Company Town : HBO Takes a More Global View of TV : Strategy: International ventures have taken a back seat at the largest U.S. pay television firm. But that’s changing.

Now that most films make more money outside the United States than they do domestically, one would expect a smart marketer like HBO--which makes its money peddling films into the home--to have worked its way into the world’s living rooms.

But despite the success of the 23-year-old HBO in the United States, where it has cracked the Hollywood production clique and retained its title as the largest pay TV service in the world, international progress has been patchy, prompting a shake-up in international management late last year.

Curt Viebranz, HBO International’s new division president, said he has a simple job description: “Basically you take a map of the world, put flags in where we are, eliminate Western Europe and explore the options.”

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While U.S. cable channels such as Turner’s CNN and Viacom’s MTV took advantage of the explosion of cable channels in Europe during the 1980s, HBO hesitated.

In its defense, HBO could never move with the speed of a CNN or an MTV because its film output deals cover only the rights for pay television in the United States and must be renegotiated in each territory. CNN and MTV’s products can move more freely into new territories.

From 1985-89, when most U.S. programmers were planting flags in Europe, HBO was facing a number of domestic hurdles, including financially crippling film output deals and the impact of new pay television competitors and the video industry.

“If you had asked (HBO Chairman) Michael Fuchs his priorities during that time . . . international would not have rolled off the tip of his tongue,” Viebranz said.

It was also 1989 when Time, a $4.5-billion company with only 5% to 7% international revenue, merged with Warner, a $4-billion company with close to 40% international revenue.

Even with these limitations, there has always been room in the multimillion-dollar U.S. film deals HBO makes to leverage prices for international territories. But strategically, international has taken a back seat at HBO. International film rights were nabbed by a range of pay television operators in each territory, including Canal Plus, the preeminent European pay television supplier that has spun off services in Spain and Germany from its very successful French base.

With only a small amount of original programming, HBO is essentially offering international markets a packaging service, with a brand name that is of dubious value outside the United States.

But HBO International has moved up a few notches in the priorities of Fuchs. “I have never been more optimistic about the future of television outside the U.S.,” he said at a New York conference last month. “American television will be making the majority of its money from overseas before too long.”

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Viebranz and HBO’s task now is to make some sense out of the company’s scattered interests, which range from investments in Germany, including television channels in Hamburg and Berlin and a share of the German-language news channel n-tv launched with Turner, to a joint venture in Scandinavian pay channel TV 1000, to two channels in Eastern Europe.

Instead of launching a channel in Britain--the largest English-speaking population outside North America--HBO invested in British production and distribution two years ago. A 50% investment in Anglia Television Entertainment and its distribution arm ITEL, which distributes HBO’s documentary product, gave HBO entree into Britain’s largest commercial terrestrial network--ITV--where it hopes to sell and produce more programming.

In January, after five days on the job, Viebranz backed out of a deal to invest with the British companies MAI and Pearson in a bid for Britain’s fifth channel--an opportunity for HBO to get a foothold in British broadcasting.

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Rather than dwell on mistakes in Europe, HBO is developing new services in Asia and Latin America. It has built up a good competitive position in the latter, one of the few regions where it can hold its own against Rupert Murdoch’s international programming empire.

HBO Ole, the first Spanish-language premium service in the region, was launched with partners in 1991. HBO Brasil was launched last year.

HBO has also been aggressive in Asia, where it launched a premium movie channel with Paramount Pictures in 1994. HBO is now working out a complicated deal to bring Sony Pictures Entertainment, MCA/Universal and Warner Bros. in as equity partners in the movie service. The strength of the venture, which will line up against Murdoch’s film channel fed by Fox product on Star TV, is undeniable.

But the studios are now demanding a share in many new film channels instead of operating in the traditional role as an outside supplier to channel operators.

HBO’s U.S. reputation as something of a bully with the studios has not helped it forge film deals internationally. When HBO and Canal Plus were planning a pay television channel for Turkey in 1993, all of the major studios with the exception of Warner Bros. signed a deal with rival Turkish channel Cine 5 in what was a clear signal that the majors would not be squeezed by their two biggest pay TV customers. Since the majors signed up with Cine 5, HBO looks likely to leave the Turkish market to Canal Plus.

“Historically, the studios have had a problem with a middle man. We are trying to reconcile that,” Viebranz said.

The Asia deal, which is a major priority now, is particularly complicated: “There are five parties in the transaction and all their lawyers,” he said. “It is a little like herding cats getting it all done.”

The politics between sister company Warner Bros. and HBO have also been a source of problems domestically and internationally.

Warner Bros. Television International’s business, which is primarily selling its programs around the world but is expanding to include the launch of its own international cable and satellite channels, may not always be best served by doing film output deals with HBO.

“Realistically, the spirit of detente between Warner Bros. and HBO has only broken down in the past few years,” Viebranz said.