M&E Daily

New Distribution Windows Change Studios’ Profit Equation

by Marcy Magiera

As networks and studios take advantage of myriad new ways to distribute content, they face greater challenges in managing windows to extract maximum profit from each transaction, said executives speaking at Variety’s Entertainment and Technology Summit at the Ritz-Carlton Hotel in Marina del Rey, Calif. on Monday.

Speaking on a “Trendsetters in Entertainment Distribution” panel, David Spiegelman, president of domestic television and digital distribution for Relativity Media, discussed the studio’s decision to give its movies to Netflix for streaming in the pay TV window, bypassing cable programmers HBO, Showtime, Starz, and others. “There’s a huge benefit for us to be on Netflix,” said Spiegelman, noting that while Netflix has a big audience – more than 20 million people subscribe to Netflix’s streaming service – the films will get less consumer exposure than they would in HBO rotation, for instance, preserving value for buyers in the downstream windows including basic cable.

“You can never have enough buyers,” said panelist Scott Koondel, president of distribution for CBS. “Right now it’s about getting paid the most for every transaction.”

For programmers like Showtime and Starz, that is driving a move to replace theatricals with original content so that they can control both the exposure and revenue of the properties in multiple windows, said Koondel and John Penney, executive vice president of strategy and business development for Starz.

Because of growing international markets and new distribution platforms, “you can produce shows for network and make money right out of the gate,” instead of waiting for syndication, said Koondel.

“Pricing is critical,” said Penney. “Whoever is setting the price has to get it right to generate enough revenue to finance new content.” He used as an example Netflix’s acquisition of the first-run series “House of Cards,” which according to Penney’s estimate, will cost one month’s revenue from all 25 million Netflix subscribers to finance.

For content owners, that means developing new distribution outlets, such as Facebook, even though it isn’t clear whether consumers want to watch movies over social networks, said Spiegelman. “If you can tap into a very small percentage of that huge platform, you could be generating so much revenue,” he said. “We want to train behavior now.”

Conference keynoter Kevin Mayer, executive vice president of corporate strategy and business development for The Walt Disney Co., also addressed windows management. As an example, he said the studio now views its ABC network as simply the first window of distribution for its TV content. “Network used to be the business,” he said. “Now content is the business.”