Sony Takes Local Approach Globally

If content is king, Sony Corp. is in an enviable position, as arguably the second-most prolific producer of TV shows in the country, after Warner Bros. But in the shifting world of television, where leverage can count as much as quality in determining what gets on the tube, Sony Television Entertainment has few chips--lacking a TV network, a station group or any major cable channels to guarantee a home for its productions.

To secure its growth, Sony is banking on an international strategy that sets it apart from the other studios and, the company hopes, will bring bigger returns than it could earn through a U.S. purchase.

“The consolidation of television has limited our shelf space here, so we are building new shelves internationally,” said Alan J. Levine, president and chief operating officer of Sony Pictures Entertainment. “The U.S. is saturated and served. As an investor, you pay a higher price for a lower return, so we have staked out other territory, where consumer needs are largely unarticulated.”

While other TV studios and programmers have the advantage of expanding their established cable channels, such as MTV, ESPN, CNN and HBO, abroad, Sony has had to start from scratch. The company is trying to leverage its big name in consumer electronics, its extensive film and TV libraries and its expertise as the producer of hit comedies like “Mad About You.”

Tailoring its efforts to the idiosyncrasies of local markets, the company over the last two years has quietly invested in a handful of cable services and launched several general entertainment channels bearing the Sony name, as well as four music networks.

It has even formed studios in India, Germany and Britain to meet the growing demand for home-grown shows. Levine calls local programming the “passport to success” offshore, particularly in countries like France that scorn imports. Local shows dominate prime time in most countries, with imports filling lower-viewership daytime and late-night hours.

“We couldn’t do line extensions [of established cable networks] like some of the other studios,” said Dennis Miller, who oversees TV as executive vice president of Sony Pictures Entertainment. “We believe in local repertoire, a mix of indigenous and library product.”

As evidence of the strategy’s logic, Miller cites the success of Viva, the German music channel formed with other major recording studios to challenge Viacom’s MTV, which takes a Pan-European approach. After only two years, the partnership of Sony, Warner Music, PolyGram and EMI is already breaking even and has spawned an offspring.

Sony’s international approach is no match for a competitor like News Corp. Through satellite ventures like British Sky Broadcasting in Britain, Star TV in Asia and a partnership recently struck with Latin America’s biggest programmers, Chairman Rupert Murdoch has spread his company’s TV reach to the far points of the globe.

While News Corp. has spent billions of dollars to establish itself as a gatekeeper and price setter for programmers, Sony is making cheaper bets with a narrower focus. Some analysts wonder whether the studio has staying power as the stakes rise abroad, citing the coming competition for channel space and the studio’s aversion to risk after several years of wild spending on unsuccessful movies led to a huge 1994 write-off.

Rivals like Walt Disney Co., Time Warner Inc. and Viacom Inc. are all plowing additional resources into emerging markets as growth slows at home. Part of Disney’s motive in buying Capital Cities/ABC Inc. was to tap into ESPN’s international appeal to help sell its children’s programming. Likewise, Time Warner is eyeing Turner Broadcasting System’s worldwide cable presence to increase its studios’ influence overseas.

What is more, though Sony is one of the pioneers of overseas production, the idea is catching on with the other big Hollywood guns. Warner Bros. has produced a weekly children’s series for one of Britain’s TV networks with a local partner and has several other shows in development.

Sony has been shaping its international strategy over the last two or three years, spurred by technological advances that have increased channel capacity abroad, foreign governments’ easing of barriers to imports, a growing middle class in countries like India and China and growth in cable households and advertising markets worldwide.

India’s middle class of several hundred million people is vastly larger than that of the U.S. Even so, advertisers spend only about $3 per TV household in India, compared with about $350 in the U.S., according to a report by Bear Stearns.

The potential upside has made India fertile ground for development. News Corp. was the first of the American studios to enter, launching Z Cinema through Star TV a year ago as the country’s third channel. “Star TV and Z really spurred cable growth in India,” said Michael Grindon, president of Columbia TriStar International Television, who estimates Indian cable households at 13 million.

