner Bros. International Television. “There is a cautious feeling in the market. Spain is feeling a lot of pain,” and both Italy and France are struggling.

But Schlesinger and other studio executives argue that several trends—notably, strong demand for U.S. programming and sales to streaming video providers— are actually producing a relatively healthy sales climate, which is good news for the Hollywood studios that rely on international sales to bring in as much as half of the revenue they get for new dramas.

For starters, the U.S. studios have output or volume deals in many major territories, which helps protect them from short-term market " uctuations. “We are not doing an awful lot of individual product sales in individual countries,” Schlesinger explains.

In tougher economic times, acquired American programming can also offer a cost-effective alternative to locally produced content, a dynamic that allowed a number of studios to increase their international sales during the deep 2008-09 global recession.

“We can offer them very high-quality programming that they don’t have to take the risk or expense of producing themselves,” says Ben Pyne, president, global distribution, Disney Media Networks. “That helps in both good markets and not-so-good markets.”

Demand for American fare also remains high, both because of its high production values and the range of product that the U.S. studios now bring to international markets. “Not every American show will play on primetime on a big terrestrial network in each European market, but some of them will,” says Armando Nuñez, president, CBS Studios International. “Some will not be on primetime and some will be on cable or satellite. But the client pool is growing, and there is an outlet for all different types of American programming. The business is really quite robust.”

High-profile cable network fare is also providing additional sales, notes Marion Edwards, president, international television, Twentieth Century Fox Television. At MIPCOM, the studio will be bringing talent from upcoming FX series The Americans and will screen the first material from the show. “It is exciting to launch something like this in Europe, and screening it for the first time at MIPCOM,” Edwards says.

Meanwhile, several new channels and streaming video outlets have entered the market, opening up new windows or creating more competition for rights that is boosting prices. “The entrance of multinational SVOD [subscription VOD] players like Amazon and Netflix has created significant competition in some territories where there was not much competition in the past,” Schlesinger says. “They are paying grown-up money, and some of these companies are competing for exclusive first-pay rights. So this has become a pretty signi! cant source of revenue.”

With U.S. networks programming more sitcoms, demand for comedies also seems to have improved. “While American sitcoms traditionally had a tougher time finding an international audience, [international] broadcasters now view them as a more important part of their schedule,” notes Keith LeGoy, president of international distribution, Sony Pictures Television.

Meanwhile, digital distribution for online or mobile services is providing studios with new windowing opportunities for their product. “It has provided us with a fantastic platform to bring TV and movies to a different audience in different ways, and that has really allowed our business to stay very healthy and buoyant,” says LeGoy.

In addition to selling programming to new international streaming services being launched by Amazon, Netflix and Hulu, Pyne notes that Disney is also looking to do TV Everywhere deals. For example, Disney content is available on digital platforms to authenticated customers of BSkyB in the U.K.

Formats are another rapidly growing business for all the studios. Edwards notes that Twentieth Century Fox Television has produced local versions around the world of Modern Family, My Name Is Earl, The Wonder Years and other shows.

Twentieth has also taken The Oaks, a pilot that did not get a U.S. network run, and sold the format to the U.K.’s ITV, which has produced two seasons. “One of the things we wanted to focus on was the studio’s enormous development slate,” and take some of “these very strong ideas” that may not have made it in the U.S. into international markets, Edwards says.

Another outlet for product continues to be studioowned channels. Sony, Disney and Fox have already built up large international portfolios of channels, and over the last few years, CBS has also been expanding its list.This summer, the company announced a partnership with Chello Media that will put CBS-branded channels in 83 territories reaching 43 million subscribers.

“These channel ventures enhance your licensing opportunities, give you equity in a channel and, in success, you have channel profits as well,” says Nuñez.

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