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BOB WALLACE
November 6, 2006

The Kings of Content, representing Twentieth Century Fox, Disney and ESPN Media Networks, and Scripps Networks, took great pains to explain the money they spend and the charges they pay in hopes that the telcos would understand their changing business models.

The trio spoke as part of an interactive discussion at the TelcoTV Conference & Expo 2006 in Dallas entitled: “The Changing Paradigm of Content Distribution and Consumption,” moderated by veteran industry consultant Bethany Gorfine, president and CEO of Federal Hill Communications, for a standing-room only crowd at the late afternoon event.

The topic of the show’s kickoff group discussion signifies a major milestone in the evolution of telco TV as service providers have apparently moved beyond the basics of content acquisition and protection (the topic of the same event at last year’s show) to focusing more on the business side of the ecosystem.

Telcos have apparently become more business-savvy and are taking a harder look at the costs they pay and expenses they incur in getting content for the IPTV networks they have, and in most cases, continue to deploy. They’re also facing a fast-growing list of competitors form outside traditional telecom markets.

“Welcome to the maze and challenging landscape of Hollywood,” prefaced Gorfine, who has been active for over a decade in helping service providers work content carriage deals with owners of the properties. “Our clients have been asking us, why is it so expensive to work with Hollywood? (Because), in the last nine months all hell has broken loose and the industry has exploded.”

In addition to a whole slew of new competitors, from retail chains to YouTube and beyond, studios have found they’ve gone way beyond just speaking with affiliate relationship reps with service providers to folks from new media groups, digital distribution, home entertainment, digital initiatives, mobile and video-on-demand, according to Gorfine.

“ At the end of the day, the movie-making process is a very risky business, with an average hit-or-miss ratio of 80 percent to 20 percent, with 80 percent of movies being misses,” said Jonathan Cody, vice-president and Fox Digital Media, who added his firm spent “a tremendous amount of money” promoting in advance the launch of its latest hit, “Borat.”

“We hope to take it downstream to windows such as PPV, VoD, HBO, basic cable and hopefully eventually to broadcast,” said Cody.

The cost of TV series was a major topic of discussion, with Cody claiming a breakeven of three to four years, with that coming before one goes to reruns and syndication.

Doug Hurst, senior vice president of on demand affiliate marketing for Scripps said the firm amortizes the expense of shows “over a three- to five-year period.” The executive said VoD, broadband and DVDs “don’t compete with us or replace us, but rather are in support of us, with our goal being to get content in front of consumers everywhere they are.”

Another reason cited for escalating costs on the content side of the house is the evolution of the way sports teams and leagues approach rights.

“They’ve gotten very specific in the way they cut up rights, going beyond game rights to clips rights and game replay rights in the case of NFL Network,” said Gene Pao, executive director of business strategy for Disney and ESPN Media Networks. “It’s now much more complex than ever before.”