U.K. Broadcasters Bidding High to Get Their U.S. TV Programs

When Warner Bros. Television International President Jeffrey Schlesinger checked into London’s Metropole Hotel two weeks ago, he expected to spend a day in the city before visiting Italy and continuing on to the large international television market held in this French resort each April.

The Metropole Hotel, however, became the Warner Bros. headquarters for an unprecedented weekend bidding war between Britain’s commercial broadcaster ITV and a new broadcaster, Channel 5, for a package of Warner Bros. movies and series. Schlesinger walked away with a British programming pact that would dwarf any single deal he could do in Cannes.

In short order, Schlesinger and Warner’s U.K. executive Richard Milne were celebrating a $140-million pact with Channel 5’s chief executive, David Elstein, and director of programming Dawn Airey over two bottles of Dom Perignon.

The speed of the deal surprised even Schlesinger, who after a trip to London in February realized the market for U.S. product was heating up. Though many of Warner’s 1997-98 films are tied up with ITV, Schlesinger decided that it made sense to put together a package of series and movies for 1999 through the year 2000.

Even so, he was surprised at how quickly Channel 5 moved. After only two weeks on the air, the broadcaster was hungry to secure future product.

“It was the fiercest bidding war I have seen in any country, period,” Schlesinger said. “The final price was more than double the starting offer, and the increments by which the bids were jumping far exceeded anything I had expected.”

Not to be outdone, ITV’s network director, Marcus Plantin, moved swiftly Tuesday to sign a deal with Universal worth more than $75 million, putting the U.K. on the map as the hottest television market for Hollywood product.

The combined $200 million of both these Hollywood deals represent a 40% to 60% jump on previous prices paid for the U.K. and are likely to push the Hollywood studio’s annual take from international television well more than the $3-billion mark hit in 1996.

Plantin said the intense competition for top movies had driven the deal.

“Securing the Universal deal tops up our war chest to the year 2000,” he explained.

Universal had sold feature films to the BBC for the last eight years. ITV will take more product than the BBC, including new films, telemovies, about 60 library titles and series like ABC’s “Time Cop,” according to Jim McNamara, president of international.

“There were never deals like this before,” McNamara said. “The U.K. used to buy feature films, but they never got into anything like an output deal.”

Channel 5, the new terrestrial broadcaster in the U.K., has been on the air only three weeks and commands 3% to 4% of the audience, compared with average winter audiences for ITV of 34%, BBC1’s 31%, BBC2’s 13% and Channel 4’s 11%. (Cable and satellite stations account for about 7% of the viewing.)

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Many British industry executives think Channel 5 overpaid for the Warner Bros. package, particularly since ITV turned around and secured the Universal package for half the price.

Warner’s Schlesinger sees it differently. “By stretching for a deal with us, Channel 5 had legitimized themselves as a player,” he said.

Recent years have seen an explosion in European demand for Hollywood products, primarily to fill new and prospective channels popping up in country after country. The U.K. has seen slower growth than most markets, however.

With the major terrestrial broadcasters BBC1, BBC2, ITV and Channel 4 relying heavily on British programming and using less than 15% U.S. programming in their schedules, U.S. studios have always had problems selling much beyond feature films.

Competition started to heat up for U.S. product with the awarding of the license for Channel 5 in the U.K. to a consortium of Pearson Television, United News & Media and CLT last year. Channel 5, which launched March 30, has a far more U.S.-style schedule than the other terrestrial channels--with series programming and a 9 p.m. movie each night--which has stirred up the market considerably for Hollywood products.

Warner’s was the first studio to benefit from Channel 5’s early aggression last November, when Channel 5 tried to outbid Channel 4 for its hit series “Friends” and “E.R.” That incident gave some indication of how quickly the prices could be driven up by the new competition in the market.

Channel 4 has been running both series for three years. “E.R.,” the most successful of the two, was bought by Channel 4 for around $150,000 an hour, according to executives close to the deal. Channel 4 had discussed renewing the deal between June and September last year, and all the deal points had been agreed except price.

Warner Bros. is believed to have asked for $200,000 per episode for “E.R.” When discussions between Warner Bros. and Channel 4 went quiet, it became apparent that another player had entered the arena. Before Channel 4 could sign a deal, Channel 5 offered $250,000 per episode, a bid Channel 4 was forced to match.

“Every new entrant wants high-class programming and they are willing to pay . . . for it. These are exceptional top end prices,” Channel 4 director of acquisitions Colin Leventhal said.

Channel 4 has long been the home of big U.S. series like “Cosby” (for which it paid about $15,000 an episode in the mid-1980s). But with the new competition, Channel 4 will be less likely to buy studio product.

“American programming will remain in the schedule, but these prices mean we will be able to buy far fewer series than we used to,” Leventhal said.

Another change in these recent U.K. deals is the volume of product. In international territories like Germany and Australia, broadcasters sign output deals with the Hollywood studios that include product they will never screen.