Working with local partners over the last 18 months, Sony turned on a Hindi-language channel in October under the Sony Entertainment Television banner. In large part because the channel is free, supported by advertising, Sony now reaches 8 million of the 10 million Hindi cable households with a service that is 80% Hindi programs and 20% dubbed U.S. shows.

Sony is now considering the launch of a second channel, perhaps in the Tamil language, which would become one of 10 Sony-branded cable channels the company hopes to have worldwide by the end of the year, according to Jon Feltheimer, president of Sony Television Entertainment.

The company has taken a different tact in Latin America, where its Sony Entertainment channel airs U.S. programming to target the English-speaking audience already accustomed to watching American hits months after they air in the U.S. On Sony’s new channel, they can see subtitled U.S. hits after only four to six weeks, including Columbia TriStar’s “Mad About You,” “Seinfeld” and “The Nanny,” as well as Warner Bros. programs such as “ER.”

Sony got its feet wet in Latin America with a 1994 investment in HBO Ole, a premium movie service launched by Time Warner with local partners. In the fall, the partners launched three new services--a music channel, the Sony channel and WBTV-The Warner Channel, featuring children’s and family programming drawn from the Columbia TriStar and Warner Bros. libraries. In February came Brazilian versions.

Grindon said Sony is now considering other Spanish-speaking channels as a way to create an economic base for establishing a local production studio.

While analysts say it could be hard to wedge into well-developed markets such as Brazil, whose studios turn out soap operas of world renown, Sony says it brings expertise in comedy that is lacking elsewhere. “In Germany and Great Britain, we are introducing a new way of development,” Feltheimer said.

In Britain, Sony has teamed up with Carlton Television to produce all new local versions for the ITV network of its popular U.S. shows “Mad About You” and Fox’s “Married . . . With Children,” to which Columbia TriStar owns foreign distribution rights. In Germany, besides reformatting U.S. shows for German audiences, Sony has started producing original series, such as the new “Die Camper,” which has tested well.

Working in less sophisticated television markets can be frustrating. “In Germany, they put [a locally made version of] ‘Who’s the Boss?’ on the schedule within two hours of the dubbed [original] version,” Feltheimer said.

Political volatility in some countries also can make entry difficult. Sony is waiting for approval from the Chinese government on a deal with Beijing Television, the Saatchi & Saatchi advertising agency and Procter & Gamble to produce a daily series. It hopes its status as a hardware supplier in the country will help.

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Sony’s International TV Strategy

Sony Pictures Entertainment is weak in U.S. television distribution, with no holdings in station groups or networks. But it has developed an aggressive international strategy with a series of ventures to provide distribution and local production.

Europe

* Sony has a 20% interest in the Viva and Viva2 music channels in Germany. It has licensing deals with BSkyB in England, Forta in Spain and Taurus Films in Germany, and has local production agreements for TV programming in Britain and Germany.

Latin America

* Partnering with Time Warner and Ole Communications, Sony has a 42% stake in HBO Ole, the premium movie service, as well as a 28% interest in HBO Brasil, a 1995 offshoot. It has launched the Sony Entertainment Television channel, providing U.S. movies and TV programs.

Australia

* Partnering with Paramount, MCA and Australis Media, Sony has a 28% stake in TV1, an Australian film and TV production group, and a 16% interest in Showtime and Encore premium movie channels with Paramount, MCA, Fox and TCI International.

Asia

* Sony is a 20% partner in HBO Asia with Time Warner, Paramount and MCA, and a 12.5% partner in Channel [V] with Rupert Murdoch’s Star TV and three other partners. It is negotiating a partnership for Mandarin-language programming in China.

* With partners Grandway Holdings, Atlas Equivin and Argos Communications Enterprises, Sony Entertainment Television has launched Hindi-language programming in India.

Source: Sony Pictures Entertainment