Zombies and secret agents will join actor Kevin Spacey on the French Riviera this week for a TV trade show that will pit content-hungry Websites such as Netflix Inc. (NFLX) and Hulu LLC against traditional broadcasters.
The success of companies streaming videos over the Internet are a blessing for production companies behind shows such as “American Idol” and “Masterchef” that are offering dramas, reality series and comedies at the Cannes Mipcom fair, the world’s biggest market for TV programs. Those sites as well as Amazon.com Inc. (AMZN)’s Lovefilm are willing to pay top dollar for rights to lure viewers from TV to the Web.
“Netflix and Hulu are competing aggressively and they are going to the source for rights -- the producers,” said Jack Davison, a consultant at London-based TV adviser 3Vision, who has worked for broadcasters such as BBC Worldwide and Viacom Inc. (VIAB)’s MTV Networks. “It’s new money for the production companies, and a new person to pitch to.”
The streaming sites, which allow consumers to watch movies and films anytime, are challenging established broadcasters and are increasingly commissioning exclusive content. With spending on digital platforms set to more than double to $6.7 billion in 2015 according to PricewaterhouseCoopers, they are changing the TV landscape -- evident at Mipcom, where Hulu Chief Executive Officer Jason Kilar will give a keynote.
Netflix, which has more than 27 million subscribers in the U.S., Britain, Ireland, Canada and Latin America, aims to expand in Scandinavia this year. Hulu operates in the U.S. and Japan.
“We’re seeing a shift of audience from TV to online,” said Claire Tavernier, head of new media division FMX at FremantleMedia, the production arm of Europe’s biggest broadcaster RTL Group SA (RTL). The company has been “knocking on the doors” of companies such as Hulu, Netflix and Google Inc. (GOOG)’s YouTube site and has sold about 115 hours of content to Netflix.
Producers coming to Cannes this year include the makers of zombie series “The Walking Dead” and “The Voice” producer Mark Burnett, who will promote his latest series, “The Bible,” a 10-hour drama from Genesis to Revelation. Producer Harvey Weinstein, who is behind films including “Inglourious Basterds,” will pitch his latest TV endeavors such as “The No. 1 Ladies’ Detective Agency.”
FremantleMedia, with shows such as “America’s Got Talent” and “The Farmer Wants a Wife,” has a deal with Hulu to distribute its shows internationally, including “A Day in the Life,” a documentary series by filmmaker Morgan Spurlock chronicling a day in the life of someone notable such as businessman Richard Branson or chef Mario Batali.
“Netflix, Hulu and others have disrupted the whole chain by coming to the market and competing and paying serious money for TV rights,” said Stewart Clarke, an editorial director at researcher Informa Telecoms & Media.
Google’s YouTube site yesterday said it’s adding new video channels from France, Germany, the U.K. and the U.S. to the 100 it has introduced in the last year to show exclusive content backed by “some of the biggest producers, well-known celebrities and emerging media companies.” Google, which said its top 25 original channels are averaging over a million views every week, said the new content will feature topics such as cooking, wellness, parenting and sports.
Hulu, based in Los Angeles, is attending Mipcom as a buyer and seller, said Andy Forssel, senior vice president of content.
“We represent a new set of buyers,” he said. “The upside for all these production companies is a new buyer and new money to make, or getting a green light for something they couldn’t make in the past.”
Hulu and Netflix also have started commissioning original content. Netflix won the rights for “House of Cards,” a political drama with actor Kevin Spacey based on a series of the same name by the BBC, over competitors including pay-TV operator HBO. Spacey is in Cannes to promote the show. Netflix ran its first original series “Lilyhammer” this year, starring Steven Van Zandt in a series about a New York gangster trying to start a new life in Norway.
Shine Group, the production company founded by Elisabeth Murdoch and acquired by her father Rupert Murdoch’s News Corp. (NWSA) last year, has a deal with Netflix to show episodes of “The Hour,” a thriller about TV journalism in the 1950s, after it aired on the BBC, said Gordon Synn, a digital media consultant at the company.
Endemol NV (EML), the company behind “Big Brother” and “Deal or No Deal,” is working with Hulu to screen Australian dramas that haven’t been seen in the U.S., said head of distribution Cathy Payne.
Competition from Websites has prompted broadcasters to strike back and start similar services.
British Sky Broadcasting Group Plc (BSY), the U.K.’s biggest pay-TV company, introduced a video-on-demand service this year, and the country’s broadcasters unveiled YouView, a set-top box enabling viewers to watch movies and TV shows on demand. Comcast Corp. (CMCSA), the biggest U.S. cable operator, started streaming service Xfinity Streampix.
Concerns that competition will hamper subscriber growth have weighed on Netflix shares. The stock dropped 25 percent on July 25 on concern the company may not meet its full-year target of adding 7 million U.S. users.
BSkyB Chief Operating Officer Mike Darcey predicts many new Web services will struggle to compete for the best content in the longer term. “I have my doubts as to whether” digital platforms “can sustain at a high level in terms of volume and quality,” he said.
BSkyB, with more than 10 million subscribers, spends more than 2 billion pounds ($3.2 billion) a year on producing its own content. Netflix’s costs to acquire content in 2012 will rise to more than $2 billion, Wedbush Securities estimates. Hulu has said it will spend $500 million on shows and films this year.
Quinn Taylor, senior vice president for movies, miniseries and acquisitions at ABC Entertainment Group, which produces programs for Walt Disney Co. (DIS)’s ABC network, said that while video-streaming sites might increase competition, they’re still far from replacing the established broadcasters.
“Of course they are driving prices up,” he said. “But the amount of content they need and can afford right now doesn’t touch what we need.”
